Opening themselves up to heated competition, Paris-based automotive suppliers Cie. Plastic Omnium SA and Valeo SA have formed a 50-50 joint venture to make integrated instrument panel modules.
The two companies, both of which are major interior suppliers in Europe, plan to continue producing instrument panel parts at separate plants. The parts then will be assembled into a cockpit module at a new plant, and possibly others scheduled to open next year, Valeo spokesman David Newhouse said last week in a telephone interview.
Assembly plant sites will be determined once the venture gets off the ground, Newhouse said.
The agreement, signed Oct. 27, melds Plastic Omnium's injection molding capabilities in instrument panels and consoles with Valeo's expertise in air conditioning and heating systems, electronic switches and displays.
A cockpit module can consist of an instrument panel's plastic shell, corresponding displays and its air conditioning and heating system, wiring harnesses and other equipment. The companies plan to tap the emerging market for cockpit modules in both Europe and North America, Newhouse said.
Potentially, the venture could produce as much as $140 million for its first year, equity analyst Armel Coville of ABN AMRO Hoare Govett in Paris said in a telephone interview. The firms are likely to produce at least 200,000 instrument panel systems initially, he said. Newhouse did not comment on expected sales or production volumes.
``I think it's a very good step for both companies,'' Coville said. ``If they want to keep the business, they both have to take a systems approach. This forces them to do that and compete much better in a global economy.''
Currently, both companies are known more for producing parts than integrated systems, Coville said.
``The trend in the industry is to cut down the number of suppliers for dashboards and cockpit systems,'' Newhouse said. ``We will provide an integrated solution that matches the competencies of both of us. That should help us be better prepared to respond to automaker requirements.''
The venture also might help the firms meet competitive pressures. In 1995, Siemens Automotive of Munich, Germany, and Sommer Allibert SA of Nanterre, France, formed a similar 50-50 joint venture to make cockpit modules. Today, those companies have about a 35 percent share of the European auto market for instrument panels, Coville said.
Other large interior suppliers, including Plymouth, Mich.-based Johnson Controls Inc.'s automotive operations and Southfield, Mich.-based Lear Corp., also are producing new instrument panel systems.
``The competition is well-established,'' Coville said. ``Valeo and [Plastic Omnium] will have to work quickly to build confidence in carmakers that they can compete. But to their advantage, cockpit modules are well-accepted today.''
The French companies also might expand cockpit assembly to a plant in North America, according to Newhouse. Both companies have other facilities on this continent.
Plastic Omnium has explored the development of an integrated cockpit at its research center in Gondecourt, France, according to a company annual report. The company has come up with its ``Generation 3'' modular approach and was looking for technological alliances with other suppliers to make the modules, the report said. Plastic Omnium officials were unavailable for comment.
The company molds instrument panels, consoles, trim and other interior components. It recorded $389 million in sales for its interior automotive components division in 1996. Of that total, 38 percent of its business came from outside France.
While Plastic Omnium serves about 20 percent of the European market for instrument panels, Valeo has a 40 percent share for its air conditioning components, Coville said.
The company, considered a market leader for air conditioning parts, recorded about $863 million in sales last year.