Valeo Group may well be the only company that can promise rapid expansion within a year in China.

The firm, one of the world's leading automotive components providers, recently announced lofty expansion plans for the coming year: Three wholly owned firms and three joint ventures will be established in China.

"Valeo has 12 industrial branches, and six of them have entered China," says Ali Ordoobadi, vice-president of Valeo Group.

"Our strategy is to introduce the remaining six branches to the market in the near future."

The firm's businesses range from transmissions, compressors and lighting systems to wipers and security systems.

Ordoobadi says China is the world's fastest-growing market, especially in terms of the automobile industry.

"All of our major international partners have a presence in China, so we need to be here to supply them," he tells China Business Weekly.

Ordoobadi says the three wholly owned firms to be established will be a security systems facility in Wuxi, in East China's Jiangsu Province; an engine-management-system production unit in Wuhan, capital of Central China's Hubei Province; and an electrical-system factory in Shanghai.

The three joint ventures, meanwhile, will produce engine-cooling systems, wiring systems and part-assistance sensors, he adds.

He would not say how much the firm will invest in the entities.

Valeo established its ninth plant in China in April. The facility produces air-conditioning compressors.

The new plant, in which 25 million euros (US$32 million) was invested, is a joint venture between Valeo and First Automotive Works Corp, China's largest automaker.

Valeo holds 60 per cent of the entity.

"The Chinese market represents a key part of Valeo's future growth," said Thierry Morin, Valeo's chairman and chief executive officer (CEO), during the signing ceremony marking the creation of the new joint venture.

"With the establishment of the new plant, Valeo will be in a better position to serve both Chinese and global automakers," Morin said.

Ordoobadi says all of Valeo's plants in China will serve the domestic market, and target overseas markets.

The firm has two large production bases in the world; one, in China; the other, in eastern Europe.

The Chinese facilities will mainly serve Asian and North American markets, while the factories in eastern Europe will supply the European market, which is the firm's largest market, Ordoobadi says.

China's automobile industry is still growing, although not as rapidly as it was two years ago, he adds.

The industry in 2003 grew 60-70 per cent.

"We see the potential of the market and Valeo can meet their demands with our innovations," Ordoobadi says.

He says he believes China's automobile market will overtake Europe's within two years.

Local purchasing

The firm also aims to make 70 per cent of its purchases in low-cost countries such as China, Mexico and Hungary by 2010.

"We plan to triple local sourcing in China from the current 300 million euros (US$384 million) to 1 billion euros (US$1.28 billion) in three years," Ordoobadi says.

The target for this year is 450 million euros (US$576 million), up 50 per cent, he says.

Major purchases in China are plastic parts, tools and aluminium parts.

Valeo's Asia purchasing office was established in 2001 in Shanghai.

The office has already demonstrated its ability to identify and train qualified suppliers to meet global standards, especially in terms of cost-competitiveness, quality, productivity, service and innovation.

Since entering the Chinese market in 1994, the firm has launched nine production facilities. Its sales volume reached 250 million euros (US$320 million) last year, which accounted for 6.3 per cent of the group's total revenues last year.

Valeo is the leader in electrical and wiper systems in China, and it has a strong presence in lighting, climate-control and clutch systems.

The firm last year opened its first research and development (R&D) centre in China, in Wuhan.

The centre is engaged in cutting-edge development of advanced automotive lighting systems, for both Chinese and European car makers.

The centre has 45 engineers. It is expected to expand that team to 70 by year's end, Ordoobadi says.

Valeo is an independent industrial group, which is focused on the design, production and sales of automobile components, integrated systems and modules.

(China Daily 06/27/2005 page2)