Paris-based automotive supplier Valeo SA is teaming up with Japan's Ichikoh Industries Ltd. to create a worldwide lighting team worth more than $1.8 billion. Valeo and Tokyo-based Ichikoh signed a memorandum of understanding April 17 to form an equity alliance that will allow each company access to production and technology operations with their partner.
Together, the companies will operate 23 lighting operations around the world — 11 in Europe, eight in Asia and four in North and South America.
Exterior auto lighting is made primarily of plastic, with polycarbonate and acrylic used in the process.
"In terms of global vehicle production, many of our customers want to deal with just one company," Valeo spokeswoman Chandra Lewis said in a telephone interview from the firm's office in Auburn Hills, Mich. "They want consistency."
The agreement, slated for completion by July 1, allows each company to buy a 20 percent stake in the other. It gives Valeo its first link in Japan, while providing Ichikoh with its initial European operation.
"It seems on the surface to be a very good relationship," said Greg Janicki, vice president of automotive consultants CSM Worldwide Corp. of Northville, Mich.
The agreement brings together several pieces of the lighting puzzle for the two companies.
Valeo is a major link for France's Renault SA, responsible for 65 percent of the automakers' lighting programs.
Renault controls Nissan Motor Co., owning more than 36 percent of the business. Ichikoh provides more than a quarter of the headlights made in Japan, with Nissan and Toyota Motor Corp. as its main customers there.
In North America, Valeo is a 50-50 partner in Valeo Sylvania Lighting Systems, along with Osram GmbH of Munich, Germany. Valeo Sylvania of Seymour, Ind., is the fourth-largest supplier of headlamps in North America, and the eighth-largest taillight supplier, Janicki noted.
Ichikoh, meanwhile, owns 10 percent of North American Lighting of Farmington Hills, Mich., which provides 97 percent of Nissan's headlights on North American-built models.
At the same time the two companies link their supply chains, automakers are aiming to reduce their supplier base. Nissan announced plans last year to cut the number of its suppliers to 600 from more than 1,100.
"Nissan is very serious about looking at its source base," Janicki said.
By joining forces, the two companies can better establish themselves as one of those suppliers left standing following the shakeout, he said.
"Not only can we offer customers a global base, but through the sharing of ideas, we can add more value," Lewis said.