Moving closer to splitting off from Ford Motor Co., Visteon Automotive Systems has paid about $492 million to buy the automotive interiors operations of Cie. Plastic Omnium SA.
The sale, announced May 11, gives Visteon a broader European roster of carmaker customers and helps the company reach its goal of achieving more than 20 percent of non-Ford business in Europe, Visteon President Craig Muhlhauser said in a telephone news conference from Paris, where Plastic Omnium is based.
With the acquisition, Dearborn, Mich.-based Visteon becomes the top-selling producer in Europe of injection molded instrument panels — a climb from fourth place to first — and one of the leaders in door panels, Muhlhauser said. The company now claims 22 percent of the instrument panel market in Europe and a 15 percent share worldwide, he added.
Visteon paid a premium for Plastic Omnium's Interior Automotive Components division, according to several analysts. The purchase, for 3 billion French francs ($492 million) and an undisclosed amount of debt, was greater than the interior division's 1998 annual sales of 2.785 billion francs ($457 million).
``It's good news for Plastic Omnium,'' said equity analyst Oliver Pouteau of of Paris-based CPR Finance SA. ``Plastic Omnium didn't have the skills and critical size to really grow the [interiors] business, so they were better off selling. Their competitors were too big.''
The operation includes 12 molding plants in southern Europe and England, six technical centers, several joint ventures and more than 250 injection presses.
Visteon also takes on 3,720 employees, giving the company more than 23,000 in Europe.
Plastic Omnium had shopped the operation since January, according to several sources. The company, through Paris-based investment house Credit Agricole SAL, held preliminary talks with such interiors suppliers as Magna International Inc., Valeo SA and Textron Automotive Co. Inc., sources said.
But the asking price scared away most other bidders, Pouteau said.
For Visteon, the acquisition keeps momentum building in the right direction toward an initial public offering, Muhlhauser said. He would not reveal when that IPO might take place.
The company, now a parts-making unit of Ford, has set a target to record more than 20 percent of non-Ford business worldwide before a spinoff. Today, about 90 percent of Visteon's work is with Ford, but little of that non-Ford business was in Europe.
``[With the acquisition], we establish more credibility in the marketplace,'' Muhlhauser said. ``We are recognized as the market leader in key technologies and in certain segments. They are all important strategies driving us toward higher shareholder value.''
One of those key technologies Muhlhauser mentioned was for interior cockpit modules, molded instrument panels that enfold electronics, electrical wiring, air vents and other parts into one complete unit.
Today, no full-blown cockpit modules are in production. But industry experts expect that to change over the next few years. The latest move, announced May 6, was a three-way joint venture in Italy between Textron, Breed Technologies Inc. and Magneti Marelli SpA.
Visteon already had one advantage in the cockpit race: sophisticated electronics. But the firm needed the molding capabilities offered by Plastic Omnium to complete the puzzle, said Kevin Mann, director of automotive-forecasting group CSM Europe Ltd. of Surrey, England.
``It's just the perfect merger,'' Mann said. ``Certainly, it's a matter of Visteon expanding its existing product base and increasing market share. But it also brings stunning synergy in instrument panels.''
Muhlhauser talked about blending Visteon technology to add driver information systems and voice-activated-control technology into the molded instrument panels.
``The power of electronics will change everything we do,'' he said.
Visteon's electronics expertise could give the company an edge over some other suppliers in cockpit development, Mann said. Other leading European instrument panel producers include Sommer Allibert SA and Johnson Controls Inc., he said.
Visteon was not a bidder for another large interiors operation, that of United Technologies Automotive Inc. of Dearborn, Mich., Muhlhauser said. Southfield, Mich.-based Lear Corp. agreed to buy UTA in March, and the deal closed in late April.
But UTA had too much Ford business to suit Visteon, he said.
``Plus, we believe the established electronics capabilities we have are much superior to UT Automotive,'' he added.
The Plastic Omnium plants — five in France, four in Spain, two in England and one in Italy — total about 2 million square feet, said Visteon spokeswoman Cheryl Eberwein. The British plants operate in a 50-50 joint venture with Tokyo-based supplier Kasai-Kogyo Co. Ltd. The company also has a joint venture with Valeo to develop cockpit modules.
Plastic Omnium opted to shed those facilities to focus more attention on its other core businesses, company spokeswoman Eliane LeMarie said from Paris. Plastic Omnium officials were unavailable for comment.
The French firm has more than 10 percent of the market worldwide for plastic exterior parts, such as bumper fascias, and plastic-based fuel tanks and systems, LeMarie said.
About 23 percent of Plastic Omnium's sales also comes from nonautomotive activities, including waste containers and medical equipment. The firm recorded about $1.49 billion in 1998 sales.
The interior division's customers include Renault SA, PSA/Peugeot-Citroen SA, Fiat SpA, Nissan Motor Co. Ltd., Honda Motor Co. Ltd. and Volkswagen AG.
Visteon would like to take cockpit technology around the globe, Muhlhauser said. The largest near-term opportunity is in South America, but Visteon also is working aggressively to make cockpit modules with German automakers, he said.
The purchase, scheduled to be completed in June, increases Visteon's European sales to $3.1 billion and hikes total company sales to $18.2 billion, based on 1998 results, Muhlhauser said.
No layoffs or plant changes are planned, he added. Joel Coque, managing director of Plastic Omnium's interiors division, will lead Visteon's European interiors business. Headquarters for that operation will remain in Paris.