French auto parts supplier Faurecia recently said it has entered an agreement to set up a joint-venture firm with Dongfeng, a Chinese state-controlled automotive group that also has a controlling stake in PSA Peugeot Citroen.
The parts maker has inked the deal as it seeks to expand its presence into the world’s largest auto market and the ties with Dongfeng are now natural since the supplier is majority-owned by PSA Peugeot Citroen. The company announced Tuesday the new joint-venture would seek deliveries worth 2 billion euros ($2.2 billion) to Dongfeng and its local automotive partners – Peugeot, Nissan, Honda and Kia, besides the Chinese firm’s own brands. According to Faurecia Chief Executive Yann Delabriere, the agreement “will contribute to the steady and profitable growth of Faurecia in China”, but the company’s investors didn’t seem overly impressed. The Faurecia stock slightly fell by 0.2 percent at 41.125 euros immediately after the announcement, with the company’s total value standing at 5.12 billion euros ($5.5 billion).
The supplier had already started its expansion plan in China, with sales jumping in 2014 by 20 percent to 2.23 billion euros – the joint venture had not been necessary because, unlike carmakers (compelled to have ties with local producers), auto parts makers had been less limited on the market. The new Faurecia-Dongfeng business unit will be consolidated in the French company’s accounting books, counting on new business with Dongfeng and its local partners. Initially, the new unit will produce and sell Faurecia interior and exterior parts and later on it will expand to manufacture seating and exhausts and also build a new joint research and development centre at China’s Wuhan automotive hub.