Combined Annual General Shareholders Meeting June 20, 2008 Annual - - PowerPoint PPT Presentation

Combined Annual General Shareholders’ Meeting

June 20, 2008

Agenda

Annual Ordinary Meeting

Agenda

Extraordinary Meeting

Combined Annual General Shareholders’ Meeting

June 20, 2008

2007 Results

Robert Charvier – Financial Control Director

June 20, 2008 I 6

2007 – Economic environment

Worldwide growth: +4.9% Automotive production: +5% Pressure on raw materials / record oil prices Euro: significant rise versus Dollar and Yen Continued increase in European interest rates

June 20, 2008 I 7 1100 1300 1500 1700 1900 2100 2300 2500 2700 2900

2003 2005 2004 2006 2007

Aluminum Evolution of cost in $ US / Ton

2,574 2,812 1,825 1,400

2006: 2,389 2007: 2,743 +15% Monthly cost Average

June 20, 2008 I 8

1300 2300 3300 4300 5300 6300 7300 8300

2003 2005 2004 2006 2007

Copper Evolution of cost in $ US / Ton

Monthly cost

7,031 7,454 3,303 1,640

Average 2006: 5,473 2007: 6,556 +20%

June 20, 2008 I 9

15 25 35 45 55 65 75 85 95

2001 2002 2003 2007 2004 2007 2007

Brent Evolution of price in $ US/Ton

95.9

26.5

June 20, 2008 I 10

2007 highlights

Accelerated growth and improved margins Successful innovations Divestiture of non-strategic activities Targeted reinforcement of certain functions

June 20, 2008 I 11

* Continued operations

2007 Key Figures

In euro million

2007 2006 Change Total operating revenues

9,689 9,550 + 1.5%

Operating income as a % of total op. revenues

319

3.3%

271

2.8%

+ 17.7%

+ 0.5 pt Net income as a % of total op. revenues

81

0.8%

161

1.7%

• 49.7%
• 0.9 pt

Net income excl. impact from divestitures

132 120 + 10.0%

Earnings per share*

1.82 1.81 + 0.6%

Net financial debt

799 968

• 17.5%

June 20, 2008 I 12

9,689 9,550

8 000 9 000 10 000 2006 2007 In million euros

Perimeter

• 0.2%

Currencies

• 1.5%

Prices*

• 3.0%

Volume/Mix +6.2%

* At identical functions

+6.2% en volume

Total operating revenues

+1.5%

June 20, 2008 I 13

Strategic rebalancing of the customer portfolio

* excluding VMA & VCS in 2001

Automakers 2001 2007

Asian 5.7% 14.7% Big 3 31.7% 21.8% German 22.5% 24.5% Mercedes & BMW 7.5% 10.6% PSA & Renault 28.1% 26.7% Fiat 5.0% 4.4% ORIGINAL EQUIPMENT SALES (2001- 2007)*

June 20, 2008 I 14

2006 2007

Gross Margin

1,463 M€ 1,497 M€ 15.5% 15.7%

% of sales

+0.2 pt

June 20, 2008 I 15

Impact of the increase in raw material prices

2006 2007

(Point of sales) Gross impact Net impact

1.8 2.0 3.6 4.5

Cumulative impact basis 2003

+0.9 pt +0.2 pt

• More rebilling

to customers

• Contract

renewals

June 20, 2008 I 16

Operating income

2007/2006

Gross Margin

+0.2 pt

• R&D*
• SG&A

+0.1 pt

• Other income and charges

+0.2 pt

Operating income

+0.5 pt*

* % of total operating revenues

June 20, 2008 I 17

Accelerated margin improvement

Annual change in the operating margin by quarter (2007)

+ 1.1

• 0.4

+ 0.3

• 1 pt

0 pt 1 pt 2 pt Q1 Q2 Q3 Q4

June 20, 2008 I 18

Results (cont’d)

In euro million

2007 2006 Change Operating income 319 271 + 17.7% Cost of net debt Other financial inc./(expenses) Associates (51) (46) 8 (51) (8) (1) Income before taxes 230 211 + 9.0% Taxes Effective tax rate Non strategic activities (83) 37.4% (59) (67) 31.6% 22 Minorities (7) (5) Net income 81 161

• 49.7%

Debt level & financial statements

June 20, 2008 I 20

Return on capital employed*

* Excluding VCS & VMA

2.5 2.4 2.4 4.0 3.7 3.9

2 2,2 2,4 2,6 2,8 3 3,2 3,4

31.12.05 31.12.06 31.12.07

Bn €

Industrial assets Return on capital employed

June 20, 2008 I 21

31/12/2006 31/12/2007 Shareholders' equity Debt

Consolidated shareholders’ equity / Net financial debt

(M€)

45%

968 1,752 799 1,782

55%

Gearing

Q1-2008

June 20, 2008 I 23

Q1-08 highlights

Economic environment

Slowdown in auto production versus H2 2007 Inflationary pressure on raw materials Further depréciation of the Dollar vs the Euro Rise in interest rates

Valeo

Improved operating margin for third consecutive quarter Earnings per share of continued operations up by 36% Successful innovations Continued redeployment of the Group’s activities

June 20, 2008 I 24

In euro million

Q1-2008 Q1-2007 Variation Total operating revenues

2,473 2,499

• 1.0%

Gross margin in % of sales

392 16.1% 377 15.3%

+ 4.0%

+ 0.8 pt

Operating margin in % of total operating revenues

90

3.6%

74

3.0%

+ 21.6%

+ 0.6 pt Earnings per share*

0.57 0.42 + 35.7%

Net financial debt

786 966

• 18.6%

Key figures – Q1-2008

* Continued operations

Strategy and Objectives

Thierry Morin – Chairman & CEO

June 20, 2008 I 26

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Strategy

Operational Excellence

Quality Cost Industrial footprint

Innovation

3 Domains for safer, cleaner and

more comfortable vehicles QUALITY COST GLOBAL PRESENCE TECHNOLOGY

June 20, 2008 I 27

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Valeo’s 3 Domains

Driving Assistance Powertrain Efficiency Comfort Enhancement

Reconciling automobiles and the environment by contributing to the creation of cleaner, more fuel-efficient vehicles Reconciling automobiles and well-being by making vehicles easier to use and enhancing driver and passenger comfort Reconciling automobiles and safety by reinforcing the active aspects of accident prevention and avoidance

Other

€9.6bn

Sales*

* 2007

June 20, 2008 I 28

I

Valeo n°1 or n°2 in the world

Driving Assistance Powertrain Efficiency Comfort Enhancement

− Alternators − Starter motors − Clutches − Engine cooling − Condensers − Wiper systems − Front and rear lighting − Ultrasonic sensors − HVAC systems − Top Column Modules

75% of Valeo sales: N°1 or n° 2 in the world

June 20, 2008 I 29

I

Refocusing the perimeter on the Domains

Identified divestitures worth 2 billion euros

Activities

– Little technological synergy – Low added value – With insufficient competitive positions

Program 50% completed in mid-2008: electric motors, wiring

harnesses, truck engine cooling

Competitive valuation multiples: 6.8 X EBITDA

Targeted acquisitions

High technology content Without deteriorating the Group’s gearing

Operational excellence

Luc Blériot – Chief Operating Officer

June 20, 2008 I 31

Automaker requirements

Cost, cycles, quality Emerging countries Low-cost vehicles

June 20, 2008 I 32

Purchasing

Supplier base

Reduction (-154) VIP strategic suppliers (79) Low-cost countries (37% of purchasing)

Tools (Bidding On Line: 1.5 billion euros)

June 20, 2008 I 33

Industrial productivity

Cost reduction Greater flexibility Return on assets

June 20, 2008 I 34

Optimization of the production footprint

* Continued operations

2001 2002 2003 2004 2005 2006 2007

72% 34% 66% 28% 68% 32% 30% 70% 38% 62% 44% 56%

48% 52%

Other countries Leading competitive-cost countries

Supporting customers in emerging countries Rationalization

Productive headcount* (%)

June 20, 2008 I 35

R&D efficiency

High technology products / Cost reduction Standardization, simulation R&D in competitive-cost countries

21% of total headcount, 9 R&D Centers

June 20, 2008 I 36

Re-engineering

Quality and Logistics: 20 pilots in 2007

Headcount reduction of 15% Reduction of non-quality and

inventory costs

Deployment in all sites

Extension of the process to other functions

June 20, 2008 I 37

15 32 53 185 10

2003 2004 2005 2006 2007

Quality

CUSTOMER RETURNS in ppm

* Defective parts per million delivered

Delivery quality

65% of sites at less than 10 ppm* 18 sites at 0 ppm

Lower warranty costs

June 20, 2008 I 38

Quality recognized by customers

Excellent Quality Performance Award from Toyota Group 3 quality awards from Toyota Peugeot Citroën Automobile Achievement Award and 3 certificates from Toyota North America and Toyota Europe Supplier Quality Award from Renault

June 20, 2008 I 39

Teams, tools, a culture

Skilled teams Organization and Methodologies Culture: ethics, respect, demanding, progress, rigor

Powertrain Efficiency

Michel Forissier – Director of the Domain

June 20, 2008 I 41

Climate change

1000 1200 1400 1600 1800 2000 200 300 400 500

Year Year

600

Source: GIEC

Concentration of CO2 in the atmosphere (ppm)

June 20, 2008 I 42

Skyrocketing oil prices

80 70 60 50 40 30 20 10

Jan 86 Jan 88 Jan 90 Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06

Source: International Energy Agency,Valeo

140 USD

May 2008

Price of crude in $/barrel

June 20, 2008 I 43

Impact on household budgets

The price of super-grade gasoline rose by 62% in 10 years A household spends 150€ per month on fuel Transportation is now the second largest expense after lodging

June 20, 2008 I 44

CO2 regulations

Europe: 120g CO2 /km in 2012 95g CO2 /km in 2020

European Commission

• Jan. 10, 2007

Japan: 16.8 km/l in 2015

Council for Transport Policy

• Feb. 2007

USA: 35 MPG in 2020

Senate Bill June 21, 2007

Equivalent (for gasoline engine): 5 l/100km 6 l/100km 6.7 l/100km then 4 l/100km

June 20, 2008 I 45

0.08 0.10 0.15 0.20 0.25 190 170 150 130 120 110 90

2012- 2020

• 20%

Divided by 3

• 20%

DIESEL MUST FIRST BECOME CLEAN DIESEL MUST FIRST BECOME CLEAN BUT THE RACE TO REDUCE EMISSIONS BUT THE RACE TO REDUCE EMISSIONS WILL BE DRIVEN BY GASOLINE ENGINES WILL BE DRIVEN BY GASOLINE ENGINES GASOLINE GASOLINE DIESEL GASOLINE DIESEL >2020

Consumption (g CO2/km) Emissions (g NOx/km)

• 30%

Consumption - situation

June 20, 2008 I 46

Valeo consumption reduction solutions

• 40% feasible

Energy management - 3% Thermal management

• 8%

Automated transmissions

• 4-6%

Engine intake systems

• 5-7%

Hybridization

• 6-15%

Engine management

• 15-20%

June 20, 2008 I 47

Electromagnetic valve actuation Thermal management Dual clutch Stop-Start + Regenerative braking Water-cooled charge air cooler Cooled EGR

Objective = - 40%, from 200 to 120 g/km on a gasoline Laguna GT 2.0 turbo Estimated extra cost: less than 1,500 €, or less than a diesel…

Optimized A/C

Valeo - 40% consumption project

June 20, 2008 I 48

Commercial success for the micro-hybrid

Citröen C2/C3 Smart mhd Mercedes Class A and B PSA Peugeot Citroën

1 million vehicles

June 20, 2008 I 49

LO LOw

w CO

CO2

2 MOTION™

MOTION™

Electromagnetic valve actuation Electromagnetic valve actuation StARS micro-hybrid StARS micro-hybrid

Innovations subsidized by public authorities

LOw CO2 MOTION to receive funding from OSEO Innovation worth 61 million euros (including 55 M€ for Valeo) over 3 years

Objectives

Thierry Morin – Chairman & CEO

June 20, 2008 I 51

I

2008 objectives

Tougher operating conditions Another year of improved results Levers

New model launches Proven ability to recover a significant share of raw material charges Identified operational levers Controlled launch and non-quality costs

June 20, 2008 I 52

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2010 objectives

Doubling of return on capital employed to 27%

Operating margin 6% Asset turn 4.5x

Levers

Growth Absorption of raw material costs Operational excellence and re-engineering

June 20, 2008 I 53

I

2005 2006 2007

32% of order intake from innovative products

8.6 9.9 10.1 Order intake / X OEM sales

1.1x 1.3x 1.3x

Innovative products Others In billion euros 32% 22% 15%

June 20, 2008 I 54

I

Valeo technology start-ups

Micro-hybrids Torque converters for automatic transmissions Radar applications Camera applications

2007 Sales: 70 M€ 400 M€ in 2010

June 20, 2008 I 55

I

Geographical expansion

14 Production sites 12 R&D centers 6,830 employees 55 Production sites 37 R&D centers 29,420 employees 13 Production sites 1 R&D center 10,480 employees

South America

10 Production sites 4,200 employees 3 Production sites 1 R&D center 1,500 employees 30 Production sites 11 R&D centers 8,770 employees

North America Western Europe Eastern Europe Africa Asia

Figures at 31 Dec. 2007

Valeo is close to its customers

June 20, 2008 I 56

I

Expansion in India

Pune Chennai

Market: 1.5 million vehicles

Valeo Electrical Systems (JV with AK Minda) Valeo Security Systems (JV with NK Minda) Valeo Friction Materials (JV with Anand Group) Valeo Clutches Production site (JV with Amalgamations) R&D center

June 20, 2008 I 57

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2007 2013

Production

1.8 M 3.4 M

Sales

1.7 M 3.0 M

Number of automakers

Russian Foreign

16

7 9

19

3 16 Market share

Russian (VAZ, GAZ, LADA, TAGAZ) Non Russian

50% 50% 25% 75%

Russian automobile market – Key figures

June 20, 2008 I 58

I

Valeo’s strategy in Russia

Presence of all product lines Partnerships under discussion

HVAC systems in the Moscow area Transmissions and Security Systems in the Nijni Novgorod area Lighting Systems in the Vladimir area

Achieve significant market shares 500 million euros of sales in 2013

June 20, 2008 I 59

I

Value creation potential

Strong involvement in the promising domains of environment annd safety Valid business model and solid financial structure High potential for creating value Policy of regular growth in dividends; proposing €1.20 for 2007 (+9%)

June 20, 2008 I 60

I

Evolution of shares since 31/12/2007

16 19 22 25 28

3 1 / 1 2 7 / 1 1 4 / 1 2 1 / 1 2 8 / 1 4 / 2 1 1 / 2 1 8 / 2 2 5 / 2 3 / 3 1 / 3 1 7 / 3 2 4 / 3 3 1 / 3 7 / 4 1 4 / 4 2 1 / 4 2 8 / 4 5 / 5 1 2 / 5 1 9 / 5 2 6 / 5 2 / 6 9 / 6 1 6 / 6 2 3 / 6 3 / 6

31/12/07 19/06/08 Δ VALEO 28.20 21.67

• 23.2%

CAC 40 5614.10 4591.39

• 18.2%

PEUGEOT 51.85 35.55

• 31.4%

RENAULT 97.01 56.14

• 42.1%

MICHELIN 78.50 48.59

• 38.1%

FAURECIA 46.60 27.41

• 41.2%

June 20, 2008 I 61

I

Valuation history (since 01/01/2005)

Enterprise value / EBITDA

maxi mini average current

Source: data from the companies and from research analysts

0x 1x 2x 3x 4x 5x 6x 7x 8x Valeo Continental Faurecia Autoliv Magna TRW

PER

0x 5x 10x 15x 20x 25x 30x Valeo Continental Faurecia Autoliv Magna TRW

Corporate governance

June 20, 2008 I 63

An active, assiduous Board of Directors

Sixteen Board meetings in 2007 Nomination and Remunerations Committee

4 meetings

Audit Committee

4 meetings

Strategic discussions

June 20, 2008 I 64

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Agreement with Pardus

A Pardus representative on the Board Loyalty commitment Avoidance of conflicts of interest Limitation of Pardus shareholding in Valeo to 20%

June 20, 2008 I 65

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Nomination and Remuneration Committee

Composition: 3 independent members

Jérôme Contamine (Chairman) Georges Pauget Philippe Guédon

Mission

Prepare the deliberations of the Board relating to the remuneration of

corporate officers and the stock options policy

Prepare the composition of the Company’s management bodies

Work in 2007

Proposals relating to the remuneration of the Chairman & CEO Proposals relating to the granting of consideration-free shares and stock

• ptions to employees and corporate officers most directly involved in the

Group’s development

June 20, 2008 I 66

I

Candidacy of Behdad Alizadeh

Current function

Partner, Pardus Capital Management L.P.

Previous functions

Managing Director of the Bank of New York Head of Merchant Banking, Bank of New York Member of the Board of Directors of Caliber Collision Centers Member of the Board of Directors of Mid West Wholesale Distribution

Education

MBA degree from Columbia Business School BS degree from New York University

Other functions and mandates

Member of the Board of Directors of the Governor’s Committee on Scholastic

Achievement

Member of the Supervisory Council of Atos Origin

June 20, 2008 I 67

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Indemnities in the event of termination of duties

• f the Chairman & CEO

In accordance with the TEPA law Amount

3 years of fixed remuneration, unchanged since appointment in 2001 Complementary retirement via pension fund accrued by Valeo (UK)

Conditions

Dismissal (except for gross misconduct) On the Chairman’s initiative in the event of a strategic change following

a recomposition of the Board of Directors

5 performance criteria

June 20, 2008 I 68

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Share purchase options

Authorization covering 1 million shares, or 1.3% of the capital Validity: 2009 AGM No discount for beneficiaries Valeo undertakes to limit the potential dilution resulting from option plans and the allocation of free shares to the current level of 9.6% of the capital

Statutory auditors’ report

Resolutions

Ordinary General Meeting

June 20, 2008 I 71

Annual Ordinary General Meeting

Approval of the annual non-consolidated and consolidated financial statements Resolutions 1 & 2

June 20, 2008 I 72

Approval of an agreement including undertakings made for the benefit of

• Mr. Thierry Morin in accordance with

article L. 225-42-1 of the French Commercial Code

Annual Ordinary General Meeting

Resolution 3

June 20, 2008 I 73

Approval of regulatory agreements and undertakings

Annual Ordinary General Meeting

Resolution 4

June 20, 2008 I 74

Allocation of profits and distribution

• f dividends

Annual Ordinary General Meeting

Resolution 5

June 20, 2008 I 75

Authorization granted to the Board

• f Directors to repurchase the

Company’s shares

Annual Ordinary General Meeting

Résolution 6

June 20, 2008 I 76

Determination of the annual amount

• f directors’ fees

Annual Ordinary General Meeting

Resolution 7

June 20, 2008 I 77

Appointment of Mr. Behdad Alizadeh as director

Annual Ordinary General Meeting

Resolution 8

Resolutions

Extraordinary General Meeting

June 20, 2008 I 79

Delegation to the Board of Directors

• f authority to grant options to

purchase shares of the Company

Extraordinary General Meeting

Resolution 9

June 20, 2008 I 80

Delegation of powers to carry out corporate formalities

Extraordinary General Meeting

Resolution 10