2007 Reference document (PDF) - Valeo

2007 Reference document

1 Activity 7 

History 8 

The Group 11 

Geographical presence 27 

Competitive context 28 

Key events in 2007 28 

Recent events and outlook 33 

2 Management Report 35 

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Key fi gures 2 

Accounting methods 36 

Statement of income 36 

Main investments over the past three years 38 

Change in stockholders’ equity 39 

Provisions 41 

Cash fl ows and debt 41 

Commitments 42 

Remuneration of corporate offi cers and directors 42 

Risks and uncertainties 

Information likely to be impacted 

44 

by a public tender offer 47 

Claims and litigation 48 

Outlook 49 

Subsequent events 49 

Parent company fi nancial statements 49 

Environmental management and performance 50 

Social indicators 65 

Consolidated fi nancial 

statements at 

December 31, 2007 79 

Consolidated statements of income 81 

Consolidated balance sheets 82 

Consolidated statements of cash fl ows 83 

Statements of recognized income and expenses 

Consolidated statement of changes 

84 

in stockholders’ equity 85 

Notes to consolidated fi nancial statements 86 

Statutory Auditors’ report on the consolidated 

fi nancial statements 142 

4 Corporate Governance 145 

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Report of the Chairman of the Board of Directors 146 

Composition of the Board of Directors 

during the year 2007 157 

Statutory Auditors’ report on the report 

of the Chairman of the Board of Directors 160 

Information on the 

Company and its capital 161 

General information about the issuer 162 

Fees paid by the Group to the Auditors and 

members of their networks 181 

General information about the Company’s capital 182 

Current ownership structure 186 

Market for the Company’s securities 190 

Investor relations 192 

Information on subsidiaries and affi liates 195 

6 Other Information 199 

2008 quaterly fi nancial information 200 

Annual information document 201 

Person responsible for the Reference document 207 

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Group profile 

2007 

Valeo is an independent and international industrial group, fully focused on the design, production 

and sale of components, systems and modules for automobiles and trucks, both on the original 

equipment market and the aftermarket. 

It is one of the world’s leading automotive suppliers. 

< Contents > 

Reference document 

The Group employs 61,200 people representing 93 nationalities in 125 production sites, 

62 Research & Development centers and 9 distribution platforms in 28 countries. 

Valeo applies its profi table growth strategy in line with a policy of sustainable development. 

valeo added TM 

This “document de référence” was filed with the Autorité des m archés f inanciers (AMF) on April 30 , 2007, pursuant to article 212-13 of the AMF’s General 

Regulations. It may only be used in connection with a financial transaction if it is accompanied by a memorandum approved by the AMF. 

In accordance with article 28 of European Regulation No. 809/2004 dated April 29, 2004, the reader is asked to refer to previous “documents de référence” 

containing the following specific information: 

1. The management report, consolidated financial statements, parent company financial statements, Statutory Auditors’ reports on the consolidated financial 

statements and parent company financial statements for the year ended December 31, 2006, and the Statutory Auditors’ special report on regulated agreements 

relating to 2006, included in the “document de référence” filed with the Autorité des m archés f inanciers on March 29 2007 under No. D. 07-0247. 

2. The management report, consolidated financial statements, parent company financial statements, Statutory Auditors’ reports on the consolidated financial 

statements and parent company financial statements for the year ended December 31, 2005, and the Statutory Auditors’ special report on regulated agreements 

relating to 2005, included in the “document de référence” filed with the Autorité des m archés f inanciers on April 3, 2006 under No. D. 06-0209. 

2007 Reference document - VALEO 

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Key fi gures 

Key figures 

Net sales by geographic area 

In millions of euros and in % of net sales 

Net sales by market (2007) 

In % of net sales 


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Gross margin 

In % of net sales 

Operating income 

In % of total operating revenues 


Key fi gures 

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Key fi gures 

Research and development expenditure 

In % of total operating revenues (net of R&D expenditure rebilled to customers) 

Net attributable income 

In millions of euros and in % of total operating revenues 


Basic earnings per share from core activities* 

In euro/share 

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Basic earnings per share for the year 

In euro/share 

Net debt 

In millions of euros and in % of equity 


Key fi gures 

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Key fi gures 


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1 Activity 

History 8 

The Group 11 

Geographical presence 27 

Competitive context 28 

Key events in 2007 28 

Recent events and outlook 33 


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1 Activity 

History 

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History 

The Group’s origins date back to the creation, in 1923, of Société 

Anonyme Française du Ferodo (SAFF), which operated out of a 

workshop in Saint-Ouen near Paris. SAFF started by distributing, then 

manufacturing, brake linings and clutch facings under the Ferodo 

license. In 1932, SAFF was listed on the Paris Bourse. 

For SAFF, the 1960s and 1970s were a time of development, both 

through diversification into new sectors (brake systems in 1961, 

thermal systems in 1962, lighting systems in 1970 and electrical 

systems in 1978) and through international growth (Spain in 1963, 

Italy in 1964 and Brazil in 1974). On May 28, 1980, at its Annual 

General Meeting of Shareholders, SAFF adopted the name Valeo, 

a Latin word meaning “I am well”. 

By the 1980s, Valeo had become a global group, developing 

through acquisitions around the world: 

1987 

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Acquisition of Neiman (security systems) and its Paul Journée 

subsidiary (wiper systems). 

Acquisition of Chausson’s heat exchanger business. 

1988 

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Acquisition of Clausor and Tibbe (security systems in Spain and 

Germany). 

Creation of Valeo Pyeong Hwa (clutches and ring gears in Korea), 

Valeo Transtürk (clutches in Turkey), and Valeo Eaton (clutches for 

heavy-duty trucks in the United States). 

Creation of the Valeo/Acustar Thermal Systems Inc. joint venture 

(climate control, United States). 

1989 

■ Acquisition of Delanair (climate control in the UK). 

■ Acquisition of Blackstone (engine cooling in the United States with 

businesses in Mexico, Canada, Sweden, Italy and Spain). 

This drive for growth was accompanied by the refocusing of the 

Group’s activities around a number of core businesses, and the sale 

of non-strategic activities (brake linings, ignition, horns) in 1990. 


Throughout the 1990s 

The Group implemented a powerful strategy based on: 

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a new industrial culture: the Group adopted its “5 Axes” 

methodology in 1991 (see paragraph 4.3, Industrial Functions, 

“The Group”); 

■ a sustained Research & Development drive: in 1992, the Group 

set up an electronics research center in Créteil (France) and an 

electronic module production site at Meung-sur-Loire (France). In 

1993, Valeo opened R&D centers for lighting systems in Bobigny 

and for clutches in Saint-Ouen (France); 

■ increasing international growth: the first production sites in Mexico 

and Wales (climate control) and Italy (lighting systems) opened in 

1993, and in 1994 the first joint ventures in China were created 

for wiper systems, climate control, lighting systems and electrical 

systems. 

The Group’s external growth continued throughout the decade: 

1995 

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Acquisition of Siemens’ thermal business in Germany. 

1996 

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Acquisition of a stake in Mirgor (thermal systems in Argentina). 

Acquisition of Fist Spa and a division of Ymos AG (security systems 

in Italy and Germany). 

Acquisition of Klimatizacni Systemy Automobilu (thermal systems 

in the Czech Republic). 

1997 

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Creation of clutches joint ventures in India and China and a friction 

materials joint venture in India. 

Acquisition of Univel (security systems in Brazil). 

Acquisition of the Osram Sylvania’s automobile business to create 

the joint-venture Valeo Sylvania (lighting systems) in the United 

States. 

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1998 

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Acquisition of the Electrical Systems activity of ITT Industries. 

1999 

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Acquisition of a division of Mando (electrical systems in South 

Korea). 

2000 

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Creation of a joint venture with Unisia Jecs (transmissions in 

Japan). 

Acquisition of a stake in Zexel (thermal systems). 

Strategic alliance with Ichikoh (lighting systems in Japan). 

Acquisition of Labinal’s automotive business (Argentina, Eastern 

Europe, France, India, Italy, North Africa, Portugal, Spain). 

The first years of the new millennium 

In March 2001, Thierry Morin was appointed Chairman of the Board 

of Directors of Valeo. The Group launched a program to streamline 

its business and give itself greater room for maneuver: 

■ industrial rationalization with production reorganized across fewer 

sites, and a greater portion of sites in low-cost regions; 

■ selective disposals of non-strategic businesses; 

■ accelerated integration of recently acquired businesses, notably 

the redeployment of the US facility at Rochester acquired from 

ITT; 

■ partnership approach with a select number of suppliers; 

■ intensification of R&D efforts coupled with improved 

productivity; 

■ a revitalized marketing approach based on the concept of Domains, 

which facilitate transversal synergies; 

■ creation of technological partnerships with experts in various 

fields, including International Rectifier, Iteris, Raytheon and Ricardo, 

to introduce new technologies into the automotive industry and 

accelerate the development of new products. 

This program resulted in the gradual improvement of Valeo’s margins 

between 2001 and 2003, and boosted confidence among the 

Group’s customers. 

In 2004 


Activity 

History 

Following this rationalization program, Valeo embarked on a new 

phase of development as part of “Valeo 2010”, its strategic project. 

The Group is establishing a platform from which to emerge as a 

global leader in its businesses according to future developments in 

the automotive equipment industry. 

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The first lever of its development is the expansion of its 

technological offering in order to provide solutions that incorporate 

systems and services from three Domains: Driving Assistance, 

Powertrain Efficiency and Comfort Enhancement. Further synergies 

have been generated between P roduct F amilies in terms of R&D 

and the marketing of innovative new products. 

The second lever of development is in terms of business 

development, both through regional growth and through boosting 

the Group’s presence in the aftermarket. In geographical terms, 

the Group will increase its presence in North America and Asia: 

close relations with all manufacturers and the development 

of world platforms are strategic advantages. With the creation 

of Valeo Service, the Group now benefits from an effective 

organisational structure that will enable it to win a greater share 

of the Aftermarket worldwide. 

The third lever of development is the enhancement of 

operational excellence through the optimisation of production 

facilities and the supply chain. The objective is to offer total quality 

to all customers on all markets. 

The fourth lever of development is to optimize the organization 

to ensure its efficiency. 

In 2005 

Guided by its strategic objectives and its financial position, Valeo 

implemented a policy of targeted acquisitions designed to reinforce 

its three Domains and increase its organic growth potential. 

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The Group significantly evolved its structure, notably by increasing 

the role of the three innovation Domains, grouping together the 

P roduct F amilies into one operational structure, and strengthening 

functional teams, particularly the Technical Department. 

Valeo acquired the Engine Electronics division of Johnson 

Controls (JCEED), which designs and produces complete engine 

management systems, electronic control units and electronic 

motor drives as well as engine components. 

2005 also saw a number of other deals which increased the 

Group’s presence in Asia, especially China: 

acquisition of shares held by Bosch in the Group’s Climate Control 

businesses in Asia (Zexel Valeo Climate Control and Valeo Zexel 

China Climate Control). This gave Valeo control of all the share capital 

of its climate control activities and compressor production, 

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1 Activity 

History 

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following this transaction, Valeo increased its holding in two Thai 

companies - Siam Zexel Co. Ltd. and Zexel Sales Thailand Co. Ltd. – 

by 35.9% and 14.3% respectively, giving Valeo 74.9% ownership 

of each of these two companies specializing in automotive climate 

control, 

Valeo concluded a new joint venture with FAWER, the automotive 

supply branch of FAW, one of the main Chinese automakers. 

The new entity, 60% owned by Valeo, develops and manufactures 

compressors for climate control systems aimed at the Chinese 

market and at export. Its plant is located in Changchun in 

the north east of China, 

Valeo announced the creation of a joint venture with Hangshen 

Electronics, a Chinese Tier One automotive supplier, for the 

production of ultrasonic park assist systems. Valeo owns a 75% 

share in this joint venture, 

Valeo increased its stake in Ichikoh—the Japanese manufacturer 

of automotive lighting systems and mirrors—from 22.7% 

to 28.2%. 


In 2006 

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Valeo pursued its strategy to rationalize its portfolio, resulting in 

the sale of its Electric Motors & Actuators business to the Japanese 

Group Nidec, the sale of its share in the bluetooth specialist Parrot, 

and the sale of Logitec, a logistics business in Japan. 

Valeo also acquired a 50% share in Threestar, one of the leading 

radiator manufacturers in South Korea. This new entity, of which 

the other 50% is held by Samsung Climate Control Group, is called 

Valeo Samsung Thermal Systems. 

In 2007 

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In selling its Wiring Harness activity to Leoni, Valeo reaffirmed its 

strategy of focusing its offer on solutions in the three Domains, 

with strong competitive positions and diverse customers, 

via targeted disposals and acquisitions. 

In July, Valeo acquired Connaught Electrics Ltd (CEL), an Irish 

manufacturer of automotive electronics, to strengthen its Driving 

Assistance Domain. 

Two joint ventures were created in India—Valeo Minda Security 

Systems and Valeo Minda Electrical Systems India Private Limited 

(for more information, see “Strategic operations”, section 3. of 

“Key Events”). 

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The Group 

1. Description and organization 

Valeo is an industrial group fully focused on the design, production 

and sale of components, systems and modules for automobiles and 

trucks, both on the original equipment and the aftermarket. 

The Group’s sole sector of activity is “Automotive Supply”. 

On 31 December 2007, the Group employed 61,200 people, 

of 93 different nationalities at 125 production sites, 

62 Research & Development centres and nine distribution platforms. 

1.1. Organization: Original Equipment 

The Group is organized into one hundred or so decentralized and 

autonomous Divisions, and it is at Division level that resources are 

allocated and performance is evaluated. The Divisions enjoy the 

backing of Valeo’s functional networks and Branches, which oversee 

the coherence of the Group’s Product Families; they also exploit 

synergies with the innovation Domains, and are coordinated by 

National Directorates in some countries. 

Valeo’s Industrial Divisions are responsible for running business 

relating to OE production and sales from the various Product Families 

for specific geographical areas. 

1.2. Organization: Aftermarket 

The industrial Divisions are also responsible for the production and 

part of the distribution of Aftermarket products on behalf of the Valeo 

Service structure, which handles the sale of products and services 

relating to the aftermarket. Valeo Service comprises two activities, 

one for each major distribution channel: automakers and their 

networks, and independent distributors (including trading groups). 

Valeo Service provides shared marketing and logistics services for 

both Branches. 

1.3. Domains 

Since the Valeo 2010 strategic plan was launched in 2004, the 

Group has adopted a transversal approach to develop new solutions. 

The Domains are responsible for the Research & Development 


Activity 

The Group 

and Marketing of transversal innovations. Their work centres 

around three strategic areas, in line with customers’ fundamental 

requirements: respecting the environment (Powertrain Efficiency 

Domain), safety (Driving Assistance Domain) and comfort (Comfort 

Enhancement Domain). Each Domain is in charge of its own budget. 

When the innovations designed and developed by the Domains 

reach the marketing stage, they are transferred to one or several 

Divisions which take charge of commercial negotiations, final 

development and production. 

1.4. Product Families 

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Valeo has ten P roduct F amilies which are, in alphabetical order: 

■ Climate Control; 

■ Compressors; 

■ Electrical Systems; 

■ Engine Cooling; 

■ Engine Management Systems; 

■ Interior Controls; 

■ Lighting Systems; 

■ Security Systems; 

■ Transmissions; 

■ Wiper Systems. 

Since May 2005, P roduct F amilies have been overseen by a single 

Department: the Operations Department. This Department was 

created to accelerate the deployment of best practices and the 

implementation of synergies between Product Families. It carries 

out operational control of the performance of individual Divisions. 

On April 1, 2007, Valeo created a new P roduct F amilies , Valeo Interior 

Controls, which combines switches and detection systems and the 

A/C control panel with the new camera-based vision assistance 

business of Connaught Electronics Ltd. It has also restructured 

some Divisions and product lines. These changes should allow the 

Group to provide a better response to the needs of its customers, 

with complete solutions developed in all three Domains—Powertrain 

efficiency, Driving assistance and Comfort enhancement. 

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1 Activity 

The Group 

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1.5. Functional networks 

The main functional networks are as follows: 

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technical networks, under the responsibility of the Group’s Technical 

Director since May 2005 (Quality, Purchasing, Industrial, Projects, 

Logistics, Information Systems, Real Estate) and Valeo’s “5 Axes” 

deployment and audit system; 

Sales and Business Development , structured according to customer 

business, with a Client Director dedicated to each major automaker, 

and according to geographic region, with a Country Director for 

each major country (China, Germany, India, Japan, North America, 

Poland, South America, South Korea, Spain); 

Research and Development, under the functional responsibility 

of Product Families and the operational responsibility of Domains 

and Product Marketing; 

Human Resources, in charge of managing skills (from recruitment 

to remuneration via internal mobility), training, and adherence to 

the Group’s Code of Ethics; 

Risks Insurance Environment Health Safety, which co-ordinates all 

actions in these domains; 

2. Domains and Product Families 

The purpose of the Domains is to foster innovation in order to 

offer the market comprehensive solutions relating to the issues of 

safety, the environment and comfort (see paragraph 1.3. above). 

The Domains work in synergy with the various Product Families in 

order to offer innovative solutions bringing together the Group’s 

different fields of expertise. 

2.1. Powertrain Effi ciency 

This Domain devises systems for enhancing vehicle performance 

and driving pleasure while minimizing fuel consumption and 

pollutant emissions. Five Product Families contribute in particular 

to developments in this Domain: Engine Management Systems, 

Electrical Systems, Engine Cooling, Compressors and Transmissions. 

2.1.1. Engine Management Systems 

By improving the specific performances of the engine, electronic 

management systems reduce the environmental impact of 

vehicles while enhancing the driving experiencing and enriching 

the Powertrain Efficiency Domain offering. 


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all Finance, Legal and Strategic operations: 

the Financial Control network guarantees the reliability of financial 

reporting and certain physical indicators. Along with the teams 

in the Operations Department, it oversees the implementation 

of action plans, 

the central Accounts teams define and apply rules relating to 

the risk management of external financing and of market risks 

relating to changes in interest rates, currency values and raw 

material costs, 

disposals, acquisitions and the creation of joint ventures are 

coordinated centrally by a specialized team, supported, where 

necessary, by expertise from individual Product Families and 

Divisions, 

Financial Communications; 

the centralized Communication Function defines communication 

plans and coordinates internal and external communication 

networks within the Product Families. 

In 2007, Valeo Engine Management Systems focused particularly 

on the following areas: 

■ the development of an original architecture for exhaust gas 

recirculation (EGR) both for diesel engines (with a view to 

reducing pollutants covered by the pending Euro6 standard) and 

for gasoline engines (in order to generate fuel savings); 

■ the development of Smart Valve Actuation technology, also 

known as e-Valve, which was pursued and supported by several 

major automakers. The technology used in this system represents 

a considerable advance in gasoline engines as it reduces 

consumption by 15-20% in mixed driving cycles, and also reduces 

pollutant emissions. The system also offers users an improved 

performance and a more comfortable driving experience. 

Other key products of Valeo Engine Management Systems are as 

follows: 

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complete engine management systems for gasoline and diesel 

engines; 

engine control units; 

electric motor drives; 

emission control systems and components; 

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ignition components; 

injectors; 

sensors. 

2.1.2. Electrical Systems 

The Electrical Systems Product Family covers key functions of the 

vehicle, such as electrical energy generation and management and 

engine ignition, aiming to provide greater driving comfort and to 

reduce fuel consumption and pollutant emissions: 

■ the StARS micro-hybrid system on the market; this system 

stops the engine when the vehicle comes to a halt and restarts 

it immediately and silently when the driver releases the brake, 

giving fuel savings of up to 28% in heavy urban traffic. This system 

is under further developments, especially towards hybridization 

(See “Powertrain Efficiency”, section 2.1.1. of “Key Events in 

2007”); 

Other products produced by Valeo Electrical Systems include: 

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starters; 

alternators; 

battery management systems; 

renovated alternators and starters for the aftermarket; 

electromagnetic retarders for trucks and buses. 

2.1.3. Engine Cooling 

This Product Family develops and manufactures components and 

modules for a full range of powertrain cooling functions, with a 

view to reducing pollution and fuel consumption, and enhancing 

passenger comfort. 

In 2007, Valeo Engine Cooling focused on the following innovations 

in particular: 

UltimateCoolingTM ■ 

, which offers both improved engine 

performance and a reduction in fuel consumption and pollutant 

emissions. (For more technical detail, see “Powertrain Efficiency”, 

section 2.1.1. of “Key Events in 2007”); 

■ the new modular front end, compliant with Phase 1 of the 

“Pedestrian Protection” regulation, launched in 2007, and specific 

solutions in terms of shock and energy absorption, pending 

the adoption of Phase 2, which comes into force in Europe in 2010. 

In combination with UltimateCooling, these allow automakers 

to conform to the new regulations; 

■ with regard to the new European regulation prohibiting the use 

of the refrigerant gas R134a on vehicles entering production as of 

2011, a new range of exchangers compatible with the new 

CO refrigerant fluid (replacing R134a) has been developed. 

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In addition, Valeo is assessing alternative refrigerants and their 

impact on current systems; 

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Activity 

The Group 

the Themis TM valve, built into the engine cooling circuit, is an 

electronic management system for engine cooling and heating. 

It is being developed for the first mass-produced applications, 

with an extended range of electronic valves to cover all engines. 

The gains offered by this system in terms of fuel savings and 

comfort enhancement support the trend towards the downsizing 

of today’s engines, one of the most promising ways of generating 

fuel savings. 

Further Valeo Engine Cooling products include: 

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thermal management systems for powertrains; 

charge air cooler modules and charge air coolers; 

cooling modules; 

condensers; 

exhaust gas coolers; 

oil exchangers; 

fan/motor systems; 

front end modules. 

2.1.4. Compressors 

Valeo Compressors develops and produces compressors for air 

conditioning systems. The solutions it offers include controlled 

air conditioning compressors, with reduced energy requirements. 

Valeo Compressors contributes to the Powertrain Efficiency Domain 

with innovations such as: 

■ the R744 Compressor, a key component in the next generation 

of air conditioning systems which will use the natural and 

environmentally friendly CO coolant. 

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This Product Family also develops and produces the following 

products: 

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pallet compressors; 

fixed-cylinder compressors; 

variable-cylinder compressors. 

2.1.5. Transmissions 

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Valeo Transmissions develops and produces systems that transfer 

engine power to the powertrain of passenger cars and industrial 

vehicles. The solutions it offers incorporate innovative systems that 

dampen noise, vibrations and harshness. This Product Family is 

present in all major markets in both the original equipment and 

aftermarket segments. 

Valeo Transmissions has developed innovations that include: 

■ the double dry clutch, a technology combining two clutches 

and their electromechanical actuators, which allows the design 

of automated manual (double clutch) transmissions, offering 

good fuel savings compared to classic hydraulic automatic 

transmissions; 

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1 Activity 

The Group 

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new generation vibration dampers for manual and automatic 

gearboxes, with better use of the fan/motor system and 

substantially reduced consumption and improved acoustic comfort. 

More especially : dual mass flywheels with improved performance, 

clutches with wide-clearance dampers (NCR, New Clutch 

Range) and new generation “ultra flat” torque converters with 

dampers; 

■ G5 clutch facings, the first range of “green” clutch facings, which 

anticipate changes in European environmental legislation and 

enable Valeo production sites to considerably reduce atmospheric 

emissions and improve working conditions. 

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cover assemblies; 

discs; 

clutch facings; 

release bearings; 

hydraulic clutch actuators; 

flexible flywheels; 

systems for automated manual transmissions 

torque converters; 

lock-up range. 

2.2. Driving Assistance 

The Driving Assistance Domain designs and produces solutions for 

monitoring the vehicle perimeter, providing the driver and other road 

users with information about the vehicle’s immediate environment 

and initiating necessary corrective actions. Three Product Families 

contribute in particular to developing innovations for this Domain: 

Interior Controls, Lighting Systems and Wiper Systems. 

2.2.1. Interior Controls 

The Detection Systems segment of the Interior Controls Product 

Family designs and manufactures solutions and sensors which 

improve the driver’s control of the vehicle’s immediate environment. 

The acquisition of Connaught Electronics Ltd. in July 2007 represented 

an important step in the strategic reinforcement of the Driving 

Assistance Domain. The firm is perfectly adapted to the Domain’s 

parking assistance offer and enhances its position in the growing 

camera business. 

In 2007, Valeo Interior Controls made important contributions to 

the following: 

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Ultrasonic Park Assist Systems which facilitate parking 

maneuvers, using four or eight ultrasound sensors at the front 

and rear of the vehicle; 


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the Park4U TM park assist system, which allows a car to be 

parked in just a few seconds without the driver even touching the 

wheel. Using ultrasound technology, it makes parking maneuvers 

safer and more comfortable; 

parking assistance system based on cameras. The vehicle is 

equipped with one, three or five cameras at the rear, front and 

sides, and allows the driver to visualize the vehicle’s immediate 

environment, facilitating forward or reverse maneuvers at low 

speed. It is a perfect addition to the ultrasonic park assist range; 

the lane departure warning system, LaneVueTM , which alerts 

the driver to unintentional lane departures via an audible or 

vibrating signal when activated by a camera located in the upper 

part of the windscreen; 

OptiVeoTM ■ 

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■ , vision systems platform. At the front of the vehicle, 

a state-of-the-art, highly sensitive compact camera positioned 

behind the rearview mirror provides a permanent view of the 

road and fulfils several functions, including automatic switching 

between full-beam and dipped headlamps, infrared night vision 

and automatic detection of speed restrictions, and informs the 

driver of current speed limits via an eye-level display; 

■ the blind spot detection system, alerting drivers to the presence 

of any vehicle in their rearward blind spots, using the multiple 

beams of two radars built into the car’s rear bumper. 

For the Driving Assistance Domain, Valeo Interior Controls 

develops and produces detection systems based on the following 

technologies: 

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ultrasound and infrared sensors; 

radars; 

cameras. 

2.2.2. Lighting Systems 

The role of the Lighting Systems Product Family is to improve driver 

visibility and clearly indicate vehicle position and changes in vehicle 

direction or speed, in all weather conditions. The distinctive styles 

of headlamps and rear lamps are also key design features, playing 

an increasingly important role in automakers’ efforts to differentiate 

the styling of their new models. 

In 2007, Valeo Lighting Systems contributed the following innovative 

systems to the Driving Assistance Domain: 

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adaptive Lighting, an addition to dynamic bending light, which 

adapts to different driving situations, such as motorway or city 

driving, and to weather conditions (rain and fog); 

the night vision system, XtraVue, which offers drivers three 

times the level of standard visibility without a dazzling effect, 

using infrared technology; this infrared active night vision system 

enables drivers to drive using dipped headlamps while enjoying 

visibility equivalent to driving with full-beam headlamps; 

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LED front and rear lighting and signaling technologies, 

which combine high performance, energy savings and innovative 

designs at the front and rear of the vehicle. This technology is 

used for daytime running lamps, which will be mandatory in all 

light vehicles throughout Europe from 2012 onwards; 

XLEDTM adaptive headlamps: Xenon directional lighting 

associated with LED modules featuring directional lighting functions 

and automatic additional lighting on highways offer optimal 

visibility (up to 90% better than halogen lamps) depending on 

driving conditions; 

dual-function headlamps with low and main beams that 

use mercury-free Xenon bulbs, an environmentally friendly 

technology. Valeo was the first supplier to market this kind of 

headlamp; 

adaptive rear lights with MicroOpticsTM ■ 

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technology: 

the uniform light surfaces achieved using this LED technology 

offer not only optimal visibility but also a wide range of design 

options. The warning signals for each situation (fog, sudden 

braking, reversing, oncoming vehicles, opening doors) inform 

drivers in following vehicles and help prevent accidents. 

The Valeo Lighting Systems range also covers: 

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main headlamps; 

foglights; 

auxiliary lights; 

leveling devices and lamp wipers; 

lighting controllers; 

DRL lamps (traditional lamps and LEDs); 

rear lighting including LED rear lamps and center high-mounted 

stop lamps; 

cigar lighters and multifunction sockets. 

2.2.3. Wiper Systems 

As a contributor to the Driving Assistance Domain, Valeo Wiper 

Systems offers windshield and rear window wiping solutions to 

give the driver perfect visibility in all weather conditions, for both 

the original equipment sector and the aftermarket. These solutions 

combine the latest innovations in terms of technology and design. 

In 2007, Valeo Wiper Systems continued to develop new products 

including: 

■ 

second-generation front and rear ultra-flat wipers: ultra-flat 

wiper systems combine elegance and exceptional performance. 

Their unique design, optimal aerodynamic form and light weight 

are a renowned combination that is greatly in demand; t he second 

generation of ultra-flat wiper blades is more aerodynamic, more 

compact, lighter and helps to prevent snow accumulation under 

the blade; 

■ 


Activity 

The Group 

a new generation of XL ultra-flat blades, which provide excellent 

wiping quality on large windshields and are increasingly fitted 

on MPVs; 

■ these wipers, using electronic front motors, are simple to fit 

and allow great freedom of design for automakers in addition to 

offering a significant reduction in the vehicle’s mass; 

■ a new rear motor using a technology that reduces mass, 

improves acoustic performance and reduces costs, was also 

developed in 2006; 

■ heated wash systems. 

The Wiper Systems Product Family includes: 

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arms; 

blades; 

linkages; 

motors; 

washing systems; 

front and rear wiping systems integrating other functions such as 

stop lights and latches. 

2.3. Comfort Enhancement 

The Comfort Enhancement Domain aims to facilitate vehicle use 

and improve vehicle comfort. This covers all phases of vehicle use: 

approach, access, ignition, driving and exiting. The three Product 

Families which work in synergy to develop solutions for this Domain 

are: Security Systems, Interior Controls and Climate Control. 

2.3.1. Security Systems 

< Contents > 

This Product Family develops and manufactures parts and systems 

that guarantee controlled and comfortable access to vehicles, while 

ensuring maximum protection against theft. The end user can 

therefore enjoy practical and comfortable solutions in a personal 

and innovative style, from the Comfort Enhancement Domain. 

During 2007, Valeo Security Systems unveiled: 

■ the Smart Car Key identifier, a new generation of intelligent, 

interactive hands-free keys. (For more technical detail, see 

“Comfort Enhancement”, Section 2.1.3 of “Key Events in 2007”); 

■ keyless access and ignition systems, a pioneering field for Valeo 

Security Systems which highlights its expertise. Valeo’s innovational 

skills have allowed it to develop a unique component—Valeo 

ALIAS (ASIC Logic for Intelligent Access System—incorporating the 

management of the system’s main functions. This solution offers 

users transparent unlocking (immediate perceived response), 

personalized locking solutions according to the preferences of 

the automaker, and a high level of reliability; 

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automatic tailgate closure with presence detection, allowing 

the user to open and close the trunk safely and effortlessly; 

assisted closing of the lateral doors, facilitating and ensuring 

correct closure without slamming or pinching; 

the styling and decoration business developed with handles and 

keys enables the user to personalize their vehicle in a completely 

new way, in terms of patterns and colors, without altering shapes 

or original materials. 

Valeo Security Systems also develops and produces the following 

ranges: 

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radio-frequency remote access controls and receivers; 

transponder-based immobilizer systems; 

steering column locks (mechanical and electrical); 

handles (especially mechatronic handles for hands free access 

systems); 

mechanical keys and locks; 

latch sets. 

2.3.2. Interior Controls 

Described in point 2.2.1. above for its contribution to the Driving 

Assistance Domain, Valeo Interior Controls develops innovative, 

intuitive and user-friendly solutions designed to improve cabin 

comfort. 

This Product Family encompasses the h uman-machine interface 

activity, top column modules, steering sensors and body 

controllers. 

In 2007, Valeo Interior Controls contributed products from s witches 

and HMI to the Driving Assistance Domain, focusing on: 

■ the faceplate of the central console, which can accommodate 

controls for the radio, air conditioning and other functions. 

The available technologies (touchpad, capacitive sensors, 

magnetic indexing, black panel) meet the increased demand 

among automakers for perceived quality. The faceplate offers new 

styling possibilities, is easy to fit and to adapt to a multiplatform 

deployment; 

■ the development of an intelligent interface surface, or touchsensitive 

controls: this innovative solution offers a telephone 

keypad and handwriting recognition on a single interface with a 

simple and discreet black panel assembly. The range of feedback 

possibilities allows automakers to highlight their brand; 

■ E-Media offers the ideal compromise between managing a 

large number of functions and ease of use. It is a multifunctional 

control interface that reduces the number of switches on the 

center console and improves ergonomics for the driver. As 

soon as the user places his hand on one of the joysticks, the 

screen displays the menu for the corresponding function groups: 


audio, air-conditioning or communication. The joysticks are easy 

to customize in terms of the number of movements, touch 

detection, magnetic indexing, illuminated fixed central symbol 

and finishing; 

■ the development of a complete range of torque sensors 

and steering angle calculators (angle sensors, torque sensors and 

combinations of both); 

■ the first applications of the protective housing for the power-supply 

management. 

For the Driving Assistance Domain, Valeo Interior Controls develops 

and produces the following product ranges: 

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top column modules; 

cabin comfort controls and control panels; 

steering angle sensors (angle and torque sensors); 

electronic control units. 

2.3.3. Climate Control 

This Product Family offers intelligent heating, ventilation and air 

conditioning (HVAC) systems that enhance individual comfort 

for vehicle occupants, in all circumstances, while limiting energy 

consumption. 

In 2007, Valeo Climate Control developments were particularly 

focused on the following systems and technologies: 

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< Contents > 

R744 air conditioning systems: protecting the environment and 

compliant with the European regulations coming into force in 

2011. These systems will generalise the use of refrigerants that 

respect the environment. With a much lower impact on global 

warming than systems using R134a, the new solutions represent 

a significant technological advance; 

management of the Air Conditioning Low Consumption 

(ACLC): the optimisation of the air conditioning loop and the use 

of lighter, innovative parts, coupled with the use of electronic 

control algorithms, promote maximum efficiency and significant 

energy savings; 

hybrid engine system: Valeo is contributing to the development 

of the drivetrain with standstill air conditioning systems for the 

“Stop-Start” function, which includes a “Stop Stay Cool” evaporator 

which keeps the air cool when the engine shuts off for the StARS 

system, helping to save fuel without compromising comfort; 

solutions for regulating the temperature of the battery; 

a range of air quality products for the OEM and the aftermarket, 

aimed at protecting passengers from ultrafine diesel particles, and 

improving their well-being with, for example, the anti-allergen 

filter, the vitamin C filter and products to eliminate bad odors 

associated with air conditioning. Valeo has also developed cabin 

purification modules based on ionization technology. 

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Valeo Climate Control has four product lines: 

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air conditioning systems and modules (aircon loop and aircon 

modules, including evaporators and heater cores); 

decentralized interior comfort modules (rear air conditioning, 

booster, Thermeo thermo-electric module); 

3. Aftermarket products and services 

Valeo Service consists of two activities whose roles are to 

supply original equipment spares to automakers and universal 

market spares to the independent aftermarket (see section 1.2. 

“Organization: Aftermarket”). It offers Aftermarket customers 

a wide range of products and services designed to increase the 

effectiveness of repair specialists. The offering responds to increased 

customer demands, going beyond simply supplying parts, to include 

ever more comprehensive and optimized services and technical 

skills (training materials, diagnostic and sales tools, technical and 

marketing support). 

In 2007, Valeo Service focused its efforts on improving customer 

satisfaction in the following ways: 

■ the launch of an innovative range of post-equipment, driving 

assistance and parking assistance products, including the Guideo 

system, which received the silver trophy at the Equip’Auto 

Innovation Grand Prix; 

■ the speeding up of OEM product availability for the original 

equipment spares market; 

■ logistics excellence through improved service levels: working 

in partnership with customers allows proximity stocks in each 

country and improved stock coverage using flexible delivery 

methods; 

■ a solution offering tailored recommendations and optimisation of 

stocks for distributor customers. 

Valeo Service extended and expanded its range of products and 

services in 2007, with: 

■ 

■ 

■ 

the launch of more than 2,000 new product references, increasing 

coverage for all product lines, with a particular emphasis on the 

engine cooling circuit and products made in Asia; 

doubling the number of references for the 4-part clutch kit (an 

innovative OE solution replacing the dual-mass flywheel and its 

kit); 

constant updating of catalogues (on paper—over 25 new print 

catalogues in 2007, multimedia and online) and the launch of a 

CD on impact parts for repair specialists; 

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Activity 

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air quality products (filters (for particles, gas and odors), scent 

diffusers, ionizers); 

adapted products for the aftermarket. 

the development of web and extranet functions to improve 

customer service (rates and instruction sheets for download, 

creation of extranets by customer); 

■ geographical expansion of the eXponentia training program, 

which keeps repair professionals up-to-date with ever more 

numerous and complex developments in current vehicle 

technologies; 

■ new packaging for the wiper range, along with new merchandising 

solutions for traditional distributors and for self-service sales; 

■ new communication tools for truck professionals. 

Valeo Service offers 176 product ranges covering 12 product 

functions for light, commercial and industrial vehicles and trucks. 

It is organized as follows: 

■ 

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< Contents > 

wiper systems: blades, arms, linkages and front and rear wiper 

motors, positioned according to brand (Valeo, Marchal, PJ, SWF, 

Cibié and own brands); 

transmissions: traditional two- and three-piece kits, four-piece 

kits with rigid flywheel, hydraulic components (three-piece kit with 

hydraulic release bearings as well as hydraulic release bearings 

available separately); dual mass flywheel, flexible flywheel; 

lighting systems: main headlamps, Xenon headlamps, auxiliary 

headlamps, (including Xenon long-range and fog lamps), rear 

lamps, daytime running lights, rear direction indicators, lamps, 

work lamps, customised lamps (laser patterns for front and rear 

lamps, headlamps with color mask, rear LED lamps); 

climate control: products belonging to the Air Quality range 

(cabin filters Clim Filter, Clim Pur, Clim Spray), compressors, 

condensers, filter driers, heaters and blowers, Climtest 2 diagnostic 

and maintenance tools, Climtest+, AirTest, CLIMFILL, regulation 

parts; 

engine cooling: heat exchangers, water pumps, thermocontacts, 

thermostats, EGR valves, cooling fluids, particle filter exchangers, 

fans; 

electrical systems: starters and alternators (new and renovated), 

a wide range of spare parts; 

post-equipment: driving and parking assistance systems; 

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PAGE 18 

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electrical accessories: window lifts, comfort and pre-heating 

timers, relays, cigar lighters and multifunctional sockets; 

security systems: steering column locks, keys, locks, door 

handles, fuel caps; 

switches: steering column switches, actuators; 

4. Functions 

4.1. Human Resources 

Valeo’s Human Resources Function continues to pursue its strategy 

of supporting the Group’s international expansion by designing a 

global policy that is rolled out taking account of the characteristics 

of the local job markets. 

The Group seeks to encourage the commitment of its employees 

at every level throughout the world, and pays close attention to all 

factors which help to motivate people at work. 

Using a dynamic training policy and the latest techniques to update 

and improve people’s skills allows Valeo to maintain an edge over 

strong competition and gives its employees career develoment 

possibilities. 

Internal mobility grew strongly in 2007 as Valeo focused on the 

internal promotion of its staff to the best of their potential. 

In 2007, Valeo also recruited 11,186 employees throughout the 

world including 1,280 engineers and managers, bringing new skills 

to the Group. 

4.1.1. Management development 

The skills management system is a comprehensive range of 

procedures and tools available to managers to drive the effective 

development of Valeo employees. This system is used to recruit, 

develop and motivate employees, not just in their day-to-day work 

but also to achieve the Group’s strategic objectives. 

The three major constituents of the management development 

strategy are external recruitment, which also includes relations 

with educational establishments, internal mobility and personal 

development, and remuneration and benefits. 

4.1.1.1. Recruitment and relations with schools 

and universities 

Recruiting the best talent is a key factor of Valeo’s success. 

Qualified teams ensure Valeo can offer its customers around 


■ 

■ 

braking: brake pads, discs and shoes, rear brake kits, hydraulic 

components, brake fluid; 

< Contents > 

ignition: pencil ignition coils, ignition rails, integrated ignition 

modules, spark and glow plugs and a wide range of spare parts 

for ignition systems. 

the world value-added services in terms of innovation, total quality 

and competitive solutions and services. 

To ensure that recruitment, both internal and external, is managed 

coherently and professionally, all managers are trained using a 

recruitment kit made available to them. This kit brings together 

in a single document all the existing tools, such as the Employer 

Brand, developed in 2002, the Internal Mobility Charter and the 

Valeo Competences system, launched in 2004. A Recruitment Guide 

explaining the Group’s operating culture and the key messages to 

communicate to applicants, is the main element of the recruitment 

kit. By offering a standard recruitment policy based on objective 

selection criteria, the Recruitment Guide helps to promote diversity 

at Valeo and to eliminate all forms of discrimination. 

Valeo has also continued and strengthened its relations with higher 

education institutes, in particular by developing partnerships with 

universities and schools recognized at an international level. In 

2007, the Group took part in many events to make contact with future 

graduates of these establishments, for example the ATUGE forum in 

Tunisia, the Best forum in Krakow (Poland) and Lviv (Ukraine), the 

Education and Innovation forum in Bucharest, the ATHENS forum 

and Women in Leadership in Paris (France) and special day events 

organized with universities in Wuhan and Changchun (China). 

Valeo has also intensified relations with a number of partner 

schools and universities, especially Supélec, the Technological 

University of Compiègne (UTC), ESIGELEC, Supmeca, ENS Cachan, 

ESEO, the Technical University of Krakow (AGH), and has concluded 

a framework partnership agreement with AUDENCIA (Nantes, 

France). In addition, Valeo sponsors the “Elles Bougent” association 

which promotes careers in the transport industry for female 

secondary school students and helped to organize the first green 

mobility rally. 

Finally, Valeo sponsors the ShARE student association, for students 

from the top Asian universities, and took part in the organization of 

ShARE’s world seminar in Paris last December. 

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4.1.1.2. Internal mobility and individual development 

To offer attractive career prospects to the 11,294 engineers 

and managers employed by Valeo, the Group’s policy demands 

that at least three out of four positions are filled internally. These 

career prospects are formalized through the creation, each year, 

of a Succession & Development Plan to identify the next stages in 

the career development of each engineer and manager. The plan 

is implemented via a review committee responsible for making 

decisions regarding internal job applications. In order to prepare 

employees for success in the next stage(s) of their career, Valeo 

has a standard “individual development plan” format comparing 

skills acquired with skills required for the next stage, allowing very 

detailed individual development plans to be drawn up. The plan is 

based on the “3 E” approach, which favors structured experience 

and first-hand knowledge in addition to more traditional training 

and education. Using these tools, more than 2,350 engineers and 

managers benefited from career development actions in 2007. 

To encourage the spread of policies, cultures and methodologies, 

and to offer international opportunities, the Group must be able to 

expatriate around 100 experienced managers every year. In order 

to be effective, Valeo’s international policy must be both competitive 

on the employment market and cost-effective for Valeo. 

4.1.1.3. Remuneration and benefits 

The Group has to monitor constantly the employment market in 

order to remain competitive, motivate and retain its talent. It also 

has to adapt its practices by offering appropriate remuneration to 

its teams everywhere in the world. The Group makes a point of 

offering competitive salaries on such volatile job markets as the 

Czech Republic, Mexico, Poland, Romania and Thailand, while 

adapting the benefits extended to its staff in the following countries: 

Brazil, China, the Czech Republic and Thailand. The human resources 

management rules are constantly updated as the Group expands 

into different countries, for example Iran, Ireland and Russia. 

4.1.2. Training 

At Valeo, training is used to serve and support the Group’s strategy 

of profitable growth. 

Valeo methodologies and processes are taught at its 5 Axes schools 

located in Europe, America and Asia. The Group’s networks deploy 

their training offer in internal Academies run by their specialists. 

The teaching system is designed as courses comprising various 

learning methods: e-learning, seminars, telephone training and, 

increasingly, training based at the workstation or in operational 

conditions. The Group is stepping up its policy of expanding 

on-the-job training and involving proximity management. 


Activity 

The Group 

The increase in internal training is linked to the need for versatile, 

multidisciplinary operators and to the development of QRQC 

(Quick Response Quality Control) teaching methods. 

Spending on training, which came to 1.6% of the payroll in 2007, 

is therefore only part of the Group’s training effort. 

65% of training hours were dedicated to the adaptation of the 

workstations and 35% to the development of new skills and 

preparation for internal mobility. 

Valeo has also increased its contribution to youth training, taking in 

1,200 trainees and 800 apprentices. 

Over 80% of employees participated in at least one training 

course, as part of the Group’s skills development policy. The online 

availability of several modules in different languages helps to increase 

the efficiency of our training offer, which has been expanded with 

internally designed modules on the development standards of products 

or systems and R&D. The development of the Valeo C@mpus offer also 

allows training courses to be more specifically personalized. 

Safety is one of the Group’s priorities: risk detection training and the 

eradication of root causes have both been intensified. An internal 

knowledge management system also helps the lessons learned in 

this respect to be shared, which consequently supports prevention. 

Safety actions have increased and impacted 48% of staff last year. 

4.1.3. Code of Ethics 

< Contents > 

The Valeo Group has been aware of its social and environmental 

responsibilities for some years, and has pledged to honor them 

by adhering to national laws and international treaties and 

agreements. 

It has made a number of commitments, both internally and 

externally, and has signed up to the UN’s Global Compact. In doing 

this, Valeo is undertaking to promote the fundamental rights set forth 

in the Universal Declaration of Human Rights, the dignity and value 

of human beings, the private life of its employees and the equality 

of women and men. 

As required of signatories, Valeo informs the Global Compact 

(Communication of progress: COP) every year of the progress it has 

made in these areas. 

In 2005, these commitments were enshrined in a Code of Ethics, 

circulated worldwide and laying down rules for the Group’s staff and 

for all the legal entities constituting Valeo, including countries where 

the letter of the law is less severe. 

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The Code of Ethics includes the prohibition of child labor, disabled 

workers, discrimination and harassment, and health and safety in 

the workplace. It also demonstrates the Group’s commitment to 

sustainable development: the environment, human resources, social 

dialogue and freedom of expression, as well as each employee’s 

individual development. It covers the Group’s commitments 

to society (professional training, new employment assistance, 

reindustrialization), business conduct and professional conduct. 

Finally, the Code states that Valeo service-providers, consultants 

and subcontractors are obliged to act in accordance with the ethical 

rules outlined by the Group. 

For the second year running, the Halde (French authority combating 

discrimination and promoting equality) listed a Valeo “good practice” 

in its annual report. The exemplary practice cited by the Halde, 

after last year’s “Recruitment Kit”, was the “Manager’s Evaluation 

Procedure”. 

Public recognition of this kind of tool by an independent 

administrative authority responsible for promoting equality and 

combating discrimination demonstrates Valeo’s commitment to the 

values expounded in its Code of Ethics and its determination to 

implement systems that promote them. 

4.1.4. Industrial Relations 

Valeo is firmly committed to a forward-looking employment and 

skills management policy. 

In view of the ongoing necessity to rationalize its industrial base, the 

Group actively seeks solutions which will provide alternative jobs 

for employees affected: transfers within the Group, individual and 

collective external redeployment, new employers to take over sites 

in question, the reindustrialization of employment regions and local 

economic development initiatives. 

Employee representatives are regularly informed and consulted on 

these operations. 

The Group’s social indicators can be consulted in section “Social 

indicators” in chapter 2 “Management Report”. 

4.2. Risk Management Insurance Environment 

Health Safety 

4.2.1. Risk and Insurance 

Valeo’s risk management policy is founded on the basis of a network 

of correspondents, rigorous procedures and management systems 

for improving performance. 


< Contents > 

The Risk Insurance Environment Department has created a 

dedicated organization, encompassing all Group departments, 

and helped by Coordinators assigned within each Product Family. 

These Coordinators provide technical support to Health Safety Security 

Environment (HSSE) managers at each site and report their findings 

to the Risk Management Committee, the central steering body 

of the Group’s Risk Insurance Environment Department. In addition 

to the Risk Insurance Environment Director, this Committee has nine 

members (one for each Product Family, two of whom have two 

Product Families under their responsibility, and a Coordinator for 

Valeo Service). 

The Valeo approach, applied systematically at all Valeo sites, can be 

summarized as follows: respecting obligations imposed by national 

legislation as well as those defined by Group policy (which exceed 

the requirements of national regulations in many areas), identifying 

risks, evaluating their impacts, setting objectives, implementing 

action plans to reduce – or where possible to eliminate – risks, and 

finally to measure, by means of regular audits, the progress being 

made. 

All procedures regarding health and safety, building security, 

the environment and the protection of knowledge and expertise 

are detailed in the Risk Management Manual, which is updated 

on a regular basis. The Group also produces an Insurance Manual, 

updated on an annual basis, providing comprehensive information 

on risk coverage and managing insurance programs. 

Each site has clearly identified risks. To achieve its objectives and 

bring risk levels down to zero, Valeo requires continuous visibility. 

Each site is subject to a full audit at least every three years, covering 

the environment, health, safety at work and the protection and 

security of buildings. This audit is carried out by external consultants, 

in accordance with local obligations, Group policy and good practice. 

It provides useful, detailed information—especially with regard to 

environmental concerns—on site activity, the surrounding area 

and the natural environment: geology, seismic risks, flood plains, 

etc. Actions to be implemented and associated action plans are 

established on the basis of these audits. 

Site action plans are communicated twice yearly at the Group level, 

providing the Risk Insurance Environment Department with precise 

and comprehensive information for evaluating the performance 

of individual sites. Each site is graded on an annual basis, based 

on factual criteria. 

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4.2.2. Environment 

Environmental protection demands a number of initiatives which 

are, by definition, long-term. Valeo has been committed to this for 

nearly twenty years, both in terms of product innovation and the 

management of industrial sites. 

The objective is of course to prevent environmental pollution, but 

also to protect the environment by reducing consumption of natural 

resources (water and raw materials) and energy, reducing or even 

eliminating the consumption of dangerous products, reducing waste 

and achieving maximum recyclability of all products, and offering an 

industrial environment that is both safe and pleasant to work in. 

■ 

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Valeo innovations systematically incorporate an environmental 

dimension into their design. This applies to a product throughout 

its lifetime: from design to production and use, right up to the 

management of the product at the end of its life. Since 1998, 

a group of experts in environmental matters and research and 

development from different Valeo Product Families have been 

working together to reduce the environmental impacts of 

processes and products over their entire lifecycle. This research 

group meets regularly to discuss specific topics such as the 

elimination of banned and restricted substances or the use of 

recycled plastic, for example. In 2007, the work group launched 

the process of compliance with the REACH Regulation (on the 

registration, evaluation, authorization and restriction of chemicals). 

This work will continue in 2008. REACH requires that chemicals 

bought or made by the company are listed, that the toxicological 

risk associated with their use is evaluated, and that if necessary, 

market authorization is sought for them. Today, Valeo is engaged 

in compiling an exhaustive list of the substances handled and 

sold, via the Group’s HSSE (Health Safety Security Environment), 

R&D and Purchasing networks. 

Valeo has also created a reference database of substances that 

are banned or restricted in the automotive industry. Updated again 

in 2007, this database details the regulations applicable in the 

different countries where Valeo operates and the requirements 

of its automaker customers concerning over 600 substances 

used in the composition of parts and in manufacturing and repair 

processes. 

To fulfill its progress objectives, Valeo bases its environmental policy 

on performance as well as the implementation of a management 

system which leads to regularly renewed external certification. 

This is the case with ISO 14001 certification, the international 

standard in terms of environmental management systems. 

At the end of 2007, 94% of the Group’s sites had ISO 14001 

certification, compared to 77% at the end of 2006. The aim 

is for all Valeo sites to be certified. Newly acquired sites are 

immediately integrated into this certification system. 

■ 


Activity 

The Group 

The g eneric plant is also a concept developed by Valeo, based on 

the work of the HQE (High Quality Environment) association, the US 

Green Building and World Bank recommendations. All new plant 

construction and refurbishment projects are carried out according 

to very detailed specifications. These cover site selection, plant 

architecture and construction, employee working conditions, plant 

operation, application of regulations, risk prevention, optimized 

energy consumption, and the reduction of emissions and waste. 

All building and renovation specifications involving safety, security, 

health and the environment are outlined in the Valeo Factory 

Design Guide. 

4.2.3. Health Safety 

As regards health and safety in the workplace, Valeo has begun 

a process for obtaining certification in accordance with the 

OHSAS 18001 international standard. Launched in mid-May 2005, 

the project aims to obtain certification for all Group sites and in 

2006 and 2007 was a key project for the Group in this domain. 

At the end of 2007, 74% of sites had OHSAS 18001 

certification, compared to 52% at the end of 2006 and 11% 

at the end of 2005. Like the ISO system, this health and safety 

management system is based on continuous improvement. 

The Group’s environmental indicators can be consulted in section 

“Environmental management and performance”, in Chapter 2 

“Management Report”. 

4.3. Industrial Functions 

Operational excellence is of critical importance to Valeo. 

The controlled expansion of the Group’s business requires the daily 

implementation of a basic principle: obtaining cost-effective total 

quality first-time, whether this involves methods, manufacture, 

projects or purchasing. 

The Technical Department, which brings together the Quality, 

Purchasing, Industrial, Projects, Logistics, Information Systems and Real 

Estate Departments was set up in 2005 to assist the Group in pursuing 

its plan of reducing costs and optimizing quality, as well as fostering 

cooperation between these seven functions. Its objective is to ensure 

that the 5 Axes are applied in a strict and disciplined manner. 

The 5 Axes methodology is applied around the world, by all 

Group employees, in order to deliver “zero defects” to the 

customer. The 5 Axes are: 

■ 

< Contents > 

Involvement of Personnel: this implies recognizing skills, 

enhancing them through training and giving people the means 

to carry out their responsibilities. Employees are particularly 

encouraged to make suggestions for improvement and participate 

actively in the work of autonomous teams; 

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Valeo Production System (VPS): the VPS is designed to improve 

the productivity and quality of products and systems. It consists 

of a pull-flow organization, flexible production resources, the 

elimination of all non-productive operations and stopping 

production at the first non-quality incident; 

Constant Innovation: to design innovative, easy-to-manufacture, 

high-quality and cost-effective products while reducing 

development time, Valeo has set up an organization based on 

project teams and the simultaneous engineering of products and 

processes; 

Supplier Integration: allows Valeo to take advantage of suppliers’ 

ability to innovate and develop productivity plans with them to 

improve quality. Valeo sets up close and mutually-beneficial 

relationships with a limited number of world-class suppliers and 

sustains these relationships in the long term; 

Total Quality: in order to meet customer demands in terms of 

product and service quality, Total Quality is required throughout 

the Group and from its suppliers. 

 

 

 

 

 

 

 


 

 

In 2005, a new definition of the 5 Axes replaced the previous version 

dating back to 2000. An update was carried out in 2007, based on 

all the audits of the previous year, and focusing on ten essential 

points for deployment in all Group sites to achieve operational 

excellence. 

< Contents > 

Three of these points rely on the QRQC approach (Quick Response 

Quality Control). Any problem which arises is immediately identified 

and analyzed on the spot by the parties involved. Corrective action 

is defined and implemented within 24 hours. This approach now 

applies to all domains: Production, Quality, Projects, Purchasing, 

Warranty, Logistics and Safety. 

The seven other points are: 

■ standard certification of operatives: ensures that every 

workstation has clear instructions and that all operatives are 

trained and capable of producing the right parts with the right 

quality at the right speed; 

■ the pull-flow industrial method: allows Valeo to reduce stocks, 

improve the productivity of the direct workforce and optimize 

deployment of resources and investments, in accordance with 

actual customer demand; 

■ the idea of Kosu: measures the resources required to manufacture 

one part. This is a cost performance and time monitoring indicator, 

designed to improve productivity; 

■ compliant project management: Project Management 

Committee meetings are held regularly, in accordance with Valeo’s 

project management process, to ensure “zero defect” launches, 

on time and with the predicted gross margin; 

■ identification of risk in the projects: all analyses of failure 

modes, their effects and their severity are carried out and the 

critical features are integrated into the control plans to ensure 

perfect quality; 

■ an appropriate supplier panel: all suppliers are selected 

according to several criteria, including their ability to provide Valeo 

with parts of the highest quality, their financial solidity and their 

ability for continuous improvement; 

■ the San Gen Shugi approach: all sites adhere to the principle 

of the three “realities” – real place, real part, and real data – in 

order to carry out flawless analyses of all problems encountered 

and to eliminate them once and for all. Feedback on experience, 

in the form of “Lessons learned cards” is entered into a database 

accessible to everyone via an intranet search tool. 

For the past ten years internal audits have been used to evaluate 

the results of the 5 Axes approach and Valeo has developed its 

own standards to analyze and improve the application of each of 

the 5 Axes. 

In 2007, moreover, the method used by the Product Families was 

adapted for use at Valeo Service. Most 5 Axes tools are applicable, 

with the exception of the Industrial and Innovation domains which 

have been altered for the specific needs of the after-sales markets 

and service. 

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4.3.1. Purchasing 

The role of Valeo’s Purchasing team is to reduce supply costs 

through increased sourcing in competitive-cost countries, 

implement rigorous selection processes for new suppliers, 

apply the total quality and innovation approach to suppliers 

and sub-contractors and establish close partnerships with 

the most innovative and best performing suppliers, in order 

to turn this strategy into a genuine competitive advantage. 

■ 

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■ 

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The Purchasing network covers all activities linked to supplier 

integration. Suppliers are divided into purchase families for 

products and services from raw materials to electronic, mechanical 

and plastic components, etc. The ten Valeo Product Families each 

have their own purchasing networks and there is a separate 

purchasing team for every Valeo site. The different Product 

Families are coordinated by Group Lead Buyers (based at the sites, 

these buyers coordinate and harmonize the purchasing policies 

of the different Valeo Divisions for which a given supplier works) 

and Group Commodity Leaders, who are responsible for strategy, 

as well as a panel of suppliers for each purchase family. 

Valeo deploys resources to help its suppliers improve their own 

quality processes. The Group’s QRQC approach continues to be 

implemented to assist suppliers in achieving zero defects. In 2007, 

210 suppliers were thus trained in this method. 

“Supplier Relationship Management” (SRM) is an essential 

tool in the relationship between Valeo and its suppliers. SRM 

is a secure extranet resource. Modules such as the Incident 

Management System and Supplier QCD monitoring (reporting 

back to suppliers on their performance in terms of quality, cost 

and delivery) can be accessed on the extranet, enabling Valeo 

and its suppliers to work closely together and share standardized 

processes, for example, in order to identify and process quality 

incidents rapidly. 

By working with fewer suppliers, Valeo is better able to support 

them in their quality strategies. The Group has thus retained 

the best suppliers in terms of quality, technology and productivity. 

In 2007, despite the addition of 150 additional suppliers due to 

the change in consolidation scope, the Group reduced the number 

of its suppliers by 40 to reach a total number of 2,574 (see Key 

Events - Strategic Operations). 

In 2007, Valeo pressed ahead with Convergence, a program 

designed to engineer a dramatic cost reduction while improving 

the quality of products produced by our suppliers. The system uses 

a specific monitoring tool, the Scorecard which provides a visual 

indication of quality performance and cost reductions implemented. 

It also provides three-year visibility of developments and areas 

of potential productivity, as well as indicating where such areas 

have not yet been identified. Each supplier Scorecard is monitored 

by a Group Lead Buyer (see above). In 2007, the Convergence 

■ 

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Activity 

The Group 

program involved 245 Valeo suppliers, representing 46% of Group 

purchasing. The program is complementary to the VIP program. 

Launched in 1999, Valeo Integrated Partners (VIP) program, covered 

80 suppliers in 2007, including suppliers from competitive-cost 

countries. In exchange for an undertaking from its suppliers to 

continuously improve operational performance, Valeo offers 

these partners greater volumes and business opportunities. 

With the launch of its new Code of Ethics, Valeo further tightened 

the requirements imposed on its suppliers in terms of labor rights 

and environmental protection. 

Innovating and designing products using different materials and 

new architectures can also help improve quality and reduce costs. 

Presentations to identify supplier innovations are organized on a 

regular basis. 

Valeo increased purchasing in low-cost countries. 

These purchases represented 37% of total production purchases 

in 2007 (compared to 33% in 2006). This result was achieved 

with the contribution of all Valeo teams as well as those of Valeo’s 

APO (Asian Purchasing Office) in Shanghai, which employs 

around forty people. 

4.3.2. The Valeo Production System and logistics 

The role of the Valeo Production System (VPS) is to improve 

product quality and customer service while at the same time 

reducing production costs and long-term assets. At the heart 

of this strategy lie the optimization of the industrial footprint 

and the deployment of a Total Quality Culture. 

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In 2007, Valeo continued to implement both its plan to standardize 

processes and equipment, using the Kosu approach to measure the 

resources required to manufacture a part, and also its investment 

optimization strategies. These operational standards make it 

possible to capitalize on experience, cut product development 

lead times, stabilize new production lines quickly while avoiding 

start-up problems, and cut costs at every stage of the process. 

All activities are now carried out using standards that supervisors 

must ensure are respected and improved. On the shop floor, 

performance is monitored in real time through a concrete analysis 

of what really happens on the production line. Problems are 

identified, immediately processed and turned into opportunities 

for improvement. Each operation is assessed for its contribution 

to the added-value of products, and operations lacking in this 

respect are eliminated. 

The ergonomic design of workstations continued to be improved. 

Each workstation is organized around the needs of operators, who 

have made significant contributions to improving their comfort and 

safety at work. This approach is also part of Valeo’s Occupational 

Health and Safety policy (see also section 4.2.3. “Health & Safety” 

of section 4 “Functions”). It helps reduce the number of accidents 

at the Group’s production sites. 

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1 Activity 

The Group 

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■ 

■ 

The specific features of the aftermarket are also taken into 

account at Valeo. This market imposes certain limitations on 

industrial operations. Products are mainly manufactured using 

the same production machines as for original equipment parts. 

If necessary, simplified lines designed for small volumes with low 

levels of automation can meet the requirements of this market. 

Servicing and maintenance of these specific machines are already 

in place. 

In order to optimize logistics, each Valeo plant is organized according 

to product flow. Responsiveness and flexibility with regard to 

customers’ requirements are fundamental. In particular, Valeo 

employs pull-flow methods to reduce stocks and simultaneously 

improve customer service levels. Two new techniques were 

applied in 2007: “the truck image” whereby orders are prepared 

in sequence to eliminate futile stock movements and “visual reordering” 

which reduces component stock levels, especially for 

shipping flows. The daily measuring of service levels is a rule 

which, little by little, is extending to our suppliers. 

4.3.3. Quality 

Quality is a key demand from consumers and automakers. 

It is the cornerstone of Valeo’s 5 Axes methodology, and an 

integral part of the Group’s culture. 

Total Quality is not just a question of methodology; it is above all 

a state of mind. It therefore requires the involvement of everyone 

at all times and in all circumstances. At Valeo, this approach is the 

responsibility of all 61,200 Group employees. 

■ 

■ 

− 

− 

− 

The role of the Quality network is to ensure that everyone is aware 

of and understands their individual responsibilities. It also consists 

of evaluating problems and requirements in terms of training 

support, and of training, supporting and validating lessons to be 

retained and shared to avoid any recurrence. 

The Valeo Quality network functions on the basis of a decentralized 

network and involves each of the 5 Axes: 

the Quality System Manager validates internal procedures, checks 

that they are applied properly, and updates them to ensure 

that they are in line with both internal and external quality 

standards, 

the Project Quality Manager ensures that the quality methodology 

is duly applied to projects and checks that projects are covered for 

their entire duration, in accordance with Valeo standards, 

the Supplier Quality Manager manages the quality of components 

delivered, from the project phase right through the product’s 

lifecycle and assists supplier progress through the implementation 

of improvement plans, 


− 

the Production Quality Manager ensures that quality-specific tools 

are properly implemented within the manufacture process and 

coordinates the deployment of control plans as well as instructions 

for work. He/she also acts as the “voice of the customer” for 

all quality incidents in order to ensure the customer’s total 

satisfaction; 

■ Valeo has also implemented a program of resident engineers, 

to provide optimal customer support. Engineers are no longer 

simply assigned to a given customer; they actually go and work 

at the customer’s premises. As soon as a problem is detected, the 

engineer communicates it to the appropriate people at Valeo, so 

that actions can be defined immediately to protect the customer. 

At the end of 2007, the Group had 72 resident engineers; 46 in 

Europe, 15 in North America, 8 in Asia and 3 in South America. 

Among these 72 people, a program of warranty resident engineers 

was also deployed, whereby 10 resident engineers joined the 

customer teams, either at the head offices or in their warranty 

management centers. 

Reinforcing the Valeo culture means mobilizing all employees at all 

levels, and is based on: 

■ 

■ 

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< Contents > 

the San Gen Shugi approach, inspired by Japanese best practices 

and based on a concrete analysis of what actually happens on 

the shop floor. San Gen Shugi is based on reality: Gen-ba (where 

and when a problem arises) Gen-butsu (using the actual parts 

involved, whether above or below standard), Gen-jitsu (with 

measurable facts). This attitude is founded on both individual 

responsibility and teamwork; 

the QRQC approach (Quick Response Quality Control) is also 

essential. When a problem occurs it is immediately identified 

and analyzed by the parties involved. Corrective action is defined 

immediately and implemented within 24 hours. In the event of 

a quality incident, meetings are held on the spot, to identify the 

root cause and eliminate it for good. These meetings involve 

employees from various functions as required: production, 

logistics, maintenance, etc.; 

in the automotive industry, non-quality of products is expressed 

in ppm (the number of defective parts per million produced). 

In four years, Valeo has reduced the number of defective parts 

by a factor of 18. In 2007, non-quality of products improved by 

29% compared to 2006, to reach 10 ppm at the end of 2007 

(compared to 14 at the end of 2006). 86 Valeo sites (compared 

to 55 at the end of 2006) were already below 10 ppm at the 

end of 2007. 

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4.3.4. Projects 

The Projects Department is responsible for promoting good project 

management practices, allowing for the launch of reliable products, 

free of quality problems and with guaranteed lifetimes. The role 

of this function is therefore to ensure that all Group projects are 

launched successfully, in terms of quality, deadlines and cost by 

implementing rigorous methods and applying them to the Group’s 

entire Project network. 

■ 

■ 

■ 

The Project function covers all domains for developing new 

applications, from standard products through to advanced 

development projects. Directors, project managers and all 

members of their teams work on development projects for the 

full spectrum of automakers. Project teams consist of buyers, sales 

staff and employees specializing in R&D, quality and processes. 

The methodologies implemented by the Projects function are 

taken from the 5 Axes approach. There are four project categories 

at Valeo: P3 (creativity), P2 (generic standards), P1 (customer 

application) and P0 (changes during the production phase for 

optimized costs and quality). This policy sets out in detail the 

project process at Valeo. In 2007 the Valeo project portfolio featured 

around 1,080 P0 projects, 1,900 P1 projects and around 600 P2 

and P3 projects, giving a total of 3,580 projects. It covers a wide 

variety of products from simple sensors, to highly sophisticated 

systems or complex integrated modules. The project management 

method is described in a document entitled Constant Innovation 

Policy. 

It also covers Group best practice and details the organization of 

teams, resource management guidelines and the development 

of systems and modules. Lean Investment and target cost 

techniques are also used to minimize production costs and 

maximize team outputs. The QRQC approach has also been 

adapted to suit the Projects function. Optimized IT tools support 

the monitoring of projects and performance. 

4.4. Research and Development 

Designing the automobile of tomorrow, creating technologies 

and products in accordance with the market, while 

anticipating its expectations and driving the market through 

innovation: these are the fundamental principles of Valeo’s 

Research & Development strategy. 

Innovation is, more than ever before, at the heart of the Group’s 

development strategy. Valeo engineers seek to anticipate automakers’ 

demand for solutions that offer real added-value for drivers: 

increased comfort, performance and respect for the environment. 

(1) Net of R&D expenditure rebilled to customers. 


Activity 

The Group 

In 2007, research and development spending represented 5.5% (1) 

of operating revenues, and over 545 new patents were filed. 

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< Contents > 

Faced with an ever more demanding market in terms of new 

products, Valeo has developed the processes necessary for 

reducing design lead times for new products. Thus, the Group 

works upstream to improve the in-house efficiency of projects, 

ensuring the appropriateness of actions scheduled and checking 

that existing competences correspond to those required (see 

section 4.3.4. “Projects”). Major efforts are made to reduce the 

cost of research and development, in order to satisfy market 

expectations. 

Since an innovation’s success is closely linked to its effectiveness 

and close conformance to drivers’ expectations, Valeo deploys 

a large range of tools, market research, forecasts and testing. 

Surveys are carried out to gain a better understanding of driver 

requirements and tests evaluate how new products are perceived. 

These tools thus enable Valeo to measure the extent to which 

innovations are accepted. The ultimate goal is to quickly develop 

and implement innovations which are useful to the driver and 

generate growth for Valeo. 

To reinforce its technological offer, Valeo also forges partnerships 

with top specialists, who are leaders in their field. In 2007, these 

efforts focused predominantly on ongoing partnerships from 

previous years: such as the association with Raytheon, the radar 

technologies specialist, with Jabil Circuit concerning the production 

of printed circuit boards, Iteris for lane departure warning systems 

and IBM for the development of onboard software. 

Valeo also partners a variety of universities and academic 

institutions, such as France’s École des Mines – Paris Tech within 

the Driving Assistance Domain, ESIGELEC for electronics, and in 

the US, Stanford University for simulation techniques and fluid 

mechanics. 

Finally, Valeo has proposed projects within the competitive centers 

on themes relating to energy, powertrains, mechatronics, software 

and complex systems, and has also invested in the governance of 

some of these centers (MOVEO, MTA, System@tic Paris-Région), 

which enables the Group to help bring universities, industry and 

research closer together. 

Valeo R&D centers are located throughout the world. 

The Group had 62 at the end of 2007, employing nearly 6,100 

people. Very high level R&D centers have also been opened in 

developing countries: Valeo has sites dedicated to R&D in Mexico 

City (Mexico), Prague (Czech Republic), Wuhan and Shanghai 

(China), Brazil and Poland. Teams working at these centers 

contribute to projects for both the local market and Group-wide 

projects. 

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1 Activity 

The Group 

PAGE 26 

4.5. Sales and business development 

Valeo develops, produces and commercializes original 

equipment and aftermarket products and systems for all car 

and truck manufacturers. 

The Group’s commercial policy extends well beyond everyday 

commercial relations and involves forging very close partnerships 

and accompanying their customers in developing their markets, 

throughout the world. 

4.5.1. Automaker customers 

Valeo’s top five OEM customers, representing a total 61.4% of Group 

sales are (in alphabetical order) Ford Motor Company, General 

Motors, PSA Peugeot-Citroën, Renault-Nissan, and Volkswagen. 

The Group’s biggest customer represents just over 19% of Valeo’s 

sales. 

Its main original equipment customers are (in alphabetical order): 

■ BMW; 

■ Chery; 

■ Chrysler; 

■ Daimler; 

■ FAW; 

■ Fiat; 

■ Ford Motor Company; 

■ General Motors; 

■ Honda; 

■ Hyundai; 

■ MAN; 

■ Mitsubishi; 

■ Navistar; 

■ Paccar; 

■ Porsche; 

■ PSA Peugeot-Citroën; 

■ Renault Nissan; 

■ Scania; 

■ SAIC Group; 

■ Tata Motors; 

■ Toyota; 

■ Volkswagen Group; 

■ Volvo Trucks. 


4.5.2. Operation 

The Sales and Business Development Function comprises three 

networks: 

■ National Directorates, which act as veritable ambassadors 

for Valeo in given geographical areas. Their role is to promote 

the Valeo brand in these regions, establish close relationships 

with the key customers in the regions and to resolve locally 

any legal or social problems, where necessary. There are ten 

National Directorates, based in China, Germany, India, Italy, Japan, 

North America, Poland, South America, South Korea and Spain. 

In 2007, a new National Directorate was created in India in order 

to coordinate the Group’s business on this growth market for the 

automotive sector, where Valeo has won several new contracts; 

■ the nine Group Customer Directors are the Sales Directors 

responsible for major automaker customers. Each represents Valeo 

in dealings with a given manufacturer and coordinates relations 

with the customer on a Group-wide basis, for all Product Families. 

In 2007, a Group Customer Director was appointed in South 

Korea, to help boost Valeo’s growing business on the country’s 

OE market; 

■ the Sales and Business Development network, consisting of 

ten Sales Directors each of whom is linked to a Group Product 

Family, defines the commercial strategy and is responsible for 

day-to-day customer relations. 

The Function’s commitments: 

■ 

■ 

■ 

< Contents > 

promoting recent technological innovations: Valeo presented 

its latest innovations at the 2007 International Motor Show in 

Frankfurt. The Group also organized over a dozen customer— 

specific events during the year, including Ride & Drive tests, 

Domain Days and Tech Days to boost its presence among the 

automakers and to highlight its pre-project innovations. This 

technological promotion was fruitful: orders for innovative 

solutions recorded by Valeo rose considerably in 2007 compared 

to the two previous years, and come to 32% of the order book; 

developing OE customer-specific sales strategies: Valeo has 

developed a certain number of tools to ensure that commercial 

relations with its customers foster a context of profitable growth 

and drive markets: the Customer Development Plan, for example, 

is a veritable tool for promoting the Group’s commercial strategy. 

Customer satisfaction surveys are also carried out on a regular 

basis; 

developing the sales force: Valeo has also developed an entire 

training module dedicated to improving the effectiveness of its 

sales force: the Valeo Sales Academy. 

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Geographical presence 

The Group optimizes its industrial footprint on an ongoing 

basis in relation to customer demand, markets and 

labor costs. 

In 2007, Valeo continued its expansion in Asia, as part of its 

globalization strategy and approach to accompanying its automaker 

Valeo presence by region at 31/12/2007 

Activity 

Geographical presence 

customers. Valeo now has production facilities in each of the world’s 

major vehicle assembly regions and new sites based in countries 

offering the most competitive production costs. 

Production 

plants 

R&D 

centers 

Distribution 

platforms 

Number of 

employees 

Western Europe 

Belgium/Netherlands, France, Germany, Ireland, Italy, Spain, Sweden, 

United Kingdom 

55 36 6 29,420 

Eastern Europe 

Hungary, Poland, Czech Republic, Romania, Slovakia, Turkey 

13 1 2 10,480 

North America 

USA, Mexico 

14 12 - 6,830 

South America 

Argentina, Brazil 

10 - 1 4,200 

Asia 

China, India, Iran, Japan, South Korea, Thailand 

30 12 - 8,770 

Africa 

South Africa, Tunisia, Egypt 

3 1 - 1,500 

125 62 9 61,200 

As part of normal operations, the capacity of some sites is currently 

being expanded. 

At December 31, 2007, the Group’s real estate portfolio (land and 

buildings) had a net book value of 526 million euros (see chapter 3, 

note 4.3. Tangible assets). It is largely composed of production sites, 

mostly wholly owned. 

The Group’s equipment is largely made up of technical facilities, 

materials and tools. At December 31 2007, they were stated as 

< Contents > 

having a net value of 949 million euros excluding fixed assets under 

construction (see chapter 3, note 4.3. on Fixed Assets). 

Environmental constraints result from the regulations applicable 

in this area to all Group establishments (see “The Group”, 

section 4.2.2. “Environment”, chapter 2, “Risks and uncertainties”, 

section 1. “Industrial and Environmental Risks” and “Environmental 

management and performance”). 


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1 Activity 

Key events in 2007 

PAGE 28 

Competitive context 

The market for automotive components and systems is 

subject to fierce competition, in terms of cost, quality, service 

and technology. 

For some product lines supplied by the Group on the original 

equipment market, Valeo is consistently one of three to five major 

suppliers who together represent more than half of the market 

(in sales), the remainder being made up of a large number of 

regional suppliers: 

■ 

in several product lines, Valeo competes against the four largest 

international automotive suppliers (in alphabetical order): Robert 

Bosch, Delphi, Denso and Visteon; 


1. Commercial success 

2007 was marked by commercial successes that contributed 

to increasing Valeo content per vehicle. For the second year 

running, OE orders came to 1.3 times sales, the highest level 

since 2001. 

1.1. Powertrain Effi ciency Domain 

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■ 

■ 

Valeo Engine Management Systems continued its developments in 

emissions control, and won seven contracts with several European 

and Asian automakers to supply EGR (exhaust gas recirculation) 

systems that meet Euro 5 standards. 

The micro-hybrid StARS system, developed by Valeo Electrical 

Systems based on starter-alternator technology, was fitted as 

standard on the smart fortwo mhd (micro-hybrid drive) from the 

second half of 2007. 

Valeo Engine Cooling saw its water-cooled charge air cooler 

mass produced for the first time on the Volkswagen Golf 1.4l TSI, 

exhibited at the 2007 IAA Frankfurt Motor Show, and the Front-End 

Module Division was selected by a US automaker to equip three 

new models that will go on sale in 2010. In addition to continued 


■ 

■ 

■ 

for certain product lines, such as transmissions, thermal systems 

and lighting systems, the leading suppliers include companies that 

are smaller or more geographically concentrated, such as Behr, 

Hella, Koito, Kostal, Luk, Melco, Sachs, Siemens, etc.; 

the following Product Families are among the world leaders in 

each segment (in sales): Transmissions, Climate Control, Engine 

Cooling, Wiper Systems, Lighting Systems, and Electrical Systems. 

In addition, several products in Valeo Interior Controls and Valeo 

Security Systems enjoy European or regional leadership positions 

(source: Valeo). 

development on its traditional markets, there were new contracts 

in 2007 for innovative products such as the Tricooler, signed with a 

US automaker. In addition, the Spanish Division of Valeo Electrical 

Systems was chosen by a Chinese automaker for the development 

and mass production of EGR coolers. Four new contracts were 

also signed with European truck manufacturers for engine cooling 

modules. 

Valeo Transmissions won several contracts to supply latestgeneration 

vibration dampers for manual and automatic 

transmissions in Asia, Europe and the United States. 

1.2. Driving Assistance Domain 

■ 

< Contents > 

In July 2007, Valeo announced that General Motors had selected 

its blind spot detection system, which will be available on certain 

Buick and Cadillac models from 2008. This system, based on radar 

technology, will also be fitted on the 2008 model of the Jaguar XF. 

27 vehicles will be e quiped by the blind spot detection system 

by 2010 

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In a world first, the Volkswagen Touran fitted with Park4U TM was 

successfully launched on the European market in April 2007. This 

system is also fitted on Volkswagen’s Cross Touran and Tiguan 

models, under the name Park Assist. Valeo will equip 16 vehicle 

models by 2010. 

1.3. Comfort Enhancement Domain 

■ 

In 2007, Valeo Security Systems improved its position with Renault 

Nissan, winning the main contracts for future vehicles, helped 

by its new joint venture in India. The Product Family proved its 

expertise in hands-free systems by winning a major contract in 

2. Technological innovations 

Throughout 2007, Valeo consolidated its position as a major 

driver of automotive progress, and demonstrated its ability to 

introduce numerous innovations through its three Domains. 

2.1. Domains 

The Domains were established to promote innovation using 

technology and synergies between P roduct F amilies , leading to the 

commercialization of global solutions in the fields of the environment 

(Powertrain Efficiency Domain), safety (Driving Assistance Domain), 

and well-being (Comfort Enhancement Domain). 

2.1.1. Powertrain Efficiency 

■ 

■ 

■ 

Electromagnetic actuation technology, e-Valve, replaces 

the conventional mechanical operation of engine valves with 

the cam belt, camshaft and hydraulic cam followers, which means 

valves can be operated in real time, with a very good potential 

for reducing consumption. 

The EGR (exhaust gas recirculation) system takes part of the 

exhaust gases at the cylinder head outlet and re-injects them 

into the air intake. The main benefit, in diesel engines, is that 

NOx is reduced at source by limiting the quantities formed in 

the combustion process, rather than by post-treating the gases. 

EGR systems are currently being developed for gasoline engines, 

which should lead to a significant drop in consumption and an 

increase in the engine compression rate. 

The StARS micro-hybrid system is the first step towards 

hybridization. The system is based on a reversible fan-driven 

14V starter-alternator which acts as both starter and alternator. 

It comprises a reversible machine with associated electronics. 

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Activity 


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Europe. Valeo Security Systems was chosen by General Motors to 

supply keys and locks for a worldwide platform, and by BMW for 

electric steering column locks and handles. Valeo Security Systems 

was also chosen by Audi to supply power closure systems for 

trunks and tailgates on several vehicles. 

Valeo Interior Controls won its first contract for faceplates 

integrating radio and AC controls. 

Valeo Climate Control won several important contracts with its 

key clients, particularly in Asia. It increased its market share with 

PSA Peugeot Citroen by signing a global contract for mid-range 

to high-end vehicles in Europe and China by 2010. 

The system won a 2006 PACE Award in the European Products 

category. Among the next steps towards hybridization currently 

being developed is the recovery of kinetic energy during braking 

which, by storing energy in super-capacitors, further reduces fuel 

consumption by around 5%. 

This technology was tested by the RATP (Paris transport authority) 

on a Gruau Microbus in Paris. The experiment, the result of a 

research partnership between the RATP, Valeo and Gruau, was 

selected and approved by ANR (French National Agency for 

Research) and PREDIT (French Program for Transport Research) 

in 2006 with the financial support of ADEME as part of the national 

“clean and cost-cutting vehicles” program. The Microbus, which 

is fitted with a Stop-Start starter-alternator, also features an 

additional function, the regenerative braking system. 

The combination of the e-Valve and StARS micro-hybrid systems 

and the regenerative braking system was rewarded by the 

allocation of significant funding from the Agency for Industrial 

Innovation (AII, project Lo CO Motion). 

w 2 

The water-cooled charge air cooler is the first step towards 

the UltimateCoolingTM system. With incoming air cooled by 

a cold water system, the supercharger system benefits from 

more efficient cooling coupled with a shorter airflow path, 

which improves the supercharged engine response times during 

acceleration. It also reduces charge losses on the air circuit, and 

reduces the costs of repair in case of front impact. 

The UltimateCoolingTM system is based on the circulation 

of a single coolant to components instead of running all 

fluids to exchangers at the front end of the vehicle. Valeo has 

undertaken several development projects for this architecture in 

partnership with vehicle manufacturers in Europe, Japan and the 

United States. 


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1 Activity 


PAGE 30 

■ 

The double dry clutch, featuring one clutch for even gears and 

one clutch for odd gears, is the cornerstone of a double-clutch 

transmission, and offers an alternative to automatic hydraulic 

transmissions and automated manual transmissions. This solution 

combines the comfort of automatic transmissions, obtained by 

switching from one clutch to another when engaging gears, with 

the efficiency of manual transmissions, thus helping to reduce 

fuel consumption. 

2.1.2. Driving Assistance 

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The Park4UTM park assist system is based on ultrasound 

technology. The system scans both sides of the road for a space, 

which it calculates according to the vehicle length. Once a slot 

has been identified, the driver stops and puts the car in reverse. 

The system then calculates the trajectory and controls the electric 

steering. The driver, aided by ultrasound sensors on the front 

and rear of the vehicle, controls acceleration and braking during 

the maneuver. The maneuver can be interrupted at any time 

by braking or simply taking over the steering wheel. The latest 

innovations on the Park4UTM system were unveiled at the IAA 

Frankfurt Motor Show in 2007: it can now be used to park in even 

smaller spaces and also to leave spaces automatically. Park4UTM received the 2008 PACE Award in the European Products category 

of the Automotive News PACE (Premier Automobile Suppliers 

Contributions to Excellence) Awards. 

The blind spot detection system helps to reduce collisions 

with unseen vehicles during lane change maneuvers. The system 

monitors the blind spot in the rearview mirrors on both sides of 

the vehicle. If a moving obstacle such as an overtaking vehicle is 

present in the blind spot, the driver is alerted by a visible icon on 

the outside rearview mirror. This system combines two areas of 

expertise: the short-range radar expertise of Valeo and Raytheon’s 

in-depth knowledge of long-range radar systems. The system won 

a 2007 PACE Award in the Product Innovation category. 

The LaneVueTM lane departure system, co-developed with 

Iteris, comprises a miniature video camera which uses algorithms 

to constantly monitor lane markings ahead of the vehicle. If the 

driver leaves the lane without indicating, the system alerts the 

driver so that he or she can take corrective action. 

Mercury-free X enon lamps contain no hazardous materials. 

This is an environmentally-friendly technology. Similar to daylight, 

X enon lamps provide optimal visibility up to 110 meters, compared 

to 80 meters with a halogen lamp. A survey carried out by TUV 

Rheinland in Germany revealed that the number of accidents 

occurring at night on country roads could be reduced by 60% if 

all vehicles were fitted with X enon lamps. 

The BeamAticTM system automatically switches from high to 

low beam depending on traffic conditions. The system gives 


■ 

optimal visibility in all driving conditions and avoids dazzling 

other road users. 

Valeo continued to promote its V360 demonstrator, a vehicle 

equipped with a range of innovative driving assistance systems. 

The vehicle demonstrates the successful integration of different 

technologies designed to inform, alert and assist, in order to make 

driving a safer experience. Equipment is controlled by systems 

using various technologies, including radar, cameras, LEDs, infra-red 

vision, ultrasound, and control and power electronics. 

2.1.3. Comfort Enhancement 

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< Contents > 

Valeo has developed a new generation of hands-free cards: 

the Smart Car Key. This new identifier offers drivers even greater 

convenience, with unique features and an innovative style, in 

harmony with the vehicle’s brand image and other hand-held 

devices. With its LCD or OLED (organic light-emitting diode) screen, 

this intelligent key can, as well as locking, unlocking and starting 

the car in hands-free mode, provide real-time information on the 

vehicle (fuel level, tire pressure, interior temperature, etc.), adjust 

the interior air conditioning, transfer data such as journey details 

and MP3 files to the car and memorize personal settings such as 

the driver seat and rearview mirror positions. 

A successful control system is a combination of good ergonomics 

research and optimal technical fine-tuning. In 2007, Valeo pursued 

its quest to replace standard switches with touch sensitive 

controls: simply moving your finger across the control is enough 

to understand intuitively how this system works. This technology 

can be applied, for example, to the seat position controls or to 

the center console to dial a phone number. 

Valeo designs environmentally friendly air conditioning systems. 

For example, the refrigerant R134a, which contributes to global 

warming, has been replaced by an alternative fluid or the 

natural gas R744. 

At the IAA Frankfurt Motor Show, Valeo presented two new 

vehicles that demonstrate the Comfort Enhancement Domain: 

Easy4U and Care4U, both Mercedes MLs. These vehicles bring 

together all innovations developed in this Domain. Easy4U is based 

on vehicle access and assistance with its use, and incorporates the 

following technologies: Senseative ® , a door closure system built 

into the latches, plus automatic trunk closure. Care4U is dedicated 

to wellbeing and comfort inside the vehicle and incorporates the 

following: the Smart Car Key, the automatic closure of the tailgate 

with presence detection, the E-Media system and the Thermeo 

system. In the space of just twelve months, Valeo’s engineers 

and the Group’s partners have integrated these new technologies 

into the electronic circuits of both vehicles, so that they operate 

together to offer new features for users. 

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Other contributions from Valeo Product Families to the three Domains 

are covered in more detail (see “The Group”, section 2, “Domains 

and Product Families”). 

2.2. Recognition of Valeo’s innovation 

The Group’s potential for technological innovation continued 

to benefit from wide recognition among market players. 

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Valeo Raytheon Systems (VRS), a joint venture between Valeo 

and Raytheon, won a 2007 PACE Award in the Product Innovation 

category for its Blind Spot Detection system. The award, which 

is co-sponsored by Automotive News, Microsoft, SAP and the 

Transportation Research Center, was presented to Valeo at the 

Society of Automotive Engineers World Congress in Detroit. This 

is the third PACE award for Valeo: the StARS micro-hybrid system 

won a PACE Award in 2006, and the LaneVue lane departure 

warning system in 2005. 

The German Automobile Association (ADAC) gave Volkswagen 

second prize in the Innovation category of the Gelber Angel Award 

for the Park4UTM system on the German automaker’s Touran, Cross 

Touran and Tiguan models. 

In October 2007, Valeo received first prize for innovation in the 

Methods and Processes category of the 2007 Best Innovator 

prize awarded by the firm of strategic consultants, AT Kearney, 

in partnership with Les Echos. The Best Innovator prize rewards 

best practice in terms of innovation management among 700 

European companies with sales of more than 300 million euros. 

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Activity 


At the International Awards for Automotive Innovation at the 

Equip’Auto trade fair, Valeo won the gold trophy for the e-Valve 

system in the Engineering and advanced technology category and 

the silver trophy for Guideo, the driving assistance system, in the 

Spares and Post-Equipment category. eXponentia, the technical 

training program partnered by Valeo, received the gold trophy in 

the Services category. 

Valeo is the driver of the Lo CO Motion project, a 211.6 million euro 

w 2 

program over the 2007-2011 period supporting the co-development 

of e-Valve technology and micro-hybrid with regenerative braking 

technology funded by the Industrial Innovation agency to the tune 

of 61 million euros. 

2.3. Collaborations and partnerships 

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< Contents > 

The policy of forming partnerships with the best specialists in each 

sector in order to speed up the introduction of new technologies 

in automobiles continued, as in previous years, with Raytheon, 

the radar expert, Iteris for lane departure warning systems and 

IBM for on-board software. 

Valeo continued its partnership with the French rally racer 

Luc Alphand, for the All-Terrain Rally World Cup and the Le Mans 

Endurance Series. This partnership is designed to promote Valeo’s 

image and technology. Valeo has developed lighting, wiping and 

air-conditioning systems for the racing and assistance vehicles in 

the Mitsubishi Motor Sports and Luc Alphand Aventures Teams. 

2007 saw a second place in the off-road rally at Dakar, a victory in 

the Por Las Pampas Rally in Argentina and medals in the Le Mans 

Endurance Series. 


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3. Strategic operations 

Valeo’s acquisitions/disposals strategy is designed to reinforce 

its three Domains and increase the organic growth potential 

of the Group. 

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On May 31, 2007, Valeo announced the creation of a joint venture 

owned equally by Valeo Security Systems and A.K. Minda, Indian 

leader in automotive security systems. Valeo Minda Security 

Systems is located at Pune near Mumbai, and designs, produces 

and markets Valeo Security Systems products including locks, 

steering column locks, latches, strikers, handles, coded engine 

immobilizers and radio frequency remote controls. 

On July 24, 2007, Valeo announced the creation of a second Indian 

joint venture, with the group N.K. Minda, a leading automotive 

supplier on the subcontinent. Valeo Minda Electrical Systems India 

Private Limited is 66.7% owned by Valeo and 33.3% owned by 

Minda. It designs, produces and markets Valeo Electrical Systems 

products, including starters and alternators for passenger cars. 

In July, Valeo acquired Connaught Electronics Ltd (CEL), an Irish 

manufacturer of automotive electronics. This acquisition boosted 

4. Operational excellence 

4.1. Optimizing industrial facilities 

Valeo continued to optimize its industrial facilities in order 

to support its customers and ensure it has a competitive cost 

base. 

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With the sale of the Wiring Harness activity to Leoni Valeo divested 

17 production and advanced logistics sites, including four in France, 

two in Italy, one in Portugal, three in Eastern Europe and seven 

in North Africa. 

The Japanese site at Shinozuka has been closed. Its activities have 

been transferred to the compressor site at Ora. 

The acquisition of Connaught Electronics includes the sites at 

Tuam in Ireland and Humpolec in the Czech Republic (Interior 

Controls). 

Six new sites have been opened: at Pusan in Korea (Engine 

Cooling), Foshan (Lighting Systems), Huadu (Engine Cooling), 

Shenzen (Interior Controls) and Wuxi (Lighting Systems) in China, 

Sunderland in the UK and Pune in India (Security Systems). 


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Valeo’s Driving Assistance Domain, by extending its range of 

camera-based vision solutions for low-speed maneuvers. 

Valeo Lighting Systems and the Romanian company Elba have 

created Valeo Lighting Injection, a joint venture 51% owned 

by Valeo and 49% by Elba. Located at Elba’s industrial site in 

Timisoara, the plant is dedicated to the injection molding of 

headlamps, and supplies the Valeo Lighting Systems aftermarket 

assembly plant, also in Timisoara. 

The acquisition of Valeo’s Wiring Harness activity by Leoni, at the 

end of December 2007, forms part of Valeo’s strategy of focusing 

its offer on solutions in its three Domains - Driving Assistance, 

Powertrain Efficiency, and Comfort Enhancement - with strong 

competitive positions and a diverse customer base. This sale 

represents another step in the implementation of this strategy 

which is based on targeted disposals and acquisitions. 

4.2. Supplier integration 

In the difficult context of inflation in raw material prices in 

2007, Valeo continued to pursue its policy of selecting and 

integrating suppliers as far upstream as possible, to make 

them preferred partners in the long term, and to help reduce 

costs and allow Valeo to communicate its quality standards 

to suppliers. 

■ 

< Contents > 

The Group demonstrated great resilience in the light of the 

record inflation in raw material prices by increasing the use of all 

purchasing resources available and pursuing its program to reduce 

the number of its suppliers. The panel fell by 40 to around 2,574 

at end December 2007, while purchasing volume stood at around 

4.8 billion euros. Valeo also pressed ahead with Convergence, 

a program designed to engineer a dramatic cost reduction while 

improving the quality of products produced by our suppliers. This 

program currently includes almost 245 suppliers, i.e. almost 8% 

of the Group’s suppliers, and 46% of purchasing volume. The 

VIP (Valeo Integrated Partners) program continued in 2007, with 

80 VIP suppliers at the end of the year. 

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The Group also continued to increase the share of supplies 

originating from low-cost countries, which grew from 33% in 

2006 to 37% in 2007. 

The online purchasing system (reverse bidding) used by Valeo, 

which allows it to optimize purchasing prices and withstand price 

increases, represented a record amount of more than 1.5 billion 

euros in reverse bidding in 2007 (compared to just over 1 billion 

euros in 2006). 

4.3. Awards 

The quality of Valeo’s products and services was recognized 

by its customers and institutional partners, testifying to the 

Group’s operational excellence. 

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Valeo won five prizes from Toyota Motor Europe: the Superior 

Performance Award in the Quality category, awarded to the 

Group; the Achievement Award in the Cost Management category, 

awarded to the Group; the Achievement Award in the Project 

Management category, awarded to Valeo Lighting Systems; two 

Recognition Certificates in the Supply category, awarded to Valeo 

Security Systems and to the Valeo Transmissions site at Amiens. 

The Superior Performance Award recognizes the level of quality 

achieved by the 19 Valeo industrial sites supplying Toyota’s 

European plants: these sites have recorded a dramatic fall in ppm 

(defective parts per million) and dpm (delivery performance) 

over the last three years. It follows the two Superior Performance 

Awards made by the same automaker to two of the Group’s 

French sites in 2006. 

Valeo Unisia Transmissions, a joint venture set up by Valeo 

Transmissions and Unisia Jecs in Japan, received the Technical 

Innovation Award from Jatco, for the successful launch of a new 

torque converter–CVT2-AFO. 

Recent events and outlook 

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Activity 


In April 2007, Toyota awarded the Angers Division of Valeo Lighting 

Systems its Award for Project Management. 

< Contents > 

At Chennai in India, Amalgamations Valeo Clutch Private Ltd, a 

joint venture between Valeo Transmissions and Amalgamations, 

received the Q1 award from Ford, and the Design Capability Award 

from Maruti Udyog Limited. 

The Valeo Engine Cooling Front End Module Division in Uitenhage 

in South Africa won the OE Supplier Excellence Award from 

Volkswagen for the fourth time in six years. For the second 

year running, this Product Family’s Mexican plant at San Luis 

Potosi, received a prize from Volkswagen Mexico in the Business 

Achievement category. 

The Valeo Climate Control Division in Itatiba in Brazil, was awarded 

a Quality Achievement Performance Certificate by Toyota Mercosur 

for its excellent quality results. 

The Electrical Systems Division at Campinas in Brazil won the Best 

Supplier Award from PSA Peugeot Citroën Mercosur. 

The Valeo Compressors North America Division received the Zero 

Defects Award from Nissan North America. 

Valeo received the Fiat Silver Award for the remarkable results 

achieved by the Valeo Security Systems Handles Division at 

Pianezza (exclusive handles supplier for Fiat) in terms of product 

quality and contribution to the development process and to sales 

performance. 

The Electrical Systems Division at Shanghai, in China, won the 

Excellent Supplier Award from Weifang Diesel, the Excellent 

Cooperation Award from Shanghai Diesel and the Best Service 

Award from JAC. 

The Electrical Systems Division at Kyung Ju, in Korea, won the Best 

Supplier Award from Hyundai Mobis. 

■ In a press release dated January 15, 2008, the Pardus investment on December 19, 2007, and now held 11.11% of the capital 

fund announced that it held a 19.7% stake in the Company, and 10.9% of the voting rights in the Company (see chapter 6, 

and had acquired options for the shares held by Morgan “Current shareholder structure and voting rights”, section 1.1. 

Stanley. On December 27, 2007, Morgan Stanley declared to 

the AMF that it had breached the 10% level of share capital 

“Principal shareholders”). 


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On April 3, 2008, Valeo announced a project to sell its heavy duty 

truck engine cooling division to the company EQT. The division 

generated sales of 176 million euros in 2007. This project aims 

to focus the Group’s engine cooling activity on passenger cars and 

light trucks. The project is subject to consultation of the employee 

representative committees. 

Renault awarded the Group the 2007 Supplier Quality prize for 

the excellent quality of engine cooling products from its European 

Division. In addition to the quality of the parts supplied, the prize 

also testified to Valeo’s responsiveness and performance in terms 

of customer satisfaction. 

Valeo announced that it received an Excellent Quality Performance 

Award from the Toyota Group at the 2008 Toyota Global Suppliers 


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< Contents > 

Convention held on February 29 in Nagoya, Japan. At the end of 

2007, the Group reached the historically low level in customer 

line returns (10 defective parts per million). 

On April 11, 2008, Valeo was awarded the 2008 Genius Safety 

Award which recognizes innovations which contribute to a safer 

automotive environment by German insurance company Allianz 

awarded to for its Park4U system. This system was also awarded 

the prestigious automotive industry 2008 PACE Award, after the 

blind spot detection system in 2007, the StARS micro-hybrid 

system in 2006 and the LaneVue system in 2005. 

The Group’s first quarter 2008 results were disclosed in a press 

release on April 24, 2008. See page 200 . 

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Accounting methods 36 

Statement of income 36 

Main investments over the past three years 38 

Change in stockholders’ equity 39 

Provisions 41 

Cash flows and debt 41 

Commitments 42 

Remuneration of corporate officers and 

directors 42 

< Contents > 

2 Management Report 

Risks and uncertainties 44 


by a public tender offer 47 

Claims and litigation 48 

Outlook 49 

Subsequent events 49 

Parent company financial statements 49 

Environmental management and 

performance 50 

Social indicators 65 


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Report 

Statement of income 

Accounting methods 

Under E uropean regulation (EC) 1606/2002 of July 19, 2002, 

the consolidated financial statements have been prepared in 

accordance with International Financial Reporting Standards (IFRS) 

as adopted by the E uropean Union. 

Out of the new standards, amendments and interpretations effective 

for reporting periods beginning on or after January 1 2007, only 

IFRS 7 “Financial Instruments: Disclosures” has a material impact 

on the 2007 financial statements. IFRS 7 introduces more detailed 

disclosure requirements for risks and financial instruments. 


Unless otherwise indicated, the comments provided below 

refer to data for 2005 and 2006 that have been adjusted as of 

December 31, 2007 for the contribution of the Wiring Harness 

1. Review of operations 

Total operating revenues for the consolidated group increased by 

1.5% to 9,689 million euros in 2007, from 9,550 million euros in 

2006. Changes in the scope of consolidation had a negative 0.2% 

impact on total operating revenues. Changes in exchange rates made 

a negative contribution of 1.5%. On a like-for-like basis (constant 

Group structure and exchange rates), total operating revenues rose 

3.2% over the year, as compared with an estimated 4.4% rise in 

the Group’s automotive production benchmark (1) . 

Full-year net sales reached 9,555 million euros, comprising 

7,865 million euros from the original equipment segment (82% 

of the total) and 1,690 million euros from the aftermarket (18%), 


The Group elected for early application, respectively as of 

January 1, 2004 and January 1, 2005, of the following two 

amendments to IFRS that came into force on January 1, 2006: 

■ the amendment to IAS 19, introducing the option to recognize 

actuarial gains and losses on defined benefit pension plans 

in reserves; 

■ the amendment to IAS 39, relating to hedge accounting for 

forecast inter-company transactions. 

The new standard which is not yet effective, has not been adopted 

early, and that may have an impact on the Group’s financial 

statements is IFRS 8 “Operating Segments”, which is obligatorily 

applicable as from 2009. The potential impacts of this standard on 

the Group’s accounts are currently being analyzed. 

business, a non-strategic activity as defined in note 1.19 to 

the consolidated financial statements, which was sold in 

December 2007. 

< Contents > 

compared to 7,692 million euros (82%) and 1,744 million euros 

(18%), respectively, in 2006. 

Full-year sales generated in Europe were up 1% in 2007 to 

6,393 million euros, representing 67% of consolidated sales by 

market (unchanged from 2006). Like-for-like sales edged up 0.4%, 

while light vehicle production in the region grew by 6.2% (source: 

J.D. Power). 

At 1,293 million euros, Group sales in North America contracted 

by 2.4% compared to 2006. On a like-for-like basis, North American 

sales jumped 5.7% in spite of a 1.5% drop in local light vehicle 

(1) Change in the production of light vehicles in E urope, North America, South America and Asia, estimated by J.D. Power and weighted by each region’s 

contribution to consolidated sales. 

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production (source: J.D. Power). In 2007, North America accounted 

for 14% of consolidated sales (unchanged from 2006). 

The Group registered sales of 1,245 million euros in Asia and the 

Middle East (unchanged from 2006). In Asia, like-for-like sales 

were up 12.2% (this figure reflects a 41% surge in China and 

growth of approximately 7% in Japan and Korea). Local automotive 

production jumped 6.6% on the back of strong growth in China 

2. Results 

Consolidated gross margin amounted to 1,497 million euros in 

2007, up 2.3% on the prior-year figure, and represented 15.7% 

of sales, against 15.5% in 2006. The hike in raw material prices 

accounted for the equivalent of 0.3% of net sales. 

Research and development expenditure came to 668 million 

euros (6.9% of total operating revenues) compared to 640 million 

euros (6.7%) in 2006. Excluding other operating revenues (mainly 

customer contributions to development expenditure), these 

expenses represented 5.5% of total operating revenues, in line with 

the prior-year figure. 

The three Domains (2) absorbed virtually all R&D expenditure, i.e., 

665 million (up 4.9% on 2006), breaking down between Driving 

Assistance (193 million euros, up 2.7%), Powertrain Efficiency 

(230 million euros, up 7.5%) and Comfort Enhancement (242 million 

euros, up 4.3%). 

Selling and administrative expenses totaled 193 million euros 

(up 1.6% year-on-year) and 424 million euros (down 0.7%), 

respectively. Combined total selling and administrative expenses as 

a proportion of total operating revenues fell 0.1% year-on-year. 

Taking into account other operating revenues, which amounted 

to 134 million euros (114 million euros in 2006), operating 

margin (3) came in at 346 million euros, up 8.1% on the 2006 figure 

(320 million euros). In 2007, operating margin represented 3.6% of 

total operating revenues, compared to 3.4% in the previous year. 

Other income and expenses amounted to a net expense of 

27 million euros (including 63 million euros in restructuring costs 

and asset impairments, non-cash income of 22 million euros from 

the resolution of litigation with a customer and a 27 million euro 

gain on the disposal of real estate assets), compared to net other 

expenses of 49 million euros in 2006 (including restructuring costs 

and asset impairments totaling 50 million euros and a 14 million 

euro gain on the disposal of Logitec). 

Management Report 


< Contents > 

(18.2%). Production levels in Japan and Korea remained stable 

year-on-year. As in 2006, Asia and the Middle East accounted for 

13% of Group sales. 

Sales generated in South America jumped 19.4% year-on-year to 

559 million euros. Like-for-like sales were up 17.6% in line with local 

automotive production (source: J.D. Power). In 2007, South America 

represented 6% of consolidated sales (5% in 2006). 

As a result, consolidated operating income for the year came in 

at 319 million euros (3.3% of total operating revenues), compared 

to 271 million euros (2.8%) in 2006. 

The cost of net debt came out at 51 million euros and was virtually 

unchanged year-on-year. 

Net other financial expenses rose from 8 million euros in 2006, 

to 46 million euros, mainly due to a negative foreign exchange 

impact (negative impact of 9 million euros) during the year and 

the 27 million euros in non-recurring gains on the disposal of Group 

financial assets recorded in 2006. 

Once the contribution of investments in associates totaling 8 million 

euros (2006: a negative amount of 1 million euros) has been taken 

into account, income before income taxes came out at 230 million 

euros, a rise of 9% on one year ago. 

Income tax expense was 83 million euros, representing an 

effective Group tax rate of 37.4%, compared to 67 million euros 

and 31.6%, respectively, in 2006. 

Non-strategic activities made a loss of 59 million euros, including 

a post-tax loss on the disposal of the Wiring Harness business 

amounting to 51 million euros. These activities generated profits 

of 22 million euros in 2006, including a post-tax disposal gain of 

41 million euros on the Motors & Actuators business. After taking 

account of minority interests (7 million euros in 2007, compared 

to 5 million in 2006), net income attributable to equity holders 

of the Company came in at 81 million euros, compared to 

161 million one year earlier. 

Basic earnings per share, computed based on net attributable 

income, was 1.06 euro (including a 0.76 euro loss attributable 

to non-strategic activities), compared with 2.10 euros in 2006 

(including 0.29 euro from non-strategic activities). Diluted earnings 

per share for the year amounted to 1.05 euro, compared with 

2.09 euros in 2006. 

(2) The objective of the Domains of Innovation is to foster and support innovation by bringing together different technologies and product groups in order to 

propose comprehensive solutions based on safety (Driving Assistance), the environment (Powertrain Efficiency), and comfort (Comfort Enhancement). 

(3) Operating income before other income and expenses. 


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Report 

Main investments over the past three years 

Main investments over the past three years 

1. 2007 

In 2007, investments in property, plant and equipment amounted to 

435 million euros, or 4.5% of total operating revenues. Investments 

in intangible assets – mainly capitalized development expenditure 

– amounted to 138 million euros (1.4% of total operating revenues). 

2. 2006 

In 2006, investments in property, plant and equipment amounted to 



– amounted to 165 million euros (1.6% of total operating revenues). 

Changes in the scope of consolidation (essentially the disposals of 

Zexel Logitec Company and the Valeo Motors & Actuators business) 

3. 2005 

In 2005, investments in property, plant and equipment amounted to 



– totaled 145 million euros (1.5% of total operating revenues). 

Acquisition-led growth over the year absorbed 466 million euros. 

Valeo implemented targeted strategic operations aimed at boosting 

the technological offering of its Domains and increasing the organic 

growth potential of its Product Families. In particular, the acquisition 

of Johnson Controls Engine Electronics (effective March 1, 2005) 


< Contents > 

Changes in the scope of consolidation had a 208 million euro net 

impact on income, and mainly reflected the disposal of the Wiring 

Harness business and the Group’s ongoing strategy of focus ing on 

around the three Domains. 

had a 124 million euro net impact on income. These disposals 

signaled the launch of the Group’s strategy of focusing on businesses 

having reached critical mass in the three Domains. 

for 316 million euros considerably boosted the potential of the 

Group’s Powertrain Efficiency Domain. Similarly, the acquisition 

(effective April 1, 2005) of the remaining shares held by Bosch in 

the climate control and engine cooling businesses in Asia, enhanced 

the growth potential of the Group’s related activities in the promising 

Asian markets, and strengthened its expertise in climate control 

compressors, one of the main components of climate control systems. 

In 2005, the Group also increased its shareholding in Ichikoh, one of 

Japan’s leading players in lighting systems, from 22.7% to 28.2%. 

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Change in stockholders’ equity 

1. Stockholders’ equity 

At December 31, 2007, stockholders’ equity including minority 

interests increased by 30 million euros to 1,782 million euros, 

compared to 1,752 million euros at December 31, 2006, 

reflecting: 

2. Share capital 

2.1. Changes in share capital 

The company’s share capital went from 77,580,617 shares with a par 

value of 3 euros each at December 31, 2006 to 78,209,617 shares 

with a par value of 3 euros each at December 31, 2007 following the 

exercise of 622,738 stock subscription options granting entitlement 

to 629,000 shares (4) . 

At December 31, 2007, a potential maximum of 2,869,556 shares 

could be issued upon exercise of stock options awarded to the 

Group’s employees and corporate officers. At that date, all of the 

OCEANE bonds were outstanding and were convertible and/or 

exchangeable for 10,105,439 shares (5) . 

2.2. Treasury shares 

At year-end, Valeo held 1,432,804 of its own shares (1.83% of the 

share capital) with a unit value (based on their purchase price) of 

34.115 euros. At December 31, 2006, Valeo held 686,704 of its own 

shares (0.89% of the share capital). 

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< Contents > 

deductions: the payment of 85 million euros in dividends relating 

to 2006; 

additions: net income for the year of 88 million euros and net 

actuarial gains on pension plans and financial instruments totaling 

47 million euros. 

At December 31, 2007, the number of treasury shares to be 

allocated upon exercise of stock options stood at 993,017, compared 

to 617,704 shares at December 31, 2006. This increase reflects: 

(i) 448,325 shares acquired on November 5, 2007 to cover the 

implementation of the agreement for partial management of its 

share buyback program entered into with an investment services 

provider on August 31, 2007; and (ii) the exercise of 72,234 stock 

options by Group employees granting entitlement to 73,012 shares 

at a price of 38.06 euros each. Trading fees as well as the fees 

relating to the management agreement entered into with the 

investment services provider totaled 20,400 euros. All of these shares 

have been allocated to cover the allotment of shares to employees 

representing their participation in the proceeds of the company’s 

expansion, and the implementation of stock option plans as well 

as company savings plans, in accordance with certain objectives of 

the share buyback program as ratified by the Combined Annual and 

Extraordinary Shareholders’ Meeting held on May 21, 2007. 

The remaining treasury shares (439,787 at December 31, 2007, 

compared to 69,000 shares at December 31, 2006) are earmarked 

(4) Following the public share buyback offer and simplified public tender offer carried out in May and June 2005, which resulted in Valeo purchasing its own 

shares at an amount higher than the publicly quoted price, the allocation ratio for stock subscription and purchase options stood at 1.01 share per option. 

(5) Following the public share buyback offer and simplified public tender, and in accordance with applicable regulations and the contract governing the 

OCEANE bond issue, the conversion/exchange ratio applicable to the bonds was amended from 1 share per bond to 1.013 share per bond. 


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Report 


for use under a liquidity agreement that complies with the code of 

ethics issued by the French Association of Investment Companies 

(Association Française des Entreprises d’Investissement), signed with 

an investment services provider on April 22, 2004. In the year to 

December 31, 2007, 1,665,696 euros had been allocated to the 

liquidity agreement, compared to 13,039,863 euros in the year to 

December 31, 2006. On the date the liquidity contract was signed, 

220,000 Valeo shares and a sum of 6,600,000 euros were allocated 

to its implementation. 

Under the liquidity agreement, in 2007 Valeo acquired 

1,870,234 shares at an average price of 35.38 euros and sold 

1,499,447 shares at an average price of 36.24 euros. In 2007, 

trading and transaction fees incurred within the scope of the liquidity 

agreement totaled 282,895 euros, compared to 264,712 euros in 

the previous year. Market transactions were carried out under the 

authorizations granted under the fifth resolution of the General 

Shareholders’ Meeting of May 21, 2007 with a view to providing 

a liquid market for the Company’s shares and stabilizing the share 

price. 

Under the terms of a contract signed with an investment services 

provider on December 11, 2007 within the scope of the agreement 

for the partial management of the share buyback program, the 

investment services provider will sell to Valeo (and Valeo undertakes 

to acquire) a certain quantity of Valeo shares not to exceed 15 million 

euros and 650,000 shares. All of these shares will be allocated to 

cover the allotment of shares to employees in respect of their 

3. Dividends 

Dividends per share paid out for the last three years are analyzed in the table below: 

Year 

Dividend per share 

(in euros) 

2004 1.10 

2005 1.10 

2006 1.10 


participation in the proceeds of the company’s expansion, and the 

implementation of stock option plans as well as company savings 

plans, in accordance with certain objectives of the share buyback 

program as ratified by the Combined Annual and Extraordinary 

Shareholders’ Meeting held on May 21, 2007. On January 16, 2008, 

Valeo undertook to acquire 529,528 shares at a price of 28.36 euros 

each under this agreement. 

2.3. Employee shareholdings 

At December 31, 2007, employees held a total of 962,270 shares 

under Group employee stock ownership plans, directly or through two 

corporate mutual funds, representing 1.23% of the Company’s share 

capital. At December 31, 2006, employees held 1,041,149 shares, 

representing 1.34% of the share capital. 

2.4. Transactions carried out by senior 

executives involving Company shares 

falling within the scope of article 

L. 621-18-2 of the French Monetary 

and Financial Code (Code monétaire 

et financier) in 2007 

During the period, Gérard Blanc, who was appointed as a director at 

the General Shareholders’ Meeting held on May 21, 2007, acquired 

150 Valeo shares at a price of 40.08 euros each. 

Allowance 

(in euros) 

< Contents > 

Total 

(In million of euros) 

Eligible for the 50% tax allowance provided for 

in article 158.3.2° of the French General Tax Code 91 


in article 158.3.2°of the French General Tax Code 84 


in article 158.3.2°of the French General Tax Code 85 

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Provisions 

The balance sheet at December 31, 2007 showed total provisions of 

1,102 million euros (including a non-current portion of 778 million 

euros), versus 1,355 million euros at the previous year-end (including 

a non-current portion of 937 million euros). 

Total provisions for reorganization expenses fell 49 million euros 

on the year-earlier period, to 127 million euros. 

Provisions for pensions and other employee benefits totaled 

608 million euros at year-end, 140 million euros lower than 

Cash flows and debt 

In 2007, net cash provided by operating activities amounted to 

582 million euros (709 million euros in gross operating cash flows) 

compared with 680 million euros one year earlier (717 million euros 

in gross operating cash flows). 

Excluding the impact of changes in the scope of consolidation, 

net cash used in investing activities during the year totaled 

529 million euros (138 million euros relating to intangible assets 

and 435 million relating to property, plant and equipment), 

compared to 610 million euros in 2006 (165 million euros relating 

to intangible assets and 494 million euros relating to property, plant 

and equipment). Changes in the scope of consolidation resulted in 

a net inflow of 208 million euros (including proceeds of 237 million 

euros on the disposal of the Wiring Harness business) compared with 

a net inflow of 124 million euros in 2006. 


Cash fl ows and debt 

< Contents > 

at December 31, 2006. The decrease in this item reflects (i) the 

recognition in equity of actuarial gains and losses for an amount 

of 79 million euros; (ii) changes in the scope of consolidation 

for 13 million euros; and (iii) translation adjustments for 

26 million euros. 

Other provisions fell from 431 million euros at end-2006 to 

367 million euros at December 31, 2007 due in part to lower 

provisions for contingencies and litigation. 

Financing activities generated net cash outflows of 98 million euros 

(including dividend payments to shareholders amounting to 

85 million euros) compared to net cash outflows of 643 million 

euros in 2006, which included 553 million in repayments of longterm 

debt. 

The net increase in consolidated cash and cash equivalents for 2007 

amounted to 167 million euros, compared to a net decrease of 

448 million euros in the previous year. 

Net debt – which is the sum of debt, net current financial 

liabilities, short-term loans and bank overdrafts, less cash and cash 

equivalents – totaled 799 million euros at year-end, compared to 

968 million euros at December 31, 2006. The consolidated gearing 

ratio is therefore 45% at December 31, 2007, compared to 55% 

at December 31, 2006. 


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Remuneration of corporate offi cers and directors 

Commitments 

The Group’s main commitments break down as follows at December 31: 

(In million of euros) 2007 2006 2005 

Lease commitments 71 76 79 

Guarantees and deposits 19 29 30 

Non-cancelable purchase commitments for fixed assets 108 72 57 

Other commitments given 124 101 66 

TOTAL 322 278 232 

These commitments are described in note 5.4 to the consolidated financial statements. 

Remuneration of corporate officers and directors 

1. Corporate officers 

The Board of Directors fixes the remuneration paid by Valeo to Thierry 

Morin, the Company’s Chairman and Chief Executive Officer, based 

on recommendations made by the Nomination and Remuneration 

Committee. In 2007 the gross fixed remuneration for the year paid 

by Valeo to Thierry Morin amounted to 1,597,133 euros (compared 

to 1,519,538 euros in 2006 and 1,302,395 euros in 2005), including 

gross remuneration of 1,577,590 euros (1,500,288 euros in 2006 

and 1,284,000 euros in 2005) and benefits in kind of 19,543 euros 

(19,250 euros in 2006 and 18,395 euros in 2005). Thierry Morin 

did not receive any variable compensation in 2007, or in the two 

previous financial years. 

Thierry Morin also earned attendance fees of 20,000 euros in his 

capacity as a director of Valeo. In 2006 and 2005 he was paid an 

amount of 35,000 euros in attendance fees. 

The gross remuneration received by Thierry Morin from companies 

controlled by Valeo (within the meaning of article L. 233-16 of the 

French Commercial Code) amounted to 45,750 euros in attendance 

fees (unchanged from 2006 and 2005). 


< Contents > 

In view of the prohibited periods set down by French stock exchange 

regulations, the Board of Directors did not award any stock options 

or free shares to Thierry Morin during 2006. The award was deferred 

until March 2007 and comprised 200,000 stock options. The Board 

set the purchase price for the 200,000 shares underlying the stock 

options at 36.97 euros, it being specified that (i) 50% of the options 

awarded to Thierry Morin are exercisable from March 7, 2009, 

and all of the options from March 7, 2010, and that the shares 

obtained upon exercise of the options may not be sold before 

March 7, 2011; and (ii) options not exercised will become null and 

void on March 6, 2015. Until such time as he leaves his position as 

corporate officer, Thierry Morin shall continue to hold, in registered 

form, at least 75% of the number of shares issued upon exercise 

of said options (after the sale of the number of shares necessary 

to finance the exercise of the options and pay the related taxes 

and transaction costs). In accordance with the terms of the stock 

option plan, the exercise of these stock options is contingent on 

Thierry Morin holding an employment contract or corporate office 

within the Valeo Group at the exercise date. 

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At the Board of Directors meeting held on November 15, 2007, 

Thierry Morin was awarded 150,000 stock options in respect of 

2007. The Board set the purchase price for the 150,000 shares 

underlying the stock options at 36.82 euros, it being specified that 

(i) 50% of the options awarded to Thierry Morin are exercisable 

from November 15, 2010 and the number of options that may be 

exercised after this date will be contingent on the operating margin 

for 2008 and will vary both proportionally and directly with the actual 

operating margin achieved within a range set by the Board, and 

that the shares obtained upon exercise of the options may not be 

sold before November 15, 2011; and (ii) options not exercised will 

become null and void on November 14, 2015. Until such time as he 

leaves his position as corporate officer, Thierry Morin shall continue 

to hold, in registered form, at least 50% of the number of shares 

issued upon exercise of said options (after the sale of the number 

of shares necessary to finance the exercise of the options and pay 

the related taxes and transaction costs). In accordance with the 

terms of the stock option plan, the exercise of these stock options 

is contingent on Thierry Morin holding an employment contract or 

corporate office within the Valeo Group at the exercise date. 

In 2007, Thierry Morin did not exercise any options granted in 

previous years. 

Thierry Morin continues to benefit from the supplementary pension 

scheme set up for senior executives who were formerly members 

of the Management Board, as approved by a decision of the 

Supervisory Board of October 17, 2002. This system is designed to 

top up existing pension benefits (Social Security, Arrco, Agirc, etc.) 

to enable beneficiaries to acquire benefits representing 2% of their 

final salary per year of service within the Group. The total amount 

2. Directors 

Directors receive attendance fees, which are paid every six months. 

These fees are not, however, paid to directors if their average rate of 

attendance at Board Meetings, and where applicable, at Committee 

meetings is lower than 50% during the six months in question. 


Remuneration of corporate offi cers and directors 

< Contents > 

of pension benefits may not exceed 60% of a beneficiary’s final 

salary and the scheme will only apply to beneficiaries who have a 

minimum of 15 years’ service in the Valeo Group when they retire 

and for whom Valeo or one of its subsidiaries was their last employer 

prior to vesting of pension benefits. 

Thierry Morin has also benefited from a pension plan held with Valeo 

(UK) Limited since his nomination as Chairman, and which will be 

paid when he leaves his post as corporate officer. This supplementary 

pension provides an additional annual pension entitlement set at 

60,980 euros when he took up his corporate office in March 2001, 

and which is linked to the annual benchmark salary index of the 

mechanical and electrical industries. The expense recorded by Valeo 

(UK) Limited in respect of this pension plan for 2007 amounted to 

76,364 euros. Compensation and benefits payable to Thierry Morin on 

termination of his corporate duties and contingent on certain criteria 

have been brought into compliance with the provisions of French Act 

2007-1223 of August 21, 2007 (see Chapter 5, page 176 ). 

Should Thierry Morin leave the Company following a decision of 

the Board of Directors or of his own volition in the event of a 

difference of opinion concerning the strategy pursued by the Board 

further to a public tender offer, his termination benefits are set 

at three times his most recent annual salary, excluding bonuses. 

These benefits are not payable in the event that the Board’s decision 

is taken on the grounds of gross misconduct in the performance 

of his duties. The terms and conditions applicable to the payment 

of the termination benefits were amended by the Board of Directors 

on March 20, 2008 (see Chapter 5, “General information about the 

issuer”, section 3.1.1.). 

Attendance fees are allocated to members of the Board of Directors 

as follows: 20,000 euros to each director and an additional 

15,000 euros for each director who is a member of one of the 

aforementioned committees. 


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Total attendance fees paid to Board members in 2007 amounted to 310,000 euros (305,000 euros in 2006) and can be broken down 

as follows: 

Director Attendance fees paid (in euros) 

Thierry Morin 20,000 

Gérard Blanc 20,000 

Daniel Camus 35,000 

Pascal Colombani 12,500 

Jérôme Contamine 27,500 

Pierre-Alain De Smedt 35,000 

François Grappotte (director until May 21, 2007) 17,500 

Philippe Guédon 35,000 

Lord Jay of Ewelme 12,500 

Helle Kristoffersen 20,000 

Jean-Bernard Lafonta (director until May 21, 2007) 10,000 

Alain Minc (director until May 5, 2007) 17,500 

Georges Pauget 27,500 

Erich Spitz 20,000 

In 2007, no Board member apart from Thierry Morin (see Chapter 6, section 3. “Compensation paid to senior managers and members of 

the Board of Directors”) received any other remuneration or benefit. With the exception of Thierry Morin, directors were not awarded stock 

subscription or purchase options or free shares, and none of them hold stock subscription options. 


1. Industrial and environmental risks 

1.1. Dependence on the automotive sector 

The Group’s sales are dependent on the level of automotive 

production, especially in Europe and North America. Production 

itself is affected by a number of factors, especially vehicle stock 

levels, consumer confidence, employment trends, disposable income 

and interest rates. The volume of production is also influenced by 

government initiatives, especially those designed to encourage 

vehicle acquisition, trade agreements, new regulations and social 

issues such as strikes and walkouts. 

Valeo’s five main customers account for almost 65% of its OE 

private passenger car sales. In decreasing order of sales these 


< Contents > 

are Renault-Nissan, PSA Peugeot-Citroën, Volkswagen, Ford and 

General Motors, each of which account for between 8% and 20% 

of total sales. 

Supply contracts take the form of open orders for all or part of the 

equipment needs of a vehicle model, with no volume guarantee. 

They are granted directly for the vehicle’s individual functions and 

generally last for the model’s lifespan. Valeo’s sales and results can 

therefore be impacted by a model’s commercial failure and/or by 

the Group not being selected to work on the production of a new 

range of vehicles. The risks are however broadly diversified, with 

Valeo’s wide range of products and services used in the production 

of a very large number of vehicles. 

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1.2. Environmental risks 

In the various countries in which it operates, the Group’s business 

is subject to diverse and evolving environmental regulations which 

constantly raise the standard of environmental protection. Valeo’s 

2. Market risks 

The Group operates in an international environment in which it is 

confronted with market risks, specifically foreign currency risk, price 

risk and interest rate risk. It uses derivatives to manage and reduce its 

exposure to changes in foreign exchange rates, raw materials prices 

and interest rates. In general, foreign currency risks, price risks in 

respect of base metals and interest rate risks for all Group companies 

are managed centrally by Valeo. Each month, the Group Financial 

Control Department provides the Chairman of Valeo with a report on 

exposure to financial risks managed by the parent company and an 

analysis of credit risk arising on accounts and notes receivable. This 

information enables the majority of the Group’s exposure to market, 

liquidity and counterparty risk to be identified. Recommendations 

based on the findings of the reports are submitted to the Chairman 

by the Financial Affairs Department. 

The corresponding risk sensitivity analyses are disclosed in the notes 

to the consolidated financial statements (note 5.3). 

2.1. Foreign currency risk 

Group entities may be exposed to transaction risk in respect of 

purchases or sales transacted in currencies other than their 

functional currency. Hedges of subsidiaries’ current and future 

commercial transactions and investments are generally contracted 

for durations of less than six months. Subsidiaries principally hedge 

their transactions with Valeo, the parent company, which hedges 

net Group positions with external counterparties. Based on the net 

foreign currency position at year-end, a movement in exchange 

rates would only have a minor impact on the Group’s consolidated 

financial statements. 

The Group is also exposed to foreign currency risk through its 

investments in foreign subsidiaries, notably the risk of a movement 

in the exchange rate of a subsidiary’s currency against the Group’s 

functional currency. The Group decides on a case-by-case basis 

whether to hedge the net investment. No derivative instrument 



environmental policy is described in the “Environmental management 

and performance” section of the chapter , and is designed to control 

and minimize environmental risks as far as possible. 

hedging a net investment is recognized in the Group balance sheet 

at December 31, 2007. 

2.2. Metal price risk 

The Group’s industrial activity requires the use of metals, particularly 

non-ferrous metals, and it is therefore exposed to the risk of 

fluctuations in the price of non-ferrous metals when purchase 

contracts are indexed to prices. However, sale contracts entered into 

with customers do not provide for any such price escalation clauses. 

In most cases, the Group hedges its future purchases of base metals 

over a period which is generally less than six months. The raw 

materials currently hedged (aluminum, processed aluminum, 

copper, zinc and tin) are quoted on official markets. The Group favors 

hedging instruments which do not involve the physical delivery 

of the underlying commodity. At December 31, 2007, the Group’s 

balance sheet shows an unrealized loss of 12 million euros with 

respect to cash flow hedges. 

2.3. Interestrate risk 

< Contents > 

The Group uses swaps to convert interest rates on its debt to either 

a variable or a fixed rate, either as from origination or during the 

term of the loan. 

At year-end, 83% of long-term debt is at a fixed rate (82% at 

December 31, 2006) and the Group’s financing rate is 4.6%, down 

by 0.1% on 2006 (excluding non-strategic activities). 

Taking account of derivatives, the estimated impact on consolidated 

income before tax of a sudden 1% rise in short-term interest rates 

applied to financial assets and liabilities at variable rates would be 

a gain of 3 million euros. Similarly, a sudden 1% fall in short-term 

interest rates would have a negative 3 million euro impact on 

consolidated income before tax. 


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2.4. Equity risk 

At December 31, 2007, the Group’s balance sheet shows cash and 

cash equivalents of 771 million euros (618 million euros at December 

31, 2006). Cash equivalents comprise marketable securities for an 

amount of 328 million euros, including money market mutual funds 

invested in very short-term securities with no capital risk, in line with 

the Group’s cash management policy. In accordance with applicable 

accounting standards, these instruments are measured at market 

value, which is very close to their accounting value. 

3. Legal risks 

3.1. Intellectual property risk (patents) 

As far as possible and when necessary, Valeo’s industrial expertise 

and the innovations generated by the Group’s research are covered 

by patents designed to protect intellectual property. Valeo files a 

large number of patents in its field, which constitute an effective 

weapon in the fight against counterfeiting. 

The Group also holds patent licenses from third parties within the 

scope of its day-to-day activities. 

4. Other risks 

4.1. Counterparty risk 

The Group is exposed to counterparty risk on transactions conducted 

on financial markets for the purposes of financial risk and cash 

management. Limits have been set by counterparty, taking account 

of the ratings of the counterparties with ratings agencies. This 

also has the effect of avoiding excessive concentration of market 

transactions with a limited number of banks. 

4.2. Liquidity risk 

The Group targets maximization of its operating cash flows to enable 

it to finance both the investments required for its development and 

growth and the dividend paid to its stockholders. In line with this 

policy, in August 2003 the Group issued 463 million euros worth of 

bonds convertible into new shares and/or exchangeable for existing 

shares (OCEANE) maturing in eight years. In addition, in June 2005, 

as part of the medium- and long-term E uro Medium Term Notes 


Under IAS 32, treasury stock is deducted from stockholders’ equity 

at the date of acquisition. Changes in the value of treasury stock are 

not recorded. When treasury stock is acquired or sold, stockholders’ 

equity is adjusted to reflect the fair value of the shares purchased 

or sold. The acquisition of 819,112 treasury shares and the disposal 

of 73,012 treasury shares in 2007 led to a year-on-year decrease of 

26 million euros in stockholders’ equity. 

3.2. Product and service liability 

< Contents > 

Valeo is exposed to warranty or liability claims by customers with 

respect to the products and services it sells. Valeo may also be 

exposed to liability claims for damage caused by defective products 

or services sold by the Group. To protect itself from this risk, Valeo has 

taken out an insurance policy to cover the financial impact of these 

claims. However, it is uncertain whether this insurance policy would 

be adequate to cover the full financial impact of such claims. 

financing program for a maximum amount of 2 billion euros, 

the Group issued 600 million euros worth of E uro Medium Term 

Notes maturing in 2013. In July 2005, it also took out two syndicated 

loans for a total of 225 million euros maturing in 2012. Valeo also 

has several confirmed bank credit lines available for an average 

period of two years in a total amount of 1.3 billion euros. None of 

these credit lines had been used at December 31, 2007. Finally, the 

Group has a short-term commercial paper financing program capped 

at 1.2 billion euros. 

At December 31, 2007, the consolidated gearing ratio stood at 

45%, i.e., well within the limit of 120% stipulated by the covenants. 

Non-compliance with this ratio would cause the credit lines to be 

suspended and lead to early reimbursement of prior drawdowns. 

The E uro Medium Term Notes include an option granted to the 

bondholders who can request early redemption of their bonds in 

the event of a change in control of Valeo leading to a downgrade 

in the bond’s rating to below investment grade. 

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4.3. Credit risk 

Valeo is exposed to credit risk, particularly to risk of default by its 

automotive customers. 

Valeo works with all automakers in the sector. At December 31, 

2007, Valeo’s largest customer accounts for 18% of the Group’s 

accounts and notes receivable. Approximately 10% of accounts 

and notes receivable are with the American automakers, Chrysler, 

Ford and General Motors. The downturn in the automobile sector 

business environment in recent years has led the Group to 


by a public tender offer 


Information likely to be impacted by a public tender offer 

strengthen control of customer risks and settlement periods which 

may, on a case-by-case basis, be subject to bilateral negotiations 

with customers. The average settlement period at December 31, 

2007 is 69 days. 

Valeo also generates more than 8% of its net sales in the aftermarket. 

The Group’s large, dispersed customer base in this market is 

constantly monitored and the risk of default is covered by a credit 

insurance policy. These customers represent slightly more than 8% 

of Group accounts and notes receivable at December 31, 2007. 

1. Direct or indirect shareholdings in the Company, brought to the Company’s 

attention (articles L. 233-7 and 233-12 of the French Commercial Code) 

As far as the Company is aware, the following shareholders held 

more than 2% of the Company’s share capital or voting rights 

at February 12, 2008. 

The ownership structure and voting rights presented above were 

prepared based on data brought to the attention of the Company 

in accordance with articles L. 233-7 and L. 233-12 of the French 

< Contents > 

Commercial Code, and where applicable, on information voluntarily 

provided by shareholders of Valeo SA. The ownership structure and 

voting rights per shareholder are calculated based on the Company’s 

share capital at January 31, 2008, i.e., 78,209,617 shares representing 

78,417,554 voting rights, excluding treasury stock. 

Shareholders % ownership % voting rights 

Pardus E uropean Special Opportunities Master Fund LP 18.5% 18.4% 

Morgan Stanley 11.1% 11.0% 

Caisse des Dépôts et Consignations Group 6.0% 8.5% 

Franklin Resources Inc 3.2% 3.1% 

Brandes Investment Partners LP 4.6% 4.5% 

M&G Investment Management Limited 2.9% 2.9% 


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Claims and litigation 

2. Agreements entered into by the Company that would change or terminate 

if there were a change in control of the Company, with the exception 

of those agreements whose disclosure would seriously harm its interests 

(except in the event of a legal obligation to disclose) 

As specified above in “Risks and uncertainties”, section 4.2. “Liquidity 

risk”, the 2013 E uro Medium Term Notes program for an amount 

of 600 million euros includes an option granted to the bondholders 

who can request early redemption of their bonds in the event of 

a change in control of Valeo leading to a downgrade in the bond’s 

rating to below investment grade. 


Some of Valeo’s customers have a clause in their general purchasing 

conditions allowing them to terminate their contract with Valeo in 

the event of a change in control. 

A number of joint ventures that are relatively immaterial in terms of 

the Group’s overall operations (Valeo Raytheon and Valeo Systems 

South Africa) contain clauses that could be activated in the event that 

a competitor of those companies should gain control of Valeo. 

3. Agreements providing for indemnities payable to employees or members 

of the Board of Directors if they resign or are dismissed without real 

or serious cause or if their employment contract is terminated as a result 

of a public tender offer 

As specified above in “Remuneration of corporate officers and 

directors”, section 1. “Corporate Officers”, Thierry Morin, Chairman of 

the Board of Directors, is entitled to termination benefits set at three 

times his most recent annual salary (excluding bonuses) if he should 

leave the Company following a decision of the Board of Directors or 

of his own volition in the event of a difference of opinion concerning 

the strategy pursued by the Board further to a public tender offer. 

Claims and litigation 

Known claims and litigation involving Valeo or its subsidiaries were 

reviewed as of the issuance date of the consolidated financial 

statements and all necessary provisions made to cover the estimated 

< Contents > 

These benefits are not payable in the event of gross misconduct in 

the performance of his duties. The terms and conditions applicable 

to the payment of the termination benefits to Thierry Morin on 

termination of his corporate duties and contingent on certain criteria 

were amended by the Board of Directors on March 20, 2008 and 

brought into compliance with the provisions of French Act 2007-1223 

of August 21, 2007 (see Chapter 5, page 176 ). 

contingencies and potential losses. The amount of these provisions is 

disclosed in note 4.9. to the consolidated financial statements. 

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Outlook 

In 2008, Valeo is aiming to boost its profitability still further in an 

increasingly uncertain market with stabilized raw material prices. 

The plan to reengineer certain Group support functions will be 

Subsequent events 

To the best of Valeo’s knowledge, no other event has occurred since 

December 31, 2007 that is likely to have a material impact on 

Parent company financial statements 

Following the creation of subsidiaries for industrial activities in 

2002, Valeo SA is now the Group’s holding and cash management 

company. 

Valeo SA’s net financial income for the year amounted to 232 million 

euros, up from 47 million euros in 2006. This marked increase was 

mainly due to a 53 million euro increase in dividends received from 

Group subsidiaries, a 32 million euro rise in financial income, and 

lower write-downs on equity investments than in 2006 (88 million 

euros). Net exceptional loss stood at 145 million euros for 2007 (2006: 

net exceptional loss of 3 million euros) and included 100 million 

euros in losses on the disposal of investments in Valeo Vision 

Belgique and Valeo Systèmes de Liaison. It also reflected 45 million 

euros in one-off expenditure relating to strategic operations, costs 

of disposal and provisions for litigation with employees. 


Parent company fi nancial statements 

< Contents > 

deployed on a larger scale and the Group will continue to pursue 

its portfolio streamlining strategy in a prudent manner. 

the business, financial position, results or assets and liabilities of 

the Group. 

Corporate income tax yielded a tax credit of 15 million euros 

compared with a tax credit of 35 million euros in 2006. In 2007, 

Valeo SA recorded an additional provision of 10 million euros 

to cover the risk of having to pay tax credits over to tax consolidated 

entities. 

Valeo SA’s net income for the year amounted to 94 million euros 

compared with 74 million euros in 2006. 

Valeo SA’s stockholders’ equity stood at 3,258 million euros at 

31 December 2007 compared with 3,232 million euros one year 

earlier. This increase mainly comprises net income for the year less 

dividends. 


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Environmental management and performance 


This environmental indicators report is based on the obligations and 

recommendations set out in the French New Economic Regulations 

Law of May 15, 2001 and decree No. 2002-221 of February 20, 2002, 

amended by decree No. 2007-431 of March 27, 2007. 

Our planet faces major ecological challenges, one of the most 

prominent of which concerns the threat of climate change. Mounting 

collective awareness of the urgent need for environmental action 

prompted many initiatives in 2007, some with a very direct bearing 

on the automotive industry. 

One international initiative in 2007 was a report on voluntary 

undertakings from automakers to bring down average vehicle CO2 emissions to 140 g per km – by 2008 for E uropean makers and by 

2009 for Japanese and Korean makers. A forthcoming E uropean 

directive was also drafted, to specify CO emission thresholds 

2 

for new vehicles on the basis of vehicle weight and to impose 

1. Environmental strategy and performance management 

1.1. Valeo and world environmental 

challenges 

Like other automotive equipment suppliers, Valeo faces three 

main environmental challenges: (i) energy consumption and 


< Contents > 

financial penalties on manufacturers who fail to comply with these 

thresholds. 

Compared to other types of industrial plant, a Valeo site has a fairly 

low environmental impact, emitting a thousand times less CO than 2 

a steelworks and 400 times less than a refinery, for example. 

On the other hand, transport is responsible for around a quarter of 

CO emissions worldwide. 

2 

This section provides an analysis of Valeo’s undertakings and 

performance in terms of protecting the environment and natural 

resources – two issues that underpin the very concept of sustainable 

development. Though it focuses primarily on production sites, it 

also examines environmental impact from a product lifecycle angle, 

covering the design, manufacture, use and disposal of Valeo’s 

products. 

related emissions (including the CO emitted by motor vehicles); 

2 

(ii) consumption of natural resources; and (iii) use of hazardous 

substances. These challenges apply to the design of Valeo products, 

and to upstream production and transport phases. 

1 

2 

3 

4 

5 

6

Valeo addresses these challenges through specific undertakings of 

internal and external scope. 

In 2003, the Valeo Group joined the UN Global Compact, under 

which it committed to: 

■ design and make innovative products enabling it to reduce 

the environmental impact of vehicles throughout their entire life 

cycle and improve passenger safety; 

■ protect the environment during production at Valeo Group 

sites. 

Internal undertakings are expressed in an Environment Charter 

and through an integrated risk management system 

covering the environment, health and safety at work, safety for 

personnel and property, and security of information, buildings and 

equipment. 

All Group directives in these fields are set out in the Valeo Risk 

Management Manual, which applies the same demanding 

requirements to all Group sites, irrespective of local constraints. 

This approach, first introduced almost 20 years ago, rooted in a 

constant quest to enhance the Group’s processes, backed by regular 

assessments by external consultants to track performance. 

1.2. Health Safety Security Environment 

organization 

The Group’s Risk Insurance Environment Department has set up 

a dedicated organization involving all Group departments, and is 

assisted by Coordinators assigned within each Product Family. 



The coordinators provide technical support to Health Safety Security 

Environment (HSSE) managers at each site and report their findings 

to the Risk Management Committee, the central oversight body 

within the Risk Insurance Environment Department. 

The HSSE managers at each site ensure that procedures are correctly 

applied, lend their expertise and perform internal audits to verify 

compliance with applicable regulations and Valeo standards. 

The Risk Insurance Environment Department liaises closely with the 

Research & Development Department, whose mission is to design 

and develop products and processes that combine technological 

innovation with environmental responsibility. 

Quarterly performance monitoring 

In 2006, the Group decided to report environmental indicators on 

a quarterly basis rather than annually as was previously the case, 

in order to use them as a tool for managing the environmental 

performance of the Group’s sites. 

Results by site and by Product Family are submitted on a yearly basis 

to General Management and Product Family management to identify 

best practices and determine improvement plans. Consolidated 

performance data is detailed in section 2. “Environmental 

Performance”. 

1.3. Life cycle environmental management 

Valeo’s environmental approach covers the whole product lifecycle, 

up to and including disposal. 

Product innovation: priority on CO 2 

reduction and lightweight design 

< Contents > 

To minimize the generation of pollutants throughout the product 

lifecycle, environmental considerations must be factored in from the 

initial design phase. For many years now, Valeo has been factoring 

in criteria on energy consumption, weight, choice of materials 

(recycled, recyclable) and substances to be discontinued, when 

assessing projects. 

In 2007, Valeo took another step forward by having a cross-functional 

eco-design committee draw up a formal directive on eco-design 

standards. Upon final validation, these standards will apply to all 

R&D projects throughout their development process, requiring 

the designer to allow for all environmental impacts at all lifecycle 

phases (type, numbers and quantities of raw materials, production, 

packaging, transport, distribution, usage, servicing, dismantling, 

recycling, reuse, utilization, disposal). 


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Optimized logistics and packaging 

Valeo’s business operations are highly transport- and packagingintensive, 

as regards incoming supplies of raw materials and parts 

from suppliers or other Valeo sites, and outgoing deliveries to dealer 

networks and automaker client sites. 

A transport survey carried out by Valeo in 2007 provided a sound 

basis for in-depth work on identifying new openings for logistics 

and environmental optimization, with respect to management of 

the upstream subcontracting chain, inter-site flows, and coordination 

with order-givers. 

Group policy on development of packaging solutions specifies 

criteria such as reductions in unit weight, and increased use of nondisposable 

packaging and recycled materials. Packaging consumption 

is included in the Valeo performance indicators detailed in section 

on environmental performance. 

Valeo generic plant: sustainable 

development for production sites 

A site’s life cycle consists of finding a suitable location, building the 

site, operating the site, and ultimately closing or selling it. Since 

1996, Valeo has been developing and extending its generic plant 

concept covering all these phases, and has issued the Valeo Factory 

Design guide setting out precise requirements: 

■ Valeo’s sites are very often located near client sites, in industrial 

zones that already exist or are under construction, to benefit from 

local infrastructure and qualified subcontractors; 

■ when choosing its locations, the Group systematically performs 

audits to check (i) if there are any potential environmental liabilities 

such as soil or groundwater pollution; (ii) if the surrounding area 

is hazardous or particularly sensitive; and (iii) if there is a risk of 

natural disasters such as floods or earthquakes; 

■ sites are constructed and rehabilitated in accordance with the 

specifications set out in the Valeo Factory Design guide, which 

include sustainable development criteria on site construction, 

working conditions for employees, site operating conditions, 

compliance with regulations, Valeo risk prevention standards, 

consumption optimization, and reduction of emissions and 

waste. 

Over and above the constraints and specifications set out in this 

guide (architectural, environmental, organizational, etc.), the key 

issue is the creation of a “project team”, which from the outset 

includes consultants in environmental and equipment safety 

matters. The project team is tasked with applying the best possible 

sustainable development solutions at each stage of a site’s life 

(construction, operation, extension, closure). 


The Guarulhos plant in Brazil was designed applying these principles 

in 2007. 

■ 

■ 

The operational phase of each site is governed by Group 

directives concerning employee health and safety, the 

environment, equipment safety and general security. If soil 

or groundwater pollution is suspected during this phase it is 

investigated and appropriate action is taken. 

When a business is sold or terminated, Valeo systematically 

performs an audit, usually along with an investigation of the soil 

and groundwater, to determine if any pollution has been caused 

during the operational phase. Any pollution detected is treated 

immediately. If a site is closed without there being an immediate 

buyer, all waste, raw materials, products and equipment are 

removed, and site maintenance continued pending arrival of a 

new occupant. 

Continuous improvement at all plants 

To demonstrate its commitment to continually reducing its 

environmental impact and improving the health and safety of its 

employees, Valeo has introduced a number of independently 

certified management systems. 

Valeo initiated its ISO 14001 certification process in 1998, and by 

December 31, 2007, 94% of Valeo sites had obtained certification, 

one of the highest figures among automotive equipment suppliers 

worldwide. Five sites obtained initial ISO 14001 certification in 

2007: Mioveni (Romania), Chrzanow (Poland), Ben Arous (Tunisia), 

Bietigheim (Germany) and Guarulhos (Brazil). 

Valeo started to roll out its OHSAS 18001 certification process in 2005, 

and obtaining this certification was one of its key projects in 2007. 

Last year, 19 additional sites passed their first certification audit, 

again illustrating Valeo’s advances in employee health and safety 

management, with 74% of sites OHSAS 18001 certified to date. 

To foster continuous improvement, Valeo provides sites with intranet 

access to various tools. A risk management self-assessment tool 

for the sites was developed with Product Family HSSE coordinators in 

2007, for rollout in early 2008. This tool sets specific questions to help 

sites evaluate their management of environment, health and safety 

risks. With specific regard to rollout of OHSAS 18001 certification, 

Valeo provides a self-analysis tool to assess compliance with 

OHSAS 18001 requirements. A regulations monitoring tool was 

also made available to French sites. 

< Contents > 

1 

2 

3 

4 

5 

6

Percentage of ISO 14001 and OHSAS 18001 

certified sites 

 

 

 

 

 

 

 

 

 

 

 

 

The percentage of ISO 14001 and OHSAS 18001 certified sites 

took a leap forward in 2007. The proportion of OHSAS 18001 

certified sites rose to 74% by the end of 2007, from 52% at 

the end of 2006. 

 

Ongoing employee training, an integral part of the Valeo 

management system, helps to change mindsets on environmental 

matters at work and home. 

Safety awareness days were held in 2007, covering all Product 

Families and all countries, with one or two sessions per country. 

Total number of hours of environmental training 



The total number of hours of environmental training has fallen 

steadily over the last three years, with the growing maturity of 

ISO 14001 management systems and the growing emphasis 

on training in occupational health and safety. 

Ensuring the safety of operations and equipment 

Valeo has always sought to afford the highest possible levels of 

protection for its sites against natural disasters and technological 

risks: 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

most of Valeo’s sites are classified HPR (Highly Protected Risk) 

and have an automatic sprinkler system to protect against fire, as 

well as teams trained to deal with all kinds of risk situations; 

all sites in seismic risk zones have been built or renovated in 

compliance with the most recent seismic regulations; 

Valeo sites are located in areas not liable to flooding or are 

equipped with systems for protecting against flood risks; 

new Valeo sites are located far from sites posing potentially 

significant risk (Seveso sites, etc.), which could have a domino 

effect and endanger Valeo sites; 

the Valeo Risk Management Manual contains a specific directive 

on the prevention of emergency situations and on situationspecific 

contingency plans. This directive requires each site to 

implement an emergency plan with a view to preventing 

potential incidents; 

in 2007, Valeo completed work on its VERM (Valeo Emergency 

and Recovery Management) tool for support in designing and 

implementing emergency and crisis management plans, as well 

as procedures for restarting equipment. Due to be rolled out to 

all sites in 2008, this tool will ensure that all emergency plans 

share a common structure and content, as well as encouraging 

employee involvement and ensuring that the plans are rapidly 

implemented; 

Valeo pushed ahead with site security developments in 2007 

(access control, CCTV, detection, physical and electronic penetration 

tests), to assess and then improve the effectiveness of its security 

systems. 

Regular checks on compliance with 

regulations and with Valeo standards 

< Contents > 

Valeo’s risk management policy is set out in the Group’s Risk 

Management Manual, and in Group-wide application guidelines. 

The related procedures are focused on ensuring that operations 

comply with Group standards and the regulations in force in each 

country. 


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This entails regular inspections by external independent 

consultants, at the request of the Risk Insurance Environment 

Department. 

A major feature of the Valeo risk management policy is the 

audit program, introduced in 1991, which involves regular audits 

(at least every three years) of all sites to assess performance and 

track progress in four broad fields: 

2. Environmental performance 

2.1. Reporting on environmental performance 

Reporting scope 

The environmental data published in this report concern all Valeo 

Group production and distribution sites worldwide, except for the 

Group’s minority interests. A reconciliation is carried out between 

the financial data reported by the Group (sales, research and 

development expenditure, etc.) and those reported by the individual 

sites. 


■ 

■ 

■ 

■ 

environment; 

occupational health and safety; 

safety of buildings and equipment; 

security of equipment and data. 

Number of sites audited by independent experts Action plans are subsequently established by the sites, based 

on observations resulting from the audit and prioritization of risks. 

Progress on these action plans is reported twice yearly to the Risk 

Insurance Environment Department. 

A total of 119 sites are included in the scope of environmental 

indicators for 2007, including six advanced supplier sites, eight Valeo 

Service sites and one storage site, it being specified that: 

■ 

■ 

■ 

The Group’s main objectives in lifecycle management of 

environmental, health and safety performance for 2008 are 

to: 

■ 

■ 

■ 

■ 

■ 

■ 

< Contents > 

finalize Group standards on product eco-design; 

obtain ISO 14001 certification at all sites; 

extend OHSAS 18001 certification process to all sites; 

develop an integral approach to auditing environmental, 

labor and social issues; 

draw up site-specific action plans to align performance 

with that of the sites obtaining the lowest impact/net sales 

ratios; 

consolidate efforts to reduce risks throughout the Group. 

advanced supplier sites are manufacturing sites located at an 

automaker client site; 

sites dedicated exclusively to research and development, or to 

office work, and sites acquired, sold or closed during the year 

have not been included; 

companies that are 50% controlled by Valeo are taken into account 

at a rate of 50%. Companies over which Valeo exercises more 

than 50% control are included on a 100% basis. 

1 

2 

3 

4 

5 

6

The 2007 reporting scope excludes sites belonging to the 

Motors & Actuators business (sold in late 2005, but included in 

environmental reporting for 2006), and the 20 sites of the Wiring 

Harness business (sold in late 2007). It includes the six sites acquired 

or built in 2006. 

Presentation of indicators 

Most indicators are expressed in terms of both quantity of products 

consumed or emitted per million euros and total quantity. Quantity 

per million euros is calculated by dividing the total quantity by the 

total sales for the sites in question. 

Figures for the current year are compared to those for the five 

previous years, to reveal trends. 

The extent to which indicators are representative is expressed by 

dividing the sales from each site that responded by the total sales 

figure of all the sites included in the report. 

As in previous years, all responses from sites were validated by an 

external body in order to ensure quality and representativeness. 

The following sections give a point-by-point rundown on the 

Valeo Group’s environmental performance in 2007, with regard 

to Valeo’s automotive equipment business. For each point, we 

outline Valeo’s strategy on product design and site management. 

Charts with comments are included for an at-a-glance view of 

Group performance and trends over the last five years. Details are 

given on the resources implemented at Group and local levels. T ext 

boxes outline forthcoming measures planned by Valeo under its 

environment endeavor. 

Up to 40% gaz reduction 



2.2 Energy consumption and global warming 

Carbon dioxide (CO ) is one of six greenhouse gases that build up in 

2 

the atmosphere and cause global warming. Transport accounts for 

around a quarter of greenhouse gas emissions worldwide, with road 

transport accounting for 18%. This figure is for vehicle usage alone, 

and does not include emissions arising from energy consumed 

in manufacturing the vehicles. With the population growth and 

economic growth expected over the coming decades, sharp demand 

for individual mobility will have to be balanced against increasing 

scarcity of fossil fuels and the ever more pressing need to combat 

global warming. 

Valeo contributes in two ways: (i) by developing products and 

technologies to reduce vehicle fuel consumption, and thereby 

CO emissions; and (ii) by implementing cleaner, energy-saving 

2 

manufacturing processes at its production sites. 

Developing products to reduce 

vehicle fuel consumption 

< Contents > 

One expression of Valeo’s long-standing commitment to 

environmental protection and the fight against global warming is 

its deliberate choice to develop environment-friendly products and 

systems. Taken together, recent Valeo innovations can reduce vehicle 

fuel consumption, and thus CO emissions, by up to 40%. 

2 

Technology Reduction 

Power on demand High Efficiency A/C systems 3% 

UltimateCooling 

Thermal Management 

TM 3% to 5% 

THEMIS TM valve 2% to 4% 

Transmission Automation Dual dry clutch and electromechanical actuators 4% to 6% 

Engine intake Cooled EGR system 5% to 7% 

Hybridization Micro-Hybrid (from Stop-Start to Regenerative braking) 6% to 15% 

Engine Operation e-Valve System 15% to 20% 


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Valeo e-Valve technology replaces classic mechanical valve 

control with a variable electromagnetic system that reduces fuel 

consumption by up to 20% and improves engine performance and 

drivability. 

The StARS alternator-starter system, which stops and starts the 

engine instantly and silently, brings significant reductions (6% to 

15%) in fuel consumption and pollutant emissions by stopping 

the engine when the vehicle is at standstill at a red light or in a 

traffic jam. 

The main function of EGR (exhaust gas recirculation) cooling 

systems is to cut down the formation of nitrogen oxide in diesel 

engines. Recent developments in EGR cooling systems for petrol 

engines achieve higher compression ratios, for fuel savings of 5% 

to 7%. 

Valeo’s dual dry clutch gearbox , an alternative to hydraulic 

automatic transmissions, uses two clutches, one for odd-numbered 

gears and one for even-numbered gears, to combine the smoothness 

of an automatic transmission with the fuel consumption of a manual 

gearbox, for a 4% to 6% reduction in CO emissions. 

2 

The THEMIS valve in the engine cooling circuit controls the flow 

of coolant through the engine, main radiator and heating radiator, 

to achieve a 2% to 4% reduction in fuel consumption, a decrease 

in pollutant emissions, and improved climate control performance 

and other advantages. 

UltimateCooling is a new cooling system that optimizes 

thermal energy management by having all fluids transit through 

a single cooling circuit. As well as fuel savings of 3% to 5%, the 

UltimateCooling system also opens the way to vehicle design 

improvements by reducing the front overhang, by 20% to 40% 

compared to a conventional cooling system. 

Valeo’s high-efficiency air conditioning system features 

innovative lightweight components, plus a computerized control 

algorithm for optimum efficiency at all times. This reduces energy 

demand by around 3%, to produce significant fuel savings. 

In the years to come, Valeo will be pushing ahead with its 

product innovation policy, which is in line with European 

initiatives. More and more vehicles will be using systems 

capable of reducing CO emissions. 

2 


Energy optimization at Valeo sites 

Energy consumption 

Response rate 

2002 2003 2004 2005 2006 2007 

97.6% 98.3% 97.1% 98.7% 96.2% 99.7% 

Breakdown of energy consumption 

< Contents > 

Response rate 

2002 2003 2004 2005 2006 2007 

Electricity 100% 98.7% 98.0% 99.7% 97.8% 99.7% 

Gas 95.0% 98.1% 97.4% 99.6% 96.8% 99.7% 

Fuel oil 94.0% 97.9% 98.2% 99.8% 98.1% 99.6% 

Despite efforts made, site energy consumption shows a slight 

rise. Generally speaking, process energy consumption is fairly 

low, which means the bulk of site energy consumption depends 

heavily on climate conditions. 

1 

2 

3 

4 

5 

6

The increase in the ratio of energy consumption to sales is 

largely explained by the exit of the Wiring Harness business, 

wiring being a predominantly manual operation that consumes 

little process energy and generates substantial sales. 

The energy mix at Valeo plants shows little change since 

2002, though we do see a steady fall in fuel oil consumption. 

Valeo’s aim is to replace fuel oil by electricity and gas wherever 

possible. 

Measures to cut down greenhouse gas emissions are taken at Group 

level and by individual sites. Valeo has been measuring fossil fuel 

combustion emissions since 2001. Energy optimization is specifically 

included in the Valeo Group generic plant concept. Building climate 

control, ventilation, lighting and process energy requirements are 

planned from the initial plant design stage to achieve control over 

operating energy expenditure. Progress has also been made in 

the design of CHP (combined heat and power) systems. But since 

processes and resources vary considerably from site to site, each 

individual site has to develop its own specific solutions. 

CO 2 Emissions (direct emissions only) 

Response rate 

2002 2003 2004 2005 2006 2007 

96.0 % 91.1 % 94.7 % 100 % 96.9 % 99.7 % 



< Contents > 

Direct emissions are emissions generated by combustion of 

gas and oil at Valeo sites, as opposed to indirect emissions, 

generated to produce the electricity consumed at the sites. 

After a drop of 20% between 2000 and 2002, CO emissions 

2 

per million euros of sales have remained stable over the 

last five years, at around 12 tonnes of CO equivalent per 

2 

million euros. 

From September 2006 to June 2007 the burners of nine stoves at 

the Limoges plant in France (Valeo Transmissions) were fitted with 

heat exchangers, bringing energy savings of up to 37%. 

In 2007, the Queretaro site (Valeo Transmissions) set up hybrid 

furnaces that run on either electricity or natural gas. This reduces 

dependency on a single energy source as well as bringing down 

greenhouse gas emissions. 

At the Toluca site (Valeo Climate Control), solar panels were installed 

to supply energy for producing hot water. 

The Isle d’Abeau site in France (Valeo Electrical Systems) replaced all 

the neon lamps on the shop floor with energy-saving units fitted with 

reflectors, to give identical lighting with half as many light sources. 

The resulting decrease in electricity consumption corresponds to a 

reduction of around 40 tonnes of CO equivalent. In 2008, the site 

2 

plans to set up a light-activated control system for the neons, saving 

a further 20 equivalent tonnes. 

Employees at all Valeo sites worldwide are constantly educated 

on everyday, common sense energy-saving tips. Some sites go 

further still: for example, the operating manual of the Skawina site 

in Poland (Valeo Wiper Systems) includes an instruction to switch off 

production equipment for all stoppages exceeding 15 minutes. 

Valeo has investigated the use of shared renewable energy solutions 

such as photovoltaic panels on factory roofs. As things currently 

stand, however, return on investment would not warrant widespread 

use of this kind of system. 

The main focus for future improvements at Valeo sites involves 

optimized energy efficiency for processes, better building 

insulation, and promotion of renewable energies. 


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Reducing transport-related 

consumption and emissions 

In 2007, an initial survey was carried out into CO emissions 

2 

generated by transport, including incoming supplies, inter-site flows 

and downstream deliveries. Analysis of data from 35 sites showed 

that transport-related emissions are about equivalent to emissions 

from Group sites. Trucks, used mostly for intracontinental routes, 

are the main transport mode, responsible for three quarters of CO2 emissions. Ships are used for intercontinental routes and account 

for around one quarter of CO emissions. Air transport is used only 

2 

occasionally, and accounts for around 2% of the Group’s transportrelated 

CO emissions. 

2 

Valeo Service has carried out preparatory work on a road-rail 

operation, but the project has been temporarily suspended owing 

to reliability shortcomings. 

Following on from this survey, the next steps, from 2008 

onward, will be to extend the scope of data collection in order 

to improve reliability of information, and to set up working 

groups tasked with drawing up action plans to reduce transportrelated 

emissions. 

2.3. Consumption of natural resources 

Consumption of natural resources such as water, minerals and oil 

increases with human activity in general. But the limited and nonrenewable 

nature of some of these resources raises the specter 

that global economic development will threaten the capacity of 

future generations to enjoy an environment as diverse as today’s. 

As illustrated by the soaring prices of raw materials (metals, oil, 

and thus plastics) on world markets in recent years, consumption of 

natural resources raises essential economic as well as environmental 

challenges. 

Because of the products it makes, and the packaging and industrial 

processes it uses, Valeo uses natural resources such as metals, plastics 

and water. To minimize the environmental impact of its business 

operations, Valeo takes two approaches: reducing consumption of 

materials in general, and making fuller use of recyclable and recycled 

materials. 

Minimum packaging quantities 

Packaging is essential for the handling of Valeo products, i.e. for 

transport, storage, protection, promotion (aftermarket), etc. To fulfill 

these functions, Valeo uses a very wide range of packaging, mostly 

made of paper/cardboard, wood, plastic and metal. 


Use of packaging materials 

< Contents > 

Response rate 

2002 2003 2004 2005 2006 2007 

71.5% 95.7% 80.1% 92.5% 90.4% 99.1% 

Breakdown of packaging materials used 

Response rate 

2002 2003 2004 2005 2006 2007 

Plastics 75.0% 87.9% 82.8% 93.1% 92.1% 99.1% 

Cardboards 73.0% 87.9% 87.0% 92.6% 92.9% 99.1% 

Wood 76.0% 87.9% 85.4% 94.3% 94.4% 99.1% 

1 

2 

3 

4 

5 

6

Overall, Valeo used higher tonnages of packaging material 

than in previous years, despite efforts to cut down. 

In the materials mix the trend toward lower plastic consumption 

continues, consistent with automakers’, demands and safety 

considerations (plastics such as PVC and polypropylene are 

dropped because of fire risks). 

Valeo promotes the use of reusable packaging (through the use of 

non-disposable packs, now widespread at Valeo sites), recyclable 

materials (plastics) and recycled materials (plastics, papercardboard). 

S everal Valeo sites have taken initiatives to minimize 

the environmental impact of their packaging. 

At the Skawina site (Valeo Wiper Systems), new cardboard 

specifications were introduced in 2007, bringing a 10% weight 

reduction. 

At the Telma site in Nanhui (Valeo Electrical Systems), a 27% weight 

reduction was achieved by introducing cardboard boxes to phase 

out wooden crates, from August 2007. 

Many sites have their wooden palettes reconditioned by social 

integration organizations (typically employing handicapped people). 

The repaired palettes are either sold or taken back into service. 

Extending palette service life helps to save timber resources. 

In 2008, Valeo will introduce short- and medium-term 

quantitative targets on reducing packaging consumption 

for each Product Family, consistent with its specificities and 

practices. 

To support the efforts of Product Family teams, a cross-functional 

working group will also be set up in 2008 to examine more 

environmentally sound packaging solutions. Improvements 

will be sought through weight reductions, extended lifespans, 

volume/capacity optimization, choice of materials, etc. 

Lower water consumption at sites 

Water consumption across the Valeo Group as a whole totaled 

3.4 million cubic meters in 2007, which works out at 250 liters 

per employee per day, twice the average domestic consumption 

in Europe. 



Water consumption 

< Contents > 

Response rate 

2002 2003 2004 2005 2006 2007 

96.2% 98.7% 98.0% 99.7% 96.9% 99.7% 

From 2002 to 2007, water consumption across the Group fell 

by 47%, with regular reductions achieved by site initiatives 

such as phase-out of open-loop cooling systems. Since 2006, 

however, consumption has steadied out, as the scope for 

further improvement narrows. 

As with energy consumption, the increase in water consumption 

per million euros of sales is explained by the exit from the 

Wiring Harness business, which had high revenues and very 

low water consumption. 

Alt hough further water savings will be more and more difficult 

to achieve, new and more economical processes are being 

introduced. 

In 2007, Valeo Lighting Systems headlamp component production 

sites in Wuhan (China), São-Paulo (Brazil) and Timisoara (Romania) 

started using a new powder-based varnishing technology that uses 

neither water nor Volatile Organic Compounds (VOCs). 

At Saint-Ouen l’Aumône (Valeo Electrical Systems), a new cooling 

tower set up in 2007 brought water consumption down from 

6,500 m3 in 2006 to 1,873 m3 in 2007, a saving of over 70%. 

The Itatiba site (Valeo Engine Cooling) changed its pipe washer for a 

new process that is 97.5% more economical with water. 

In 2007, the Breuilpont site (Valeo Service) set up a rainwater 

recovery system to feed its automatic sprinkler system. 


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In line with the objectives of the Valeo generic plant concept, 

each site is encouraged to implement techniques for achieving 

further reductions in water consumption over the years to 

come: leak detection, improvements in individual behavior, 

replacement of open-loop cooling systems, etc. Rainwater 

and wastewater recovery is a major avenue for case-by-case 

investigation. 

2.4. Waste production and reuse 

Any good waste management policy will have four focuses: 

at-source waste reduction (the best way to manage waste is 

by not producing any), sorting, recycling and disposal (under 

environmentally sound conditions). Valeo addresses all four issues, 

both in managing sites and in designing products, which will 

inevitably become waste at the end of their useful lives. The Group 

also contributes to meeting the objectives set by E uropean directive 

2000/53/EC on end-of-life vehicles (ELV), which specifies a 95% 

ELV utilization rate by January 1, 2015, with 85% through reuse 

and recycling. 

Low-waste product design 

Valeo’s forthcoming directive on eco-design standards seeks to 

minimize the environmental impact of products throughout their 

lifecycles. It sets out requirements on three aspects of end-of-life 

impact: heavy metal content, recyclability and reusability. 

Waste management is planned for from the initial product design 

stage, by minimizing the parts count, using fewer different metals, 

ensuring products can be dismantled easily, and giving priority to 

reusable products. 

Reduction in site waste production 

The Group’s main waste products are, in descending order of volume, 

metal, wood and plastics. Almost all metal waste (98%) is sold for 

recycling. Some 75% of wood is recycled and the remainder is used 

for heating. Two-thirds of plastic are sold for recycling. 


Waste Production & reuse 

Response rate 

2002 2003 2004 2005 2006 2007 

95.0% 96.5% 98.5% 99.9% 97.4% 99.7% 

85.0% 97.9% 95.4% 99.4% 96.8% 94.7% 

Hazardous waste Production 

< Contents > 

Response rate 

2002 2003 2004 2005 2006 2007 

98.0% 98.7% 98.7% 100% 97.4% 100% 

There are two main explanations for the increase in overall 

waste production per million euros of sales: the increase in 

response rate for this indicator, and the closure of foundry at 

the Amiens site, which recycled 14,000 tonnes of ferrous metal 

waste per year. 

1 

2 

3 

4 

5 

6

All Valeo Group sites will be certified to ISO 14001 in 2008, confirming 

continuous improvement in performance, through specific recycling 

measures implemented locally in accordance with each site’s 

business operations. In addition, the Valeo generic plant concept 

seeks to minimize waste production and increase recycling rates. 

The Sainte-Florine and Sablé-sur-Sarthe sites (Valeo Engine 

Management Systems) have developed methods for saving 24 tonnes 

of resin per year; instead of being discarded, bottom-of-the-barrel 

resin is recovered and used in new barrels. 

2.5. Hazardous substances 

Efforts to eradicate exposure to hazardous substances apply both to 

products and production processes. Two challenges are at play here 

– the environment and human health: 

■ 

■ 

We see a steady increase in the recycling rate, however, to 

74% in 2007. 

There was also a marked reduction in hazardous waste 

production in 2007. 

Valeo’s objective over the years to come is to push ahead with 

improvements on all fronts: process improvements to reduce 

waste, increased recycling, and reuse of materials. 

when servicing or dismantling end-of-life products, substances 

toxic to the environment may be released into the air, soil or 

water, causing local pollution; 

hazardous substances usually have toxic properties (carcinogenic, 

mutagenic, etc.) liable to threaten the health of persons exposed 

to them (machine operators at production plants, mechanics at 

vehicle repair centers, etc.). 

Heavy-metal-free products 

Two E uropean texts govern the use of hazardous substances in the 

automotive industry today. The ELV (end-of-life vehicle) directive 

banned the use of heavy metals (lead, cadmium, chrome 6, etc.) 

in all E uropean vehicles from July 1, 2003. Regulation 1907-2006, 

on registration, evaluation, authorization and restrictions applying to 

chemicals (REACH Regulation) specifies procedures for substances 

of different properties in different tonnages. 

As well as meeting these regulatory requirements, Valeo also 

implements systematic procedures for eradicating heavy metals 

at sites worldwide. 



Valeo set up a data bank on banned and regulated substances in 

1997, which it updates regularly by monitoring changes in regulations 

and automaker requirements. Where alternative thresholds are set, 

Valeo systematically adopts the most restrictive. Product designers 

are not allowed to use any of the listed substances in new product 

development. Through this procedure, Valeo ensures that all its 

products (including those bought from outside suppliers) comply 

with the ELV directive. 

In the context of the implementation of the REACH Regulation, 

a thematic steering group was formed in 2007, based on information 

from a network of Product Family correspondents. Following a 

preliminary survey across a number of pilot sites, Valeo developed 

a tool for inventorying regulated substances, which it had validated 

by Product Family teams. This tool is now being rolled out to help 

Valeo meet the preliminary census deadlines set by the REACH 

Regulation. 

Use of heavy metals 

< Contents > 

Response rate 

2002 2003 2004 2005 2006 2007 

92.0% 96.1% 97.2% 99.6% 97.5% 100% 

Since the data bank on banned and regulated substances 

was set up, use of heavy metals across the Valeo Group has 

fallen dramatically (by 90% since 2002). In 2007, another step 

forward was achieved, with consumption halved with respect 

to 2006. 


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These results have been achieved through a number of major 

specific measures taken by Product Family teams over the years: 

■ 

■ 

■ 

eradication of lead in solder for electronic components; 

upgrade of surface treatment processes, from chrome 6 to 

chrome 3; 

eradication of cadmium in pigments. 

Eradication of hazardous substances at sites 

As well as working on the eradication of hazardous substances 

from products, Valeo has also abolished the use of all substances 

considered hazardous at its industrial sites. 

To this end, sites apply a procedure that involves identifying banned 

substances, seeking replacement substances (at economically 

acceptable conditions), testing them, and having them approved 

by clients. In the case of residual hazardous substances at Valeo sites, 

most products are either awaiting certification or the Group has been 

unable to find replacement products at a viable cost. 

Use of chlorinated solvents 

Response rate 

2002 2003 2004 2005 2006 2007 

95.0% 93.3% 95.8% 99.3% 98.2% 100% 


Use of Carcinogenic, Mutagenic and Reprotoxic (CMR) 

substances 

Response rate 

< Contents > 

In the years to come, Valeo will continue to extend the initial 

scope of substances covered by the ELV directive to approach 

the target of “zero heavy metals” in its products. This goal will 

be pursued through sustained technological efforts by Product 

Family R&D departments. 1 

2002 2003 2004 2005 2006 2007 

76.0% N/A 94.9% 98.8% 98.2% 99.4% 

Use of chlorinated solvents and CMR substances has fallen 

steadily since 2004, and 2007 performance showed a significant 

improvement on 2006 with ratios per million euros of sales 

down by 25% and 60% respectively. This illustrates effective 

implementation of instructions, such as the requirement on 

look-up in the data bank on banned and regulated products. 

The number of listed chemicals has fallen at all sites, and limitations 

have been set on the quantities of chemicals used. 

In the years to come, Valeo will be continuing with measures 

aimed at eradicating all hazardous substances from its 

production sites. Sites will also be helping to inventory 

substances covered by the REACH Regulation, and complying 

with this regulation. 

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2.6. Reducing all types of pollution 

Minimizing all forms of pollution is another of the Group’s ongoing 

environmental objectives, which involve ensuring that industrial 

activities are properly integrated into their environment. This concerns 

both the performance of products developed by the Group and 

the processes implemented to create such products. 

The Group has developed the StARS starter-alternator that allows an 

engine to be stopped and restarted instantly and silently, resulting 

in a notable reduction in noise pollution in urban areas. 

Operations at Valeo sites are not particularly noisy, and Valeo is 

careful to locate new sites sufficiently far from residential areas. 

In accordance with the recommendations of the Valeo Factory Design 

guide, the visual impact of sites is taken into account at the time 

of their construction, and a large section of each site is given over 

to green spaces. 

As odor pollution, usually caused by the emission of Volatile Organic 

Compounds (VOC), can be particularly unpleasant for local residents, 



a number of at-source measures have been taken to reduce VOCs. 

For example, solvent-based paints have been replaced by waterbased 

alternatives, and trichloroethylene has been phased out of the 

manufacturing process for clutch facings. The Valeo sites concerned 

are equipped with systems for treating these compounds in order to 

keep odor pollution below the perception threshold. Such systems 

include biofiltration, absorption, condensation and incineration, with 

incineration being the most frequently used. 

Valeo is also highly aware of the need to protect the health of local 

residents near its sites. In 2005, it compiled a directive on legionella 

bacteria. This directive is based on French law, which is one of the 

strictest in this domain, and is available at all Valeo sites worldwide. 

Under this directive, the sites must: 

■ 

■ 

■ 

< Contents > 

replace wet cooling towers with dry towers wherever possible; 

implement preventive treatment systems to avoid the proliferation 

of legionella bacteria; 

carry out frequent controls to ensure the effectiveness of 

treatments in place. 


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3. Table of environmental indicators 


< Contents > 

2002 2003 2004 2005 2006 2007 

Total sales across all sites in reporting scope (gross) 11,373 9,632 9,940 10,786 10,486 9,222 

Number of sites in reporting scope 125 114 137 137 138 119 

Total workforce across all respondent sites 64,879 58,343 66,998 6,4312 62,350 54,913 

ISO 14001 certified sites (%) 39 59 65 70 77 94 

OHSAS 18001 certified sites (%) 0 2 4 11 52 74 

Number of independent environment audits 65 60 42 59 46 37 

Number of occupational health and safety audits 44 52 42 58 46 37 

Number of equipment safety audits 86 75 115 116 110 97 

Number of security audits 74 98 51 71 42 51 

Number of hours of environment training (total plant) 29,229 34,907 38,979 36,938 37,386 33,458 

Total volume of water consumption (thousand m 3 ) 6,334 5,201 5,032 3,262 3,463 3,377 

Total volume of water consumption/sales (m 3 /€) 579 540 514 303 341 367 

Total energy consumption (GWh) 1,758 1,678 1,739 1,814 1,868 1,861 

Total energy consumption/sales (MWh/€ millions) 158 174 179 171 185 202 

Electricity (%) 60 60 58 63 64 64 

Gas (%) 31 32 33 34 34 32 

Fuel oil (%) 4 2 6 2 2 1 

Other energies (%) 5 6 3 1 0 0 

Use of chlorinated solvents (tonnes) 2,288 848 1,469 1,171 1,096 739 

Use of chlorinated solvents/sales (kg/€ millions) 212 88 153 109 107 80 

Use of heavy metals (tonnes) 1,396 415 274 296 294 131 

Use of heavy metals/sales (kg/€ millions) 133 43 28 28 29 14 

Use of CMR substances (tonnes) 1,947 N/A 1,062 1,049 1,138 406 

Use of CMR substances/sales (kg/€ millions) 192 N/A 107 98 111 44 

Use of packaging materials (tonnes) 59,301 51,903 48,606 67,239 63,248 72,065 

Use of packaging materials/sales (kg/€ millions) 7,293 5,389 5,503 6,741 6,669 7,882 

Proportion of plastic packaging (%) 11 7 8 17 10 10 

Proportion of cardboard packaging (%) 49 60 48 53 57 58 

Proportion of wooden packaging (%) 40 33 44 29 32 31 

Proportion of other packaging materials (%) 0 0 0 1 1 2 

Use of recycled plastics (tonnes) 10,026 10,420 6,219 5,020 6,150 7,184 

Volume of industrial effluent emissions (thousand m 3 ) 1,174 940 1,009 695 748 918 

Volume of industrial effluent emissions/sales (m 3 /€ millions) 104 98 102 65 76 103 

Heavy metal content in effluent (kg) 859 1,196 365 208 278 242 

Heavy metal content in effluent/sales (kg/€ millions) 0 0 0 0 0 0 

VOC atmospheric emissions (tonnes) 2,473 2,931 1,242 1,708 1,489 1,296 

VOC atmospheric emissions/sales (kg/€ millions) 329 304 143 162 153 141 

TCE atmospheric emissions (tonnes) 1,740 917 536 465 327 51 

TCE atmospheric emissions/sales (kg/€ millions) 178 92 54 44 32 6 

Lead atmospheric emissions (kg) 167 270 130 72 52 173 

Lead atmospheric emissions/sales (g/€ millions) 19 27 13 7 5 20 

Greenhouse gas emissions (tonnes CO 2 equiv) 122,011 107,035 112,195 121,157 123,971 122,151 

Greenhouse gas emissions/sales (tonnes CO 2 equiv/€ millions) 11 11 12 11 12 13 

Total waste produced (tonnes) 139,707 112,054 123,216 132,725 138,772 159,223 

Total waste produced/sales (tonnes/€ millions) 13 12 13 12 14 17 

Hazardous waste (tonnes) 29,975 30,121 20,924 23,102 23,296 20,485 

Non-hazardous waste (tonnes) 109,495 80,854 102,755 109,628 115,498 138,738 

Waste reuse rate (%) 62 62 59 71 72 74 

Number of fines and compensation awards N/A N/A 5 5 3 1 

Amount of fines and compensation awards (€ thousands) N/A N/A 25 16 4 1 

Provisions and guarantees for environmental risks (€ thousands) 

Functional expenditure to prevent environmental impact of operations 

N/A N/A 7,580 8,054 3,091 4,289 

(€ thousands) 

Investments (excluding decontamination work) to prevent 

N/A N/A 14,140 13,861 16,417 19,789 

environmental impact of operations (€ thousands) N/A N/A 5,624 7,205 4,244 3,552 

Decontamination cost (€ thousands) N/A N/A 869 1,467 1,240 1,427 

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Social indicators 

This social indicators report is based on the obligations and 

recommendations set out in the French New Economic 

Regulations Law (NRE) of May 15, 2001 and decree No. 2022- 

221 of February 20, 2002, amended by decree No. 2007-431 of 

March 27, 2007. 

The Valeo Group has chosen to base its social indicators on data 

from all of its companies worldwide. There are some exceptions to 

this, which are listed on a case-by-case basis. The indicators have 

1. Employment 

1.1. Number of employees 

1.1.1. Changes in number of employees over three years 

Excluding non consolidated entities 

At December 31, 2007, the Group employed 61,051 people 

worldwide, down 12.4% on 2006 and 13.2% on 2005. This reduction 

is mainly attributable to the sale of the Wiring Harness business 

on December 31, 2007. 

Overall temporary staffing levels (fixed-term contracts and agency 

temporary personnel) decreased by a further 4.5% on the back of 

the Group’s efforts to increase job security. On a consolidated basis, 

temporary staffing levels remained stable, representing 15% of 

the Group’s total employees in 2007, compared with 14% in 2006 

and 16% in 2005. 

Partly as a result of sale of the Wiring Harness business, the percentage 

of engineers and managers edged up once again in 2007, to 20.6% 

of headcount versus 18.8% in 2006 and 18.4% in 2005. 



< Contents > 

been significantly impacted by the disposal of the Wiring Harness 

business at December 31, 2007. 

Valeo continued the step-by-step improvement of its indicators 

system in 2008 across all ten of its Product Families, Valeo Service, 

and holding companies, representing a total of 125 production 

sites, 62 R&D centers and 9 distribution platforms in 28 countries 

(excluding the Wiring Harness business). 

2005 2006 * 2007 ** 

Engineers and managers 11,953 12,134 11,294 

Administrative staff, technicians and supervisors 11,514 11,198 9,307 

Operators 41,499 41,126 34,303 

Registered headcount 64,966 64,458 54,904 

Agency temporary staff 5,338 5,206 6,148 

Total headcount 

including: 

70,304 69,663 61,051 

Permanent staff 58,976 59,969 51,791 

Temporary staff 

* 

Excluding Motors & Actuators (with the exception of its Chinese division). 

** 

Excluding Wiring Harness (with the exception of the Porriño plant in Spain). 

11,329 9,695 9,260 

1.1.2. Internationalization of Group headcount 

The Group’s global expansion has given rise to an increasingly 

international staff. The proportion of employees currently working 

in countries other than France currently stands at 71.2%, compared 

with 47.8% in 1995. This percentage has, however, remained fairly 

stable over recent years (73% in 2006 and 71.5% in 2005). 

The decrease on the 2006 figures is solely due to sale of the Wiring 

Harness business, which employed 5,900 people in Morocco 

and 4,900 in Tunisia. 


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Total headcount excluding France 

* Excluding Wiring Harness (with the exception of the Porriño plant in Spain). 

Year-on-year, headcount increased by 3 points in Western E urope, 

2.5 points in Eastern E urope, 0.9 point in North America, 1.8 point in 

South America, and 3.4 points in Asia, but decreased by 11.4 points 

in Africa with sale of the Wiring Harness business. 

1.1.3. Generational turnaround 

Permanent workforce by age bracket * 



1995 2000 2005 2007 * 

14,125 50,002 50,273 43,484 

Western Europe Eastern Europe Africa North America South America Asia 

Total headcount at 

December 31, 2007* 29,279 10,480 1,502 6,828 4,201 8,762 


48.0% 17.2% 2.5% 11.2% 6.9% 14.4% 

At December 31, 2007, the Group’s permanent workforce broke 

down as follows: 

■ 1.0% aged under 20; 

■ 26.8% aged 20 to 29; 

■ 35.6% aged 30 to 39; 

■ 22.1% aged 40 to 49; 

■ 13.8% aged 50 to 59; 

■ 0.7% aged over 60. 

Around 43% of engineers and managers and 35% of administrative 

staff, technicians and supervisors are in the 30-39 age bracket. 

Around 33% of operators are aged 30 to 39, and 30% are aged 

20 to 29. 

Because of the large numbers of new staff recruited each year, 

generational turnaround is significant. 

1.2. Recruitment 

< Contents > 

Thanks to its strong corporate image and experience, the Group 

did not encounter any particular problems with recruitment during 

the year, apart from certain highly localized difficulties concerning 

positions requiring advanced specialization or specific language 

skills, or in catchment areas where competition for new recruits 

is tough. 

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1.2.1. Permanent contracts 

Number of new hires on permanent contracts 

In 2007, Valeo severely curtailed external recruitment in the 

“engineers and managers” and “administrative staff, technicians 

and supervisors” categories with a view to encouraging internal 

mobility. As a result, the number of new hires on permanent 

contracts decreased by 15% across all socio-professional categories. 

Engineers and managers accounted for just 17% of new hires, as 

against 23% in 2006 and 27% in 2005. 

Breakdown of new hires on permanent contracts by geographical area * 



Since the measure did not extend to operators, new hires in this 

segment accounted for 76% of the total in 2007, up from 67% in 

2006 and 61% in 2005. 


Permanent contracts 2007 * 797 2,515 108 1,529 1,111 991 

11.3% 35.7% 1.5% 21.7% 15.8% 14.1% 


The Group focused its recruitment efforts during the year on Eastern Europe and North America. 

1.2.2. Fixed-term contracts 

Number of new hires on fixed-term contracts 

2005 2006 * 2007 ** 

Engineers and managers 258 239 73 

Administrative staff, technicians and supervisors 380 239 82 

Operators 7,655 6,876 3,980 

TOTAL 8,293 7,354 4,135 

* Including Motors & Actuators. 

** Excluding Wiring Harness (with the exception of the Porriño plant in Spain). 

< Contents > 

2005 2006 * 2007 ** 

Engineers and managers 1,772 1,890 1,207 


Operators 4,029 5,581 5,360 

TOTAL 

* 

Including Motors & Actuators. 

** 

Excluding Wiring Harness (with the exception of the Porriño plant in Spain). 

6,558 8,320 7,051 

4,135 fixed-term contracts were signed during the year, down 43.8% on 2006 and 50.1% on 2005. 

Employees on fixed-term contracts occupied 3,112 posts at December 31, 2007, compared with 4,489 in 2006 and 5,991 in 2005. 


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Breakdown of new hires on fixed-term contracts by geographical area * 



2007 Fixed-term contracts * 2,261 313 447 665 0 449 


1.3. Departures 

Valeo terminated 2,007 contracts in 2007, representing 3.9% of 

the permanent workforce (5.3% in 2006 and in 2005). 

As in 2005 and 2006, redundancies accounted for less than one 

third of total contract terminations in 2007, as opposed to one-half 

in 2004. 

Early retirement and retirement represented the equivalent of 1.6% 

of the permanent headcount (1.3% in 2006 and 1.5% in 2005). 

54.7% 7.6% 10.8% 16.1% 0.0% 10.9% 

Compared to 2006, the number of new hires on fixed-term contracts increased by 14.1 points in Western E urope, 8.2 points in North America, 

and 6 points in Asia, but decreased 7.5 points in Eastern Europe and 20.7 points in Africa, due to the sale of the Wiring Harness business. 

2005 2006 * 2007 ** 

Contract terminations 3,143 3,153 2,007 

of which redundancies 993 1,017 607 

Resignations 4,196 4,723 4,029 

Early retirement 462 162 160 

Retirement 420 640 668 



< Contents > 

Resignations remain the principal reason for departures, representing 

7.8% of the permanent headcount in 2007 (7.9% in 2006 and 7.1% 

in 2005). By socio-professional category, resignations accounted 

for 11% of engineers and managers on permanent contracts, 5% 

of administrative staff, technicians and supervisors on permanent 

contracts, and 7% of operators on permanent contracts. 

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5 

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Breakdown of 2007 departures by geographical area * 

Information on rightsizing and employment protection 

plans, transfer, rehiring and assistance measures 

Valeo is firmly committed to a forward-looking employment and 

skills management policy. During restructuring operations the Group 

regularly consults with employee representatives and explores 

all possible avenues to finding alternative employment for staff, 

including internal transfers, outplacements, initiatives aimed at 

finding buyers for divested operations and reindustrialization of 

employment catchment areas. 

As in 2006, rightsizing programs launched in 2007 involved six 

of the Group’s ten Product Families (excluding the Wiring Harness 

business, with the exception of the Porriño plant), and a total of 679 

employees (727 in 2006). The six Product Families concerned were: 

2. Organization of the working week 

2.1. Working hours/days 

Full-time employees 

The work of employees within the Group’s 125 production sites, 

62 R&D centers and nine distribution platforms is based on statutory 




Redundancies 252 11 0 328 5 11 

41.5% 1.8% 0.0% 54.1% 0.8% 1.8% 

Dismissals 288 175 5 550 321 61 

20.6% 12.5% 0.4% 39.3% 22.9% 4.4% 

Resignations 1,018 1,152 110 1,124 177 448 

25.3% 28.6% 2.7% 27.9% 4.4% 11.1% 

Early retirement 143 1 0 8 0 8 

89.7% 0.6% 0.0% 4.7% 0.0% 5.0% 

Retirement 379 14 0 176 6 94 

56.7% 2.1% 0.0% 26.3% 0.9% 14.0% 

* Excluding Wiring Harness(with the exception of the Porriño plant in Spain). 

< Contents > 

Valeo Climate Control, Valeo Engine Cooling, Valeo Compressors, 

Valeo Interior Controls, Valeo Electrical Systems, and Valeo Wiper 

Systems. 

In respect of programs completed in 2007, 462 out of a total of 652 

employees found new employment, a rate of 70.8% (compared 

with 98.9% in 2006). Internal transfers accounted for 10.8 points of 

this figure and outplacements for 12.7 points. Early retirement and 

retirement made up another 34.0 points, resignations 12.0 points, 

and alternative transfer solutions 1.2 point. 

working time, which varies from 35 to 48 hours per week depending 

on the country. 

The most widespread statutory working time is 40 hours per 

week. 


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In France, the agreement on the reduction in working time, signed with trade unions on April 20, 2000, sets the applicable working time 

as follows: 

Engineers and managers 215 days per year 

Administrative staff, technicians and supervisors 35 h 

Employees without paid overtime hours 37 h 30 

Operators 35 h 

Part-time employees 

As part-time work is defined as any work schedule with fewer working hours than the standard schedule for the entity in question, the average 

working time for part-time employees varies from 16 to 36 hours per week, depending on country and socio-professional category. 

2.2. Shift patterns 

Employee breakdown by shift patterns in % 


2005 2006 * 2007 ** 

Day workers 45% 43% 44% 

Two 8-hour shifts 27% 30% 24% 

Three 8-hour shifts 21% 20% 24% 

Night workers 5% 5% 6% 

Weekend workers 2% 2% 2% 

* Excluding Motors & Actuators (with the exception of its Chinese division). 


Most production employees work two or three shifts or nights in 

order to optimize plant utilization. In 2007, there were 30,691 shift 

workers, representing 55.9% of total headcount. 

2.3. Overtime 

In 2007, 5,596,662 hours of overtime were paid (as compared 

with 6,554,338 in 2006 and 7,248,369 in 2005), 84% of which to 

production employees (81% in 2006 and 79% in 2005). 

This paid overtime corresponds to 5% of the Group’s possible number 

of working hours (i.e. the maximum number of hours that could 

possibly be worked by all Group employees). 

2.4. Part-time work 

In 2007, 1,362 of the Group’s employees worked part-time, 

representing 2.5% of the permanent workforce (1.9% in both 2006 

and 2005). 

Women accounted for 73.8% of the Group’s part-time workers 

(75.2% in 2006). 

Part-time numbers break down as follows: engineers and managers 

8.4%; administrative staff, technicians and supervisors 16.5%; and 

operators 75.1%. 

In certain countries the percentage of part-time employees was 

much higher than the Group average. This was particularly the case 

in Germany (12.2%), Belgium (11.7%), Ireland (10.8%), Spain 

(5%), Italy (3.3%), and Egypt (2.7%). In France part-time employees 

represented 2.4% of the workforce. 

2.5. Absenteeism 

< Contents > 

Absenteeism, expressed as the number of hours absent over 

the possible number of working hours, fell once again in 2007, 

to 2.65%, down 0.05 points on 2006 and 0.15 points on 2005. 

Absenteeism recorded during the year was due to sickness (82.1%), 

unauthorized absences (5.5%), authorized absences such as unpaid 

leave (4.2%), accidents at the workplace or in journeys between 

the office and home (4.0%), strikes (1.5%), suspensions (0.4%) 

and other reasons (2.3%). 

The sustained reduction in absenteeism rates, from 2.9% in 2004 

and 3.4% in 2003, was achieved through action plans implemented 

across the Group. 

France comes halfway in the absenteeism ranking with a rate of 2.8%, 

up 0.1 points on 2006. 

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3. Equality between men and women in the workplace 

3.1. Male-female breakdown 

Valeo places great importance on equality between men and 

women in the workplace, in terms of career development, training 

possibilities, salaries and rank within the company. 

Valeo draws up a comparative male-female status report for the 

Group’s French companies every year. This report is used as a basis 

for annual negotiations between labor and management on targets 

Breakdown of women by socio-professional category 



for equality in the workplace and on the measures required to 

achieve these targets. 

The sale of the Wiring Harness business, which employed a high 

proportion of women, especially among operators, drove down 

the percentage of women in the Group, to 30.7% at end-2007, 

compared with 37.2% in 2006 and 36.6% in 2005. 

2005 2006 * 2007 ** 

Engineers and managers 17.1% 17.1% 17.4% 

Administrative staff, technicians and supervisors 28.3% 26.5% 26.3% 

Operators 44.4% 46.0% 39.2% 

* Excluding Motors & Actuators (with the exception of its Chinese division). 


Through partnerships with leading French business schools and 

associations such as Elles Bougent, which promotes careers in 

engineering for women, Valeo is striving to increase the percentage 

of women it employs. As the table below shows, the percentage of 

Percentage of women hired under permanent contracts over three years 

women hired under permanent contracts in all socio-professional 

categories has been increasing over recent years, gaining nine 

percentage points between 2005 and 2007. 

Engineers and managers 

Administrative staff, 

technicians and supervisors Operators Total 

Women % Women % Women % Women % 

2005 369 20.8% 157 20.7% 1,470 36.5% 1,996 30.4% 

2006* 414 21.9% 184 21.7% 2,268 40.6% 2,866 34.4% 

2007** 337 27.9% 146 30.1% 2,298 42.9% 2,781 39.4% 



3.2. Diversity 

The Valeo Group has sites in 28 countries and is thus highly 

diversified. 

In 2007, the Group’s workforce comprised employees of 

93 nationalities. 

The ten most prevalent nationalities within our Divisions are French, 

German, Chinese, Spanish, Mexican, Italian, Portuguese, Moroccan, 

Brazilian, and Polish. 

< Contents > 

The countries where Valeo has the largest number of nationalities 

are: France (62 nationalities), Germany (38), the United States (29), 

the Czech Republic (28), and Italy (20). 

The two most diversified Divisions are the Valeo Interior Controls 

Product Family in Germany, with 23 nationalities across a workforce 

of 1,613 employees, and the Valeo Wiper Systems Product 

Family in Germany, with 23 nationalities across a workforce of 

1,456 employees. 


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4. Labor relations and collective bargaining agreements 

Valeo has developed an active contractual labor relations policy. 

In 2007, a total of 213 agreements were signed in 16 countries, 

compared with 359 in 2006 and 315 in 2005, on various issues 

and in accordance with the terms and conditions stipulated under 

different national legislations. 

Among these agreements, 67 (31.5%) related to working time, 

99 (46.5%) to salaries, 25 (11.7%) to profit-sharing and incentive 

schemes, and 36 (16.9%) to premiums or bonuses. 

In certain countries such as France, Italy, Germany, Tunisia and Japan, 

many meetings took place with trade unions, leading not only to 

formal and informal exchanges but also to the signature of numerous 

agreements, including the following: 

Western Europe 

■ 

■ 

■ 

■ 

France: wage agreements for 2007, agreements on forwardlooking 

employment and skills management and the organization 

of working time and leave, and on labor law provisions in company 

bylaws; 

Italy: agreements on the organization of working time and leave, 

unemployment benefits and long-distance mobility; 

Germany: agreements on retirement and on the organization of 

working time and leave; 

Spain: c ollective bargaining agreements. 

Eastern Europe 

■ 

■ 

■ 

Czech Republic: collective bargaining agreements and wage 

agreements; 

Romania: collective work agreement; 

Hungary and Poland: wage agreements. 

5. Health and safety in the workplace 

The Group’s target in terms of health and safety is to intensify its 

approach to work-related accident prevention and achieve a zeroaccident 

rate. 

Health and safety at work is a clear priority for Valeo. Systematic 

audits are performed by external consultants to assess and control 

risks, and Valeo has implemented Group-wide standards. 


North America 

■ 

Mexico: wage agreements and agreements on employee profitsharing 

and incentive schemes. 

South America 

■ 

■ 

Brazil: wage agreements, collective bargaining agreements and 

agreements on employee profit-sharing and incentive schemes; 

Argentina: wage agreements. 

Asia 

< Contents > 

■ Japan: agreements on the payment of premiums and bonuses, 

wage agreements and agreements on the organization of working 

time and leave; 

■ China: agreement on employment contracts; 

■ South Korea and Thailand: wage agreements. 

The E uropean Works Council includes representatives from Belgium, 

Czech Republic, France, Germany, Hungary, Italy, Poland, Portugal, 

Romania, Slovakia, Spain and Sweden. With the sale of the Wiring 

Harness business, Portugal left the E uropean Works Council catchment 

area at December 31, 2007. Membership renewal is planned for 

Spring 2008, at which time Irish delegates will join the Council. 

The Council met five times in 2007. 

The countries in which employees are fully or partially covered by a 

collective bargaining agreement are France, Spain, Italy, Germany, 

Belgium, Ireland, Hungary, Romania, Tunisia, South Africa, the United 

States, Mexico, Brazil, Argentina, South Korea, Japan, and India. 

True to its continuous improvement ethic, Valeo extended and 

optimized the tools instigated in 2006 for analyzing work-related 

incidents and accidents. In 2007, the information system rolled out 

in 2006 was also upgraded to improve the dissemination of good 

practices with a view to eradicating risk. 

1 

2 

3 

4 

5 

6

Valeo’s “Well-being and effectiveness at the workstation” project 

was finalized in 2007 and underwent initial tests at pilot sites. 

It seeks to prevent work-related accidents and illness among both 

production and administrative employees. Under this project a 

method for identifying high-risk positions and dangerous situations 

was formalized. 

In addition to the systematic audits, Valeo uses three indicators to 

gauge the effectiveness of the measures adopted: 

■ 

number of workplace accidents, regardless of whether or not they 

lead to time off work, and accidents involving a potential risk of 

personal injury (indicator implemented in 2006); 

Group 



■ frequency rate (number of accidents leading to absence per million 

hours worked); 

■ gravity rate (number of days lost because of work-related accidents 

per thousand hours worked). 

In 2007, the number of workplace accidents (with or without time 

off work) and accidents involving a potential risk of personal injury 

was down almost 27% on 2006, to 4,914. There were 555 accidents 

leading to absence, compared with 763 in 2006. 

The main causes of accidents leading to absence could be traced to 

machines and processes (48.1%) and ergonomics (19.5%). 

2005 2006 2007 

Frequency rate* 5.07 5.55 5.47 

Gravity rate** 0.16 0.15 0.14 

* Frequency rate: number of accidents leading to absence per million hours worked. 

** Gravity rate: number of days lost because of work-related accidents per thousand hours worked. 

France 

2005 2006 2007 

Frequency rate 12.74 11.35 8.94 

Gravity rate 0.33 0.28 0.21 

In France the frequency and gravity rates for work-related accidents 

are lower by 0.83 and 15.76 points respectively than the industry 

average (source: CNAMTS 2006 - latest survey). 

The main causes of accidents leading to absence could be traced to 

machines and processes (48.0%) and ergonomics (19.7%). 

< Contents > 

Around 13% of the training hours provided within the Group in 2007 

were dedicated to safety, up 2.2 points on 2006. 


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6. Remuneration 

6.1. Changes in remuneration and social charges 

(In million of euros) 2005 * 2006 * 2007 

Payroll excluding social charges 1,473 1,532 1,517 

Social charges 368 402 399 

Pension expenses in respect of defined contribution schemes 116 105 96 

Total payroll 1,957 2,039 2,012 

Charge rate 32.9% 33.1% 32.6% 

* On a like-for-like basis (excluding Motors & Actuators and Wiring Harness). 

(In million of euros) 2005 * 2006 * 2007 

Personnel costs (including temporary staff) 1,636 1,699 1,686 

% of sales 17.8% 18.0% 17.6% 

* On a like-for-like basis (excluding Motors & Actuators and Wiring Harness). 

Breakdown by geographical area in 2007 * 


France Europe (excl. France) Outside Europe 

Payroll excluding social charges 619 511 387 


Total payroll 834 623 459 

Charge rate 34.7% 21.9% 18.6% 

The highest headcount is in France, with over 15,000 employees. 

Overall, wages went up an average of 2.1% in 2007, with inflation 

standing at 1.5%. 

Eleven wage agreements were signed in the Group’s 17 French 

companies with employee representative bodies and unions. 

Of these agreements, eight (47%) were signed by the majority of 

the representative unions, including six (37%) that were agreed 

unanimously. 

6.2. Profi t-sharing, incentive schemes and 

employee savings schemes 

6.2.1. Profit-sharing 

In 2007, 4,980,694 euros was set aside in a special profit-sharing 

reserve by five out of the Group’s 17 companies in France. 

6.2.2. Incentive schemes 

A total of 2,260,317 euros was paid out under incentive schemes 

to employees from five of the Group’s 17 companies in France in 

2007. 

6.2.3. Employee savings 

< Contents > 

Group savings scheme 

Employees can invest sums of money from profit-sharing and 

incentive schemes in an Employee Savings Plan set up on 

November 13, 2001, under a collective agreement signed by 

Group Management and four trade union organizations. Voluntary 

payments can also be made with top-up payments of 0% to 75% 

by Valeo. 

This scheme only applies to French companies. 

1 

2 

3 

4 

5 

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At December 31, 2007, 11,738 employees were members of Valeo’s 

Employee Savings Plan (up 0.2% on the previous year), representing 

75.3% of the total French headcount (68.6% in 2006), and a total 

amount of 36 million euros split between six investment funds. 

Employee stock ownership 

In late 2004, the Group set up an employee shareholders plan 

entitled Valeorizon, which was subscribed to by 14% of employees 

in 16 of the countries in which Valeo has operations. 

7. Training 

Trends in training over the last three years 

The overall cost of training in 2007 amounted to 24,922,581 euros, 

the equivalent of 1.6% of payroll excluding social charges. 

This represents a drop of 20% on 2006, largely explained by the 

disposal of the Wiring Harness business, which means costs have 

stabilized on a like-for-like basis. 



At December 31, 2007, the Valeorizon fund held 128,656 shares, 

and the Valeorizon + fund held 832,046 shares. 

Some 1.23% of Valeo’s capital is now held by its employees, making 

them one of the Company’s main shareholder groups. 

The Group plans to launch a new employee stock ownership plan 

in 2008. 

2005 2006 * 2007 ** 

Number of employees trained 52,692 56,116 44,523 

Number of training hours given 1,508,698 1,696,645 1,172,356 

Training costs (in euros) 31,752,527 31,249,239 24, 922,581 



Breakdown of hours by type of training in 2007 

< Contents > 

In 2007, the Group also stepped up its contribution to youth training, 

taking on 1,253 interns (36.4% women) and 821 apprentices 

(27.9% women). A total of 323 trainees were also taken on as 

part of the international internship program (VIE), of whom 31.7% 

were women. 


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Percentage of employees trained per socio-professional category 


2005 2006 * 2007 ** 

Engineers and managers 87.3% 90.4% 87.0% 

Administrative staff, technicians and supervisors 81.8% 87.5% 78.5% 

Operators 79.1% 82.7% 79.9% 

TOTAL 81.1% 85.0% 81.1% 



Average number of training hours per socio-professional category 

2005 2006 * 2007 ** 

Engineers and managers 48 44 41 


Operators 20 25 18 

TOTAL 29 30 26 



In 2007, 81% of employees participated in at least one training 

course, as part of the Group’s skills development policy, compared 

with 85% in 2005. 

The Group’s intention is to develop internal training by involving 

local country management, in particular with regard to enhancing 

operators’ versatility and skill-diversity. The Group also continued 

to train and certify internal trainers. This on-the-job training is not 

always recognized and accounted for in our information system. 

65% of total training hours are dedicated to workstation 

familiarization and 35% to developing new skills and preparing for 

internal transfers. 

The percentage of induction courses and training sessions on 

corporate culture rose slightly from 15.3% to 17.9%, despite a 29% 

drop in recruitment. This is thanks to the fact that our induction 

modules are now available in various languages, and to intense 

activity at our “5 Axes” schools, especially in Asia. 

Consistent with globalization of the Group’s businesses and the 

need to develop cross-disciplinary relations, the number of hours 

of language training (primarily English) continued to climb, from 

9.5% to 12.3% of the total number of training hours. 

Valeo is continuing to develop its online training offering through 

Valeo C@mpus, which allows it to create more tailor-made programs 

and combine various training methods such as online and classroombased 

training and on-the-job coaching. To step up the efficiency 

of its learning tools, Valeo C@mpus offers all employees access to 

training – at their own pace and with the possibility of assistance from 

< Contents > 

tutors – in areas including languages and office systems, and specific 

modules on Valeo’s 5 Axes and Valeo’s products and processes. This 

offering is enhanced by internally-developed modules on product 

and system development standards and R&D. 

As a complement to existing career plans, management also worked 

on formalizing Individual Career Development Plans in 2007, based 

on a three-pronged approach – training, practical application and 

experience. A training and preparation plan for the role of supervisor, 

developed and tested in 2007, will be rolled out in 2008. 

Valeo is continuing its emphasis on health- and safety-related 

actions, which reached 48% of employees and accounted for 13% 

of total training hours. 

A “Wellbeing and effectiveness at the workstation” program was 

designed and tested at certain sites and is expected to be deployed 

worldwide from 2008. This program aims to train local country 

managers to recognize certain situations and postures with a view 

to preventing musculoskeletal disorders. 

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8. Disabled employees 

Valeo amended its Code of Ethics in 2004, further strengthening its 

commitment to promote the respect of people’s dignity and value in 

the workplace as well as equal rights for workers. Consequently, the 

Valeo Group participates in measures to promote the employment 

and training of disabled workers. 

At December 31, 2007, 777 disabled employees worked for the 

Group, 24% fewer than in 2006. 

9. Social and cultural activities 

In most of the countries in which it has operations the Group makes 

financial contributions to sports, educational, cultural or charity 

organizations. In 2007, 34.4 million euros was spent on social 

benefits programs, representing 2.3% of total payroll excluding 

social charges. 

Valeo dedicated 10.3 million euros, or 1.7% of total payroll excluding 

social charges, to social benefits programs in France in 2007 

10. Subcontracting 

Valeo uses subcontractors for specific services carried out at its sites, 

such as gardening, cleaning, maintenance, IT and administrative 

support. 

It is particularly vigilant in ensuring that its subsidiaries comply with 

the fundamental principles of national and international labor law 

in all their dealings with subcontractors, and that subcontractors and 

11. The company’s role in youth training and employment 

11.1. International outlook 

To help meet its recruitment requirements, Valeo has entered into a 

number of partnerships with higher education establishments and 

universities in the regions where it operates. 

It also participates in numerous forums and open days in order 

to present the Group’s activities to students and future graduates. 

In 2007, Valeo took part in the Atuge forum in Tunisia, the “Best” 

forums in Cracow (Poland) and Lvivi (Ukraine), two career information 



< Contents > 

In France there were 466 disabled employees at December 31, 2007 

(608 at end-2006 and 652 at end-2005), representing 3% of the 

total headcount. The number of subcontracting and service contracts 

set up with centers promoting the employment of disabled workers 

represented almost 3.7 million euros in 2007 (3.4 million euros 

in 2006). 

(11.8 million euros in 2006 and 11 million euros in 2004). 

This amount breaks down as follows: 23% on canteen facilities and 

restaurant vouchers, 12% on cultural outings, 9% on transport 

subsidies, 5% on sports clubs or leisure activities, 5% on medical 

services and vaccination campaigns, 3% on crèches and holiday 

camps for employees’ children, 1% on charitable works, 1% on 

libraries, and 42% on other activities. 

suppliers apply the provisions of the Valeo Code of Ethics in relation 

to fundamental human rights. 

Subcontracting costs amounted to 187 million euros in 2007, 

representing 12.3% of total payroll excluding charges. In France, 

subcontracting costs amounted to 87 million euros, or 14.1% of total 

payroll excluding charges. 

sessions at the Cracow University of Technology, the international 

employment forum in Paris (VIE), the Education and Innovation 

forum in Bucharest (Romania), and presentations organized by the 

universities of Wuhan and Changchun in China. 

In Mexico, Valeo built up ties with the Tech de Monterrey and the 

Technical University of San Luis Potosí , and in Poland it strengthened 

its relations with the Cracow University of Technology and the Cracow 

Polytechnic. 


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In Tunisia, it signed a partnership agreement with the IHEC business 

school on the development of a postgraduate program in logistics 

and supply chain management. 

Valeo also sponsors the association ShARE, which brings together 

students from Asia’s most reputable universities, and helped to 

organize its global seminar in Paris last December. 

11.2. In France 

To help meet its recruitment requirements in France, Valeo has 

strengthened its partnerships with educational establishments, 

including: 

■ 

■ 

■ 

■ 

■ 

Supélec, in connection with the PERCI program for teaching and 

research in cooperation with industry; 

UTC (Compiègne), through Thierry Morin’s sponsorship of the 

graduate year and the development of scientific partnerships; 

ESTACA, by sponsoring the activities of Elles Bougent, an association 

that promotes careers in engineering for women; 

Audencia Nantes, through a partnership set up to help create an 

engineering program; 

ESIGELEC engineering school, under its international development 

drive. 


< Contents > 

Valeo also played an active role in various college and university 

forums, including those organized by ENSAM Paris, Supélec, Centrale 

Paris, Mines de Paris, ESEO Angers, École des Pétroles et Moteurs, 

ESO, Supméca, ENSEA, HEC, ESSEC, ESCP-EAP, IEP Paris, EM Lyon, 

Audencia Nantes, and EDHEC, as well as the Ouest Avenir forum 

in Brest, the UTT in Troyes, the UTC in Compiègne, a day dedicated 

to careers in purchasing, in Grenoble, and the Rencontre forum in 

Lille. 

To diversify the profile of its new recruits and make the transport 

and automotive industry more attractive to female high school 

and university students, Valeo actively sponsors the Elles Bougent 

association, which organized its first eco-mobility rally in 2007. It also 

took part in the Women in Leadership forum in Paris to promote the 

Group’s businesses among potential candidates from various sectors. 

Finally, Valeo strengthened its relations with the ParisTech network 

by participating in two meetings relating to the ATHENS E uropean 

exchange program, open to non-French students from leading Paris 

engineering schools. 

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3 

< Contents > 

Consolidated financial 

statements at 

December 31, 2007 

Consolidated statements of income 81 

Consolidated balance sheets 82 

Consolidated statements of cash flows 83 

Statements of recognized income and 

expenses 84 


in stockholders’ equity 85 

Notes to consolidated financial statements 86 

Statutory Auditors’ report on the 

consolidated financial statements 142 


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3 Consolidated 

PAGE 80 

fi nancial statements at December 31, 2007 


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1 

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Consolidated statements of income 

(In millions of euros) Notes 

Consolidated fi nancial statements at December 31, 2007 

Consolidated statements of income 

2007 2006 (1) 

As restated 

2005 (1) 

As restated 

NET SALES 3.1 9,555 9,436 9,191 

Other operating revenues 134 114 96 

TOTAL OPERATING REVENUES 9,689 9,550 9,287 

Cost of sales (8,058) (7,973) (7,729) 

GROSS MARGIN (2) 1,497 1,463 1,462 

% of net sales 15.7% 15.5% 15.9% 

Research and development expenditure (668) (640) (610) 

Selling expenses (193) (190) (185) 

Administrative expenses (424) (427) (424) 

Other income and expenses 3.3 (27) (49) (35) 

OPERATING INCOME 319 271 304 

% of total operating revenues 3.3% 2.8% 3.3% 

Interest expense 3.4 (82) (83) (76) 

Interest income 3.4 31 32 31 

Other financial income and expenses 3.5 (46) (8) (50) 

Equity in net earnings of associates 8 (1) 6 

INCOME BEFORE INCOME TAXES 230 211 215 

Income taxes 3.6 (83) (67) (60) 

INCOME FROM CORE ACTIVITIES 147 144 155 

% of total operating revenues 1.5% 1.5% 1.7% 

Income/(loss) from non-strategic activities (3) (59) 22 (7) 

NET INCOME FOR THE YEAR 88 166 148 

Net income attributable to equity holders of the company 81 161 142 

Minority interests 

Income from core activities attributable to equity holders of the 

company 

7 5 6 

▪ b asic earnings per share (in euros) 

1.82 1.81 1.89 

▪ d iluted earnings per share (in euros) 

1.81 1.80 1.88 

Net income attributable to equity holders of the company 

▪ b asic earnings per share (in euros) 

3.7.1 1.06 2.10 1.80 

▪ d iluted earnings per share (in euros) 

3.7.2 1.05 2.09 1.79 

(1) 

The statements of income for 2005 and 2006 were restated from those published in February 2007 following the sale of the Wiring H arness activity (see note 2.1.1). 

(2) 

Gross margin represents net sales (excluding other operating revenues) less cost of sales. 

(3) See note 2. 

The notes are an integral part of the consolidated financial statements. 

< Contents > 


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Consolidated balance sheets 

Consolidated balance sheets 

(In millions of euros) Notes Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 2005 

ASSETS 

Goodwill 4.1 1,165 1,415 1,484 

Other intangible assets 4.2 514 528 522 

Property, plant and equipment 4.3 1,790 1,918 2,041 

Investments in associates 4.4 103 103 116 

Non-current financial assets 5.2.1 18 24 28 

Deferred tax assets 4.5 99 96 100 

Non-current assets 3,689 4,084 4,291 

Inventories 4.6 622 647 654 

Accounts and notes receivable 4.7 1,699 1,834 1,906 

Other current assets 292 311 243 

Taxes recoverable 72 64 51 

Other current financial assets 5.2 4 10 24 

Assets held for sale 4.3 7 20 11 

Cash and cash equivalents 4.10.4 771 618 949 

Current assets 3,467 3,504 3,838 

TOTAL ASSETS 

LIABILITIES AND EQUITY 

7,156 7,588 8,129 

Share capital 235 233 233 

Additional paid-in capital 1,402 1,387 1,385 

Retained earnings 101 94 56 

Stockholders’ equity 1,738 1,714 1,674 

Minority interests 44 38 43 

Stockholders’ equity including minority interests 4.8 1,782 1,752 1,717 

Provisions - long-term portion 4.9 778 937 1,123 

Long-term debt 4.10 1,283 1,274 1,303 

Deferred tax liabilities 4.5 21 1 9 

Non-current liabilities 2,082 2,212 2,435 

Accounts and notes payable 1,836 1,955 1,925 

Provisions - current portion 4.9 324 418 431 

Taxes payable 72 76 82 

Other current liabilities 750 836 792 

Current maturities of long-term debt 4.10 29 54 581 

Other current financial liabilities 5.2 21 11 9 

Short-term debt 4.10.3 260 274 157 

Current liabilities 3,292 3,624 3,977 

TOTAL LIABILITIES AND EQUITY 7,156 7,588 8,129 



< Contents > 

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Consolidated statements of cash flows 


Consolidated statements of cash fl ows 

(In millions of euros) Notes 2007 2006 2005 

CASH FLOWS FROM OPERATING ACTIVITIES (1) 

Net income for the year 88 166 148 

Equity in net earnings of associates (8) - (6) 

Net dividends received from associates 2 4 4 

Other expenses (income) with no cash effect 4.11 479 411 518 

Cost of net debt 57 59 54 

Income taxes (current and deferred) 91 77 60 

Gross operating cash flows 709 717 778 

Income taxes paid (85) (85) (65) 

Changes in working capital 4.11 (42) 48 107 

Net cash provided by operating activities 

CASH FLOWS FROM INVESTING ACTIVITIES 

582 680 820 

(1) 

Outflows relating to acquisitions of intangible assets (138) (165) (145) 

Outflows relating to acquisitions of property, plant and equipment (435) (494) (441) 

Inflows relating to disposals of property, plant and equipment 47 17 41 

Net change in non-current financial assets (3) 32 (3) 

Impact of changes in scope of consolidation 2.3.3 208 124 (466) 

Net cash provided by (used in) investing activities 

CASH FLOWS FROM FINANCING ACTIVITIES 

(321) (486) (1,014) 

(1) 

Dividends paid to parent company stockholders (85) (84) (91) 

Dividends paid to minority interests in consolidated subsidiaries (4) (5) (5) 

Issuance of share capital 20 4 1 

Sale (purchase) of treasury shares (26) 4 8 

Issuance of long-term debt 22 3 826 

Grants and contributions received 57 48 39 

Net outflows related to capital reductions - - (252) 

Net interest paid (47) (60) (33) 

Repayments of long-term debt (35) (553) (196) 

Net cash provided by (used in) financing activities (98) (643) 297 

Effect of exchange rate changes on cash 4 1 28 

NET CHANGE IN CASH AND CASH EQUIVALENTS 167 (448) 131 

Net cash and cash equivalents at beginning of year 344 792 661 

Net cash and cash equivalents at end of year 

Of which: 

511 344 792 

▪ c ash and cash equivalents 

771 618 949 

▪ s hort-term debt 

(260) (274) (157) 

(1) The impact of changes in scope of consolidation at December 31, 2007 is described in note 2.3. 


< Contents > 


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(In millions of euros) 2007 2006 2005 

Translation adjustment (17) (69) 135 

Actuarial gains (losses) on defined benefit plans 

Cash flow hedges: 

79 27 (50) 

▪ g ains (losses) taken to equity 

(12) 7 23 

▪ (g ains) losses transferred to income for the year 

(6) (19) (8) 

Net investment hedges 

▪ g ains (losses) taken to equity 

- - (3) 

Remeasurement of available-for-sale financial assets (5) - - 

Income taxes on items recognized directly in equity (11) (1) 5 

Income and expenses recognized directly in equity 28 (55) 102 

Net income for the year 88 166 148 

TOTAL RECOGNIZED INCOME AND EXPENSES FOR THE YEAR 

Of which: 

116 111 250 

▪ a ttributable to equity holders of the company 

109 109 240 

▪ a ttributable to minority interests 

7 2 10 



< Contents > 

1 

2 

3 

4 

5 

6


in stockholders’ equity 

Number 

of shares (In millions of euros) 

82,671,220 

Share capital Additional 

paid-in 

capital 


Consolidated statement of changes in stockholders’ equity 

Translation 

adjustment 

Retained 

earnings 

Stockholders’ 

equity 

Minority 

interests 


3 

Stockholders’ 

equity including 

minority i nterests 

Stockholders’ equity at 

January 1, 2005 251 1,617 9 (69) 1,808 57 1,865 

Dividends - - - (91) (91) (5) (96) 

230,100 Treasury stock - - - 8 8 - 8 

(6,250,000) Capital reduction (1) (19) (233) - - (252) - (252) 

51,333 Share-based payments 

Income and expenses 

recognized directly in 

1 1 - 7 9 - 9 

equity - - 131 (33) 98 4 102 

Net income for the year - - - 142 142 6 148 

Other movements (2) Stockholders’ equity at 

- - - (48) (48) (19) (67) 

76,702,653 December 31, 2005 233 1,385 140 (84) 1,674 43 1,717 

Dividends - - - (84) (84) (4) (88) 

121,000 Treasury stock - - - 4 4 - 4 

Capital increase - - - - - 1 1 




- 2 - 11 13 - 13 

equity - - (66) 14 (52) (3) (55) 


Other movements 


- - - (2) (2) (4) (6) 

76,893,913 December 31, 2006 233 1,387 74 20 1,714 38 1,752 

Dividends - - - (85) (85) (4) (89) 

(746,100) Treasury stock - - - (26) (26) - (26) 

Capital increase - - - - - 3 3 




2 15 - 10 27 - 27 

equity - - (17) 45 28 - 28 


Other movements 


- - - (1) (1) - (1) 

76,776,813 December 31, 2007 235 1,402 57 44 1,738 44 1,782 

(1) 

Capital reduction carried out following the purchase by Valeo of around 7.5% of its own shares, in connection with a public share buyback offer and a simplified public tender offer. 

(2) 

This caption includes the impacts of the acquisition of minority interests in Valeo Zexel China Climate Control and Valeo Thermal Systems Japan Corp. 


< Contents > 

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Notes to consolidated financial statements 


1. Accounting policies 

The consolidated financial statements of the Valeo Group for the 

year ended December 31, 2007 include the accounts of Valeo, its 

subsidiaries and the Group’s share of associates and jointly controlled 

entities. 

Valeo is an independent Group fully focused on the design, production 

and sale of components, systems and modules for the automobile 

sector. It is one of the world’s leading automotive suppliers. 

Valeo is a French legal entity, listed on the Paris Stock Exchange, whose 

head office is located at 43, rue Bayen, 75017 Paris. 

Valeo’s consolidated accounts were authorized for issue by the Board 

of Directors on February 12, 2008. 

They will be submitted for approval to the next Annual General 

Meeting of shareholders. 

1.1. Accounting standards applied 

Under European regulation (EC) 1606/2002 of July 19, 2002, 

the consolidated financial statements have been prepared in 

accordance with International Financial Reporting Standards (IFRS) as 

adopted by the European Union. 

Out of the new standards, amendments and interpretations effective 

for reporting periods beginning on or after January 1, 2007, only 

IFRS 7 “Financial Instruments: Disclosures” has a material impact 

on the 2007 financial statements. IFRS 7 introduces more detailed 

disclosure requirements for risks and financial instruments, which are 

presented mainly in note 5. 

The Group elected for early application, respectively as of 

January 1, 2004 and 2005, of the following two amendments to IFRS 

that came into force on January 1, 2006: 

■ the amendment to IAS 19, introducing the option to recognize 

actuarial gains and losses on defined benefit pension plans in 

reserves; 

■ the amendment to IAS 39, relating to hedge accounting for forecast 

inter-company transactions. 

The new standard which is not yet effective, has not been adopted 

early, and that may have an impact on the Group’s financial statements 

is IFRS 8 “Operating Segments”, which is obligatorily applicable as 

from 2009. The potential impacts of this standard on the Group’s 

accounts are currently being analyzed. 


Other interpretations and amendments that have been published 

but are not yet applicable should not have a material impact on the 

Group’s consolidated financial statements. 

1.2. Basis of preparation 

The financial statements are presented in euros and are rounded to 

the closest million. 

They have been prepared in accordance with the principal assumptions 

of IFRS: 

■ true and fair view; 

■ going concern; 

■ accrual basis of accounting; 

■ consistency of preparation; 

■ materiality and aggregation. 

Preparation of the financial statements requires Valeo to make 

estimates and assumptions which could have an impact on the 

reported amounts of assets, liabilities, income and expenses. 

These estimates and assumptions concern both risks specific to the 

automotive supply business such as those relating to quality and 

safety, as well as more general risks to which the Group is exposed 

on account of its industrial operations across the globe. Whenever 

the Group must exercise its own judgement regarding these risks, it 

does so based on past experience and other factors considered to be 

reasonable in the circumstances. These estimates and assumptions 

are reviewed on a continuous basis. The definitive amounts that will 

be stated in Valeo’s future financial statements may be different from 

the amounts currently estimated. 

The main risks to which the Group is exposed, along with the related 

estimates and assumptions, are described in the following sections 

of the notes to the consolidated financial statements: 

■ 

■ 

■ 

3.4.3 Impairment losses on non-current assets ; 

4.9 Provisions for other liabilities ; 

5.3 Risk management policy. 

1.3. Consolidation methods 

< Contents > 

The consolidated financial statements include the accounts of Valeo 

and companies under its direct and indirect control. 

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2 

3 

4 

5 

6

The proportionate consolidation method is used when the contractual 

arrangements for control of a company specify that it is under the joint 

control of the two venturers. Companies of this type are called joint 

ventures. In this case, the Group’s share of each asset and liability and 

each item of income and expense is aggregated, line-by-line, with 

similar items in its consolidated financial statements. 

All significant inter-company transactions are eliminated (for joint 

ventures the elimination is performed to the extent of the Group’s 

ownership interest in the company), as are gains on inter-company 

disposals of assets, inter-company profits included in inventories and 

inter-company dividends. 

Companies over which Valeo exercises significant influence are 

accounted for by the equity method. Valeo is considered to exercise 

significant influence over companies in which the Group owns 

more than 20% of the voting rights. The equity method consists of 

replacing the book value of the investments by the Group’s equity in 

the associate’s underlying net assets, including goodwill. 

Companies acquired during the year are consolidated as from the 

date at which the Group exercises (sole or joint) control or significant 

influence. 

1.4. Foreign currency translation 

Each Group company maintains its accounting records in its functional 

currency. A company’s functional currency is the currency of the 

principal economic environment in which it operates, generally being 

the local currency. 

Transactions carried out in a currency other than the company’s 

functional currency are translated using the exchange rate prevailing 

at the transaction date. Monetary assets and liabilities denominated 

in foreign currency are translated at the year-end exchange rate. 

Non-monetary assets and liabilities denominated in foreign currency 

are recognized at the historical exchange rate prevailing at the 

transaction date. Differences arising from the translation of foreign 

currency transactions are recognized in income, with the exception of 

differences relating to loans and borrowings which are in substance 

an integral part of the net investment in a foreign subsidiary. These 

are recorded, for their amount net of tax, in consolidated stockholders’ 

equity under translation reserves until the net investment is disposed 

of, at which time they are recognized in income. 

The financial statements of foreign subsidiaries whose functional 

currency is not the euro are translated into euros as follows: 

■ 

■ 

assets and liabilities are translated at the year-end exchange rate; 

income statement items are translated into euros at the exchange 

rates applicable at the transaction dates or, in practice, at the 

average exchange rate for the period, as long as this is not rendered 

■ 



inappropriate as a basis for translation by major fluctuations in 

exchange rates during the period; 

unrealized gains or losses arising from the translation of the 

financial statements of foreign subsidiaries are recorded through 

stockholders’ equity. 

1.5. Operating revenues 

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Operating revenues are comprised of net sales and other operating 

revenues. 

Net sales primarily include sales of finished goods and also include 

all tooling revenues. Sales of finished goods and tooling revenues are 

recognized at the date on which the Group transfers substantially all 

the risks and rewards of ownership to the buyer and no longer retains 

continuing managerial involvement nor effective control over of the 

goods sold. In cases where the Group retains control of the future 

risks and rewards related to tooling, any customer contributions are 

recognized over the duration of the project, over a maximum period 

of four years. 

Other operating revenues consist of all revenues for which the 

associated costs are recorded below the gross margin line. They 

mainly comprise sales of prototypes and contributions received from 

customers to development costs. Such contributions are deferred as 

appropriate and are taken to income over the period of sale of the 

corresponding products, within a maximum period of four years. 

1.6. Gross margin and operating income 

Gross margin is defined as the difference between net sales and 

cost of sales. Cost of sales primarily corresponds to the cost of goods 

sold. 

Operating income includes all income and expenses other than: 

■ interest paid on debt and interest earned on cash and cash 

equivalents; 

■ other financial income and expenses; 

■ equity in net earnings of associates; 

■ income taxes; 

■ income/(loss) from non-strategic activities (“discontinued 

operations” under IFRS 5). 

In order to facilitate interpretation of the statement of income and of 

Group performance, unusual items that are material to the consolidated 

financial statements are presented separately within operating income 

under “Other income and expenses”. 


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1.7. Financial income and expenses 

Financial income and expenses are comprised of the cost of net debt 

and other financial income and expenses. 

The cost of net debt corresponds to interest paid on debt less interest 

earned on cash and cash equivalents. 

Other financial income and expenses notably include: 

■ gains and losses on currency and interest rate hedges; 

■ foreign exchange gains and losses on transactions that do not 

meet the definition of hedges under IAS 39 “Financial Instruments: 

Recognition and Measurement”; 

■ charges to provisions for credit risk as well as the cost of credit 

insurance; 

■ the effect of unwinding discounts on provisions, including the 

discount on provisions for pensions and other employee benefits, 

to reflect the passage of time; and 

■ the expected return on pension and other employee benefit plan 

assets. 

1.8. Earnings per share 

Basic earnings per share are calculated by dividing consolidated net 

income by the weighted average number of shares outstanding during 

the year, excluding the average number of shares held in treasury 

stock. 

Diluted earnings per share are calculated by including equity 

instruments such as stock options and convertible bonds, when such 

instruments have a dilutive potential effect, which is particularly the 

case for stock options when their exercise price is below the market 

price (average Valeo share price over the year). When funds are 

received on the exercise of these rights (such as on the subscription 

of shares), they are deemed to be allocated in priority to the purchase 

of shares at market price. This calculation method – known as the 

treasury stock method – serves to determine the “unpurchased” 

shares to be added to the shares of common stock outstanding for the 

purposes of computing the dilution. When funds are received at the 

date of issue of dilutive instruments (such as for convertible bonds), 

net income is adjusted for the net-of-tax interest savings which would 

result from the conversion of the bonds into shares. 

1.9. Business combinations 

All identifiable assets acquired and liabilities and contingent liabilities 

assumed, are recognized at their fair value at the date of transfer 

of control to the Group (acquisition date), independently of the 

recognition of any minority interests. 


The cost of a business combination is equal to the acquisition price, 

plus any costs directly attributable to the acquisition. Any excess of 

the acquisition cost over the fair value of the net assets acquired and 

liabilities and contingent liabilities recognized, is recorded in assets as 

goodwill. Goodwill is not amortized but is tested for impairment at 

least once a year. 

Adjustments to the fair value of assets and liabilities acquired or 

assumed within the scope of business combinations and accounted for 

on a provisional basis (i.e., pending expert appraisals or complementary 

analyses) are recognized as a retrospective adjustment to goodwill 

if they occur within 12 months of the acquisition date. Adjustments 

made after the initial accounting is complete are taken directly to 

income unless they correct an accounting error. 

1.10. Intangible assets 

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Innovation can be analyzed as either research or development. 

Research is planned investigation undertaken with the prospect of 

gaining new scientific or technical knowledge and understanding. 

Development is the application of research findings with a view to 

creating new products, before the start of commercial production. 

Research costs are recognized in expenses in the year they are 

incurred. 

Development expenditure is capitalized where the Group can 

demonstrate: 

■ that it has the intention, and the technical and financial resources 

to complete the development; 

■ that the intangible asset will generate future economic benefits; 

and 

■ that the cost of the intangible asset can be measured reliably. 

Capitalized development costs therefore correspond to projects 

for specific customer applications that draw on approved generic 

standards or technologies already applied in production. These projects 

are analyzed on a case-by-case basis to ensure they meet the criteria 

for capitalization as described above. 

Capitalized development costs are amortized over a maximum period 

of four years from the start of volume production. Impairment losses 

may, as required, be recognized in respect of capitalized development 

costs. 

Other intangible assets are carried at cost less any amortization and 

impairment losses recognized. They are amortized on a straight-line 

basis over their expected useful lives. 

Intangible assets are tested for impairment using the methodology 

described in note 1.12. 

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1.11. Property, plant and equipment 

Property, plant and equipment are carried at cost excluding interest 

expense, less accumulated depreciation and impairment losses. 

Material revaluations, recorded in accordance with laws and 

regulations applicable in countries in which the Group operates, have 

been eliminated in order to ensure that consistent valuation methods 

are used for all fixed assets in the Group. 

Tooling which is specific to a given project is subjected to an economic 

analysis of contractual relations with the automaker in order to 

determine which party has control over the associated future risks 

and rewards. Tooling is capitalized in the balance sheet when Valeo 

has control over these risks and rewards, or carried in inventories until 

it is sold if no such control exists. Any resulting loss on the tooling 

contract (corresponding to the difference between the automaker’s 

contribution and the cost of the tooling) is provided for as soon as the 

amount of the loss is known. 

When the terms of a lease entered into by the Group as lessee transfer 

substantially all the risks and rewards related to ownership of an asset 

to the Group, the corresponding asset is recognized in property, plant 

and equipment in the Group’s balance sheet at an amount equal to the 

lower of its fair value and the present value of future minimum lease 

payments. This amount is subject to depreciation and, if necessary, 

impairment. The corresponding obligation is recorded in debt under 

liabilities. 

Depreciation is calculated on a straight-line basis over the estimated 

useful lives of the assets concerned: 

■ buildings 20 years; 

■ fixtures and fittings 8 years; 

■ machinery and tooling 4 to 8 years; 

■ other fixed assets 

Land is not depreciated. 

3 to 8 years. 

Capital grants received are recognized in liabilities and are written 

back to income proportionately to the recognition of depreciation on 

the corresponding assets. 

1.12. Impairment of assets 

At each balance sheet date, the Group assesses whether there is 

an indication that an asset (other than a financial asset), a cashgenerating 

unit (CGU - as defined by IAS 36), or a group of CGUs may 

be impaired. 

CGUs are largely autonomous management entities representing the 

level at which resources are allocated and performance is measured. 

They generally correspond to production sites or to groups of 

production sites. 



< Contents > 

Intangible assets with indefinite useful lives and intangible assets 

which are not yet ready to be brought into service are systematically 

tested for impairment at least once a year. If the asset’s carrying 

amount is greater than its recoverable amount, it is written down to 

its recoverable amount. 

The recoverable amount of an asset or a CGU is the higher of its fair 

value less costs to sell and its value in use. In practice, since the fair 

value less costs to sell of group CGUs can seldom be reliably estimated, 

Valeo applies value in use (unless otherwise specified) to calculate 

the recoverable amount of a CGU in accordance with paragraph 20 of 

IAS 36. Value in use corresponds to the present value of future cash 

flows expected to derive from the use of an asset or CGU. The discount 

rate used is the rate that reflects both the current assessment of the 

time value of money and risks specific to the asset (or group of assets) 

for which future cash flows estimates have not been adjusted. 

Impairment losses taken against CGU assets are allocated first to 

reduce the carrying amount of goodwill, and then to the other CGU 

assets in proportion to their carrying amounts. 

Impairment losses recognized on goodwill balances are never 

reversed. For other assets, when an indicator shows that the asset 

may no longer be impaired, the amount of the impairment loss to 

be reversed is based on the revised recoverable value of the asset 

but cannot exceed the carrying amount of the asset that would have 

been determined had no impairment loss been recognized. 

1.13. Financial assets and liabilities 

Recognition and measurement principles regarding financial assets 

and liabilities are defined in IAS 32 and IAS 39. Valeo elected to apply 

these standards with effect from January 1, 2005. The impact of the 

change in accounting policy was recorded in equity at that date. 

1.13.1. Available-for-sale financial assets 

This category includes shares in non-consolidated companies. 

Available-for-sale financial assets are recognized at fair value upon 

initial recognition, with any subsequent changes in fair value 

recognized through equity or income in the event of a significant, 

prolonged decline in fair value. 

Investments whose fair value cannot be estimated reliably are carried 

at cost. 

1.13.2. Long-term loans and receivables 

This category consists essentially of long-term loans, which are 

measured on an amortized cost basis using the effective interest 

rate. 


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1.13.3. Other non-current financial assets 

This category includes mainly securities with maturities greater than 

three months, which can be easily sold and are risk-free. 

These securities are subsequently measured at fair value, with changes 

in fair value recognized in income. 

1.13.4. Current financial assets and liabilities 

Current financial assets and liabilities include trade receivables 

and payables, derivative financial instruments, and cash and cash 

equivalents. 

■ Cash and cash equivalents 

Cash and cash equivalents are comprised of marketable securities 

such as money-market funds with an extremely low price volatility 

risk, deposits and very short-term risk-free securities maturing in under 

three months which can be readily sold or converted into cash, and 

cash at bank. 

These current financial assets are carried at fair value through income 

and are generally held with a view to being sold in the short term. 

■ Trade receivables and payables 

Trade receivables and payables are initially recognized at fair value and 

subsequently at amortized cost. The fair value of accounts receivable 

and accounts payable is deemed to be their nominal amount in view 

of the fact that periods to payment are generally less than three 

months. 

Accounts receivable can be subject to provisions for impairment in 

value. If a loss event is identified during the financial year subsequent 

to initial recognition of the receivable, the required provision will be 

calculated by comparing the estimated future cash flows discounted 

at the original effective interest rate to the carrying amount in the 

balance sheet. Provisions are recognized in other financial expenses 

if they relate to a risk of insolvency of the debtor. 

■ Derivative financial instruments 

Derivatives are recognized in the balance sheet at fair value under 

other current financial assets or other current financial liabilities. The 

accounting impact of changes in the fair value of derivatives depends 

on whether or not hedge accounting is applied. 

When hedge accounting is applied: 

■ for fair value hedges of recognized assets and liabilities, the hedged 

portion of these items is stated at fair value. Changes in fair value 

are recognized through income and are offset (for the effective 

portion) by symmetrical changes in the fair value of the hedging 

instrument; 

■ for cash flow hedges, the effective portion of the change in fair 

value of the derivative is recognized directly through equity, while 


the ineffective portion is taken to other financial income and 

expenses; 

■ for hedges of net investments in foreign subsidiaries, the change 

in fair value of the hedging instrument is taken to equity (for the 

effective portion) until the disposal of the net investment. 

Changes in the fair value of derivatives that do not qualify for hedge 

accounting are recognized in other financial income and expenses. 

■ Foreign currency derivatives 

Changes in the value of derivatives are generally recognized in 

financial income and offset, as applicable, by changes in the fair 

value of the underlying receivables and payables. In certain cases, the 

Group applies hedge accounting for highly probable future flows at the 

inception of the hedging relationship: changes in the fair value of the 

derivatives are then recognized through equity for the effective portion 

of the hedge, and subsequently taken to operating income when the 

hedged item itself affects operating income. The ineffective portion of 

the hedge is recognized in other financial income and expenses. 

■ Metals derivatives 

The Group applies cash flow hedge accounting. The effective portion 

of the hedge is reclassified from equity to operating income when the 

hedged position affects income. The ineffective portion of the hedge 

is recognized in other financial income and expenses. 

■ Interest rate derivatives 

The Group generally applies fair value hedge accounting when it uses 

interest rate derivatives swapping fixed-rate debt for variable-rate 

debt. Changes in the fair value of debt attributable to changes in 

interest rates, and symmetrical changes in the fair value of the interest 

rate derivatives are recognized in other financial income and expenses 

for the year. 

Certain interest rate derivatives are not designated as hedging 

instruments within the meaning of IAS 39. Changes in fair value 

of these derivatives are recognized in other financial income and 

expenses for the period. 

1.13.5. Debt 

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■ Bonds and other loans 

Bonds and loans are valued at amortized cost. The amount of interest 

recognized in financial expenses is calculated by applying the loan’s 

effective interest rate to its carrying amount. Any difference between 

the expense calculated using the effective interest rate and the actual 

interest payment impacts the value at which the loan is recognized. 

Hedge accounting is generally applied to financial debt hedged by 

interest rate swaps. The debt is remeasured to fair value, reflecting 

changes in interest rates. 

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■ OCEANE bonds 

Bonds convertible into new shares or exchangeable for existing shares 

(OCEANE) grant bearers an option for conversion into common shares 

of Valeo. These bonds constitute a hybrid financial instrument which, 

under IAS 32, must be split into its two components: 

■ 

■ 

the value of the debt component is calculated by discounting the 

future contractual cash flows at the market rate applicable at the 

date of issue of the bond (taking account of credit risk at the date 

of issue) for a similar instrument with the same characteristics but 

without a conversion option; 

the value of the equity component is calculated as the difference 

between the proceeds of the bond issue and the amount of the 

debt component. 

■ Short-term bank debt 

This caption mainly includes credit balances with banks and commercial 

paper issued by Valeo for its short-term financing needs. Commercial 

paper has a maximum maturity of three months and is valued at 

amortized cost. 

1.14. Inventories 

Inventories are stated at the lower of cost or net realizable value. 

Cost includes the cost of raw materials, labor and other direct 

manufacturing costs on the basis of normal activity levels. These costs 

are determined by the “First in-First out” (FIFO) method which, due 

to the rapid inventory turnover rate, approximates the latest cost at 

the balance sheet date. 

Provisions for impairment in value are recorded on the basis of the 

net realizable value. 

1.15. Income taxes 

Income tax expense includes current income taxes and deferred taxes 

of consolidated companies. Deferred taxes are accounted for using the 

liability method for all temporary differences between the tax base 

and the carrying amount of assets and liabilities in the consolidated 

financial statements and for all tax loss carry forwards. The main 

temporary differences relate to provisions for pensions and other 

employee benefits and other temporarily non-deductible provisions. 

Deferred tax assets and liabilities are measured at the tax rates that 

are expected to apply when the temporary differences reverse, based 

on tax rates that have been enacted or substantively enacted by the 

balance sheet date. 

Deferred tax assets are only recognized to the extent that it appears 

probable that the Valeo Group will generate future taxable profits 

against which these tax assets will be able to be recovered. 



The Group reviews the probability of future recovery of deferred tax 

assets on a periodic basis. This review can, if necessary, lead the Group 

to no longer recognize deferred tax assets that it had recognized in 

prior years. 

Taxes payable and tax credits receivable on planned dividend 

distributions by subsidiaries are recorded in the statement of 

income. 

1.16. Share-based payment 

< Contents > 

Employee stock option plans and plans for granting free shares and 

Stock Appreciation Rights (SARs) to employees lead to the recognition 

of a personnel expense. This expense corresponds to the fair value of 

the instrument issued, and is recognized over the rights’ vesting period. 

Fair value is estimated on the basis of valuation models adapted to 

the characteristics of the instruments (Black-Scholes-Merton model 

for options, Monte Carlo method for SARs, etc.). 

1.17. Pensions and other employee benefi ts 

Pensions and other employee benefits cover two categories of 

employee benefits: 

■ post-employment benefits which include statutory retirement 

bonuses, supplementary pension benefits and coverage of certain 

medical costs for retirees and early retirees; 

■ other long-term benefits payable (during employment), 

corresponding primarily to long-service bonuses. 

These benefits are broken down into: 

■ defined contribution plans, under which the employer pays fixed 

contributions on a regular basis and has no legal or constructive 

obligation to pay further contributions; 

■ defined benefit plans, under which the employer guarantees a 

future level of benefits. 

The provision for pensions and other employee benefits (including 

long-term benefits) is equal to the present value of Valeo’s future 

benefit obligation less, where appropriate, the fair value of plan 

assets in funds allocated to finance such benefits. The calculation 

of this provision is based on valuations performed by independent 

actuaries using the projected unit credit method and final salaries. 

These valuations incorporate both financial assumptions (discount 

rate, expected rate of return on plan assets, and increases in salaries 

and medical costs) and demographic assumptions, including rate of 

employee turnover, retirement age and life expectancy. 

The effects of differences between previous actuarial assumptions and 

what has actually occurred (experience adjustments) and the effect 

of changes in actuarial assumptions (assumption adjustments) give 

rise to actuarial gains and losses. Actuarial gains and losses arising 


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on long-term benefits payable during employment are recognized 

in full in the income statement for the financial year in which they 

were incurred. However actuarial gains and losses arising on postemployment 

benefits are recognized directly through equity in the 

year in which they arise, pursuant to the option provided by IAS 19 

as amended in December 2004. 

1.18. Provisions 

A provision is recognized when the Group has a legal or constructive 

obligation resulting from a past event, where it is probable that 

future outflows of resources embodying economic benefits will be 

necessary to extinguish the obligation and where the obligation can 

be estimated reliably. Commitments resulting from restructuring plans 

are recognized when an entity has a detailed formal plan and has 

raised a valid expectation in those affected that it will carry out the 

restructuring by starting to implement that plan or announcing its 

main features. 

Provision is made for estimated product warranty costs at the time 

of sale of the products. The corresponding expense is recognized in 

cost of sales. 

When the effect of the time value of money is material, the amount 

of the provision is discounted using the risk-free rate applicable to 

the corresponding country and maturity. The increase in the provision 

related to the passage of time (termed “unwinding”) is recognized 

through income in other financial income and expenses. 

1.19. Assets held for sale and non-strategic 

operations 

When the Group expects to recover the value of an asset, or a group 

of assets, through their sale rather than through continuing use, such 

assets are presented separately under “Assets held for sale” in the 

balance sheet. Any liabilities related to such assets are also presented 

under a separate caption in balance sheet liabilities. Assets classified as 

held for sale are valued at the lower of their carrying amount and their 

estimated sale price less costs to sell. Such assets are thus no longer 

subject to depreciation and amortization. Any impairment losses and 

proceeds from the disposal of these assets are recognized through 

Group operating income. 

In accordance with IFRS 5, non-strategic (discontinued or held-for-sale) 

operations represent a separate major line of business of the Group; an 

operation that forms part of a single coordinated plan to dispose of a 

separate major line of business; or a company acquired solely with a 

view to resale. Classification as a non-strategic operation occurs at the 

date of sale or at an earlier date if the business meets the criteria to 

be recognized as an asset held for sale. Income or losses generated by 


these operations, as well as any capital gains or losses on disposal, are 

presented net of tax on a separate line of the income statement. 

1.20. Segment reporting 

< Contents > 

According to IAS 14, segment reporting should be provided at both 

a primary and secondary level. The choice of segments and levels of 

disclosure depends on the differences in terms of risk and return and 

on the organizational structure of the Group. 

The Group’s risks and returns are based on the nature of its products or 

services, the nature of its production processes, the type of customers 

to whom the products or services are to be sold, the methods used to 

distribute the products or provide the services, and the nature of the 

regulatory environment. They also depend on the countries in which 

the Group operates and markets its products, raw material costs used 

in the production cycle and the Group’s capacity to innovate in order 

to offer its clients products that meet market expectations. 

Analysis of these factors demonstrates that they are common to the 

Group’s business as a whole and different business segments cannot 

therefore be separately identified within the meaning of IAS 14. 

Valeo is organized in a multi-dimensional manner: 

■ the Group is divided into autonomous Divisions which represent 

the levels at which resources are allocated and performance is 

measured. However, as there are approximately one hundred such 

divisions, none of them can be considered to be material within 

the meaning of IAS 14; 

■ the Divisions are supported by Valeo’s functional networks and 

Branches, which oversee the coherence of the Group’s Product 

Families; they also exploit synergies with the Innovation Domains, 

and are coordinated by National Directorates. 

The organization of the Group has remained unchanged since 2005, 

when the role of the three Innovation Domains was strengthened 

and all industrial branches were brought under a single management 

team. 

Analysis of this organizational structure does not allow any specific 

dimension of the Group’s business to be separated out from the others 

within the meaning of IAS 14. 

Accordingly: 

■ the Group as a whole is considered as a single business segment 

(“Automotive equipment”); 

■ information for each geographical area, supplemented by 

information based on the most appropriate criteria for understanding 

the Group’s business, is provided for the secondary level of segment 

reporting. 

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2. Changes in the scope of consolidation 

2.1. Transactions carried out in 2007 

2.1.1. Sale of the Wiring H arness activity 

to the Leoni Group 

In December 2007, the Valeo Group sold its Wiring H arness activity 

to German Group Leoni for an amount of 143 million euros. The 

impact of this transaction on income for 2007 was a capital loss of 

51 million euros after tax, included in the consolidated statement of 

income under “Income/(loss) from non-strategic activities”. 

In 2007, this business generated net sales of 551 million euros and 

operating income of 3 million euros. In accordance with IFRS 5 on 

assets held for sale and discontinued operations, the after-tax profit 

from the Wiring H arness activity is presented in aggregate on a 

separate line under “Income/(loss) from non-strategic activities” 

in the 2007 statement of income. Income generated by the Wiring 

H arness activity in prior years was reclassified to this caption to 

provide a meaningful comparison between the three periods 

presented. 

The impacts of the disposal of the Wiring H arness activity on net 

sales and on the consolidated financial statements are described in 

sections 2.3 and 3.1. 

2.1.2. Acquisition of Connaught Electronics Ltd. (CEL) 

In July 2007, the Group acquired Irish Group Connaught Electronics Ltd 

(CEL) which manufactures electronic equipment for the automotive 

industry. The full consolidation of this entity did not have a material 

impact on the Group’s consolidated balance sheet at December 31, 

2007 or statement of income for the year then ended. CEL is expected 

to generate sales of 30 million euros in 2008. Identification of the 

assets acquired and liabilities assumed in the acquisition will be 

finalized in July 2008, in accordance with the period allowed under 

IFRS 3 “Business Combinations”. 

2.1.3. Creation of two new joint ventures in India 

In May 2007, Valeo formed a joint venture specializing in automotive 

security systems with the A.K. Minda Group, one of India’s leading 

automotive equipment suppliers. The consolidation of this entity 

using the proportional method does not have a material impact on 

the Group’s 2007 financial statements. 

On July 24, 2007, Valeo and the N.K. Minda Group created another 

joint venture to produce starters and alternators for private passenger 

vehicles, 66.7%-owned by Valeo and 33.3%-owned by Minda. In 

view of the agreements between Valeo and N.K. Minda, this entity 



is fully consolidated. The first-time consolidation of this entity did not 

have a material impact on the Group’s 2007 financial statements. 

2.1.4. Ichikoh 

Valeo raised its interest in Ichikoh, one of Japan’s largest lighting 

systems suppliers, from 29.4% at December 31, 2006 to 31.6% at 

December 31, 2007. This investment is accounted for by the equity 

method in Valeo’s consolidated financial statements. 

2.2. Transactions carried out in 2006 

2.2.1. Sale of Electric Motors & Actuators business 

In December 2006, Valeo sold its Electric Motors & Actuators business 

to the Japanese Group Nidec. The sale price for this business was 

142 million euros. This transaction generated a capital gain of 

46 million euros before tax and 41 million euros after tax. This 

positive impact is recognized in the consolidated statement of income 

for 2006 under “Income/(loss) from non-strategic activities”. 

In accordance with IFRS 5, the profit after tax of the Electric Motors 

& Actuators business for financial years 2005 and 2006 is presented 

in aggregate under “Income/(loss) from non-strategic activities”. 

In 2006, at the date of disposal of the Electric Motors & Actuators 

business, the assets and liabilities related to this business were 

removed from the Group’s consolidated balance sheet. 

2.2.2. Sale of Parrot 

< Contents > 

In the context of Parrot’s IPO, Valeo sold its 14.8% interest in the 

company. The capital gain on the sale of this non-consolidated 

investment was recognized in “Other financial income and expenses” 

for an amount of 24 million euros at December 31, 2006. 

2.2.3. Investment in Threestar, a Korean company 

In February 2006, Valeo created a joint venture with its Korean 

partner Threestar, the country’s leading manufacturer of automotive 

radiators. Valeo Samsung Thermal Systems, which was created as 

a result of this agreement, was proportionally consolidated; the 

remaining 50% of the capital is held by the Samsung Climate Control 

Group. This company contributed 9 million euros to Group net sales 

in 2006. 


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2.2.4. Sale of Zexel Logitec Company 

On June 30, 2006, Valeo sold Zexel Logitec Company. The contribution 

of this company to Group net sales amounted to 30 million euros 

in 2006 (over the period from January 1 to June 30) and 53 million 

euros in 2005. The capital gain recognized by the Group in “Other 

income and expenses” for 2006 amounted to 14 million euros. 


2.2.5. Valeo Raytheon Systems Inc. 

Valeo continued to invest in Raytheon Systems Inc., increasing its stake 

from 73.1% at December 31, 2005 to 77.2% at December 31, 2006. 

Valeo owns Raytheon Systems Inc. jointly with the Raytheon Group, 

and accounts for its interest by the proportional consolidation method 

because of the characteristics of the partnership agreement. 

2.3. Impact of changes in scope of consolidation on the statement of income, statement of cash 

fl ows and balance sheet 

2.3.1. Statement of income 

■ The components of the income statement caption “Income/(loss) from non-strategic activities” are as follows: 


Income/(loss) from non-strategic activities before income taxes - (9) (1) 

Income taxes on income from non-strategic activities (8) (10) (6) 

Pre-tax capital gain or loss on disposal of non-strategic activities (51) 46 - 

Taxes on capital gains from disposal of non-strategic activities - (5) - 

Income/(loss) from non-strategic activities (59) 22 (7) 

■ Earnings per share from non-strategic activities are as follows: 

Income/(loss) from non-strategic activities 

2007 2006 2005 

▪ b asic earnings (loss) per share (in euros) 

(0.76) 0.29 (0.09) 

▪ d iluted earnings (loss) per share (in euros) 

(0.76) 0.29 (0.09) 

2.3.2. Statement of cash flows 

■ Cash flows from non-strategic activities are analyzed as follows: 

< Contents > 


Cash flows from operating activities - non-strategic activities 7 30 56 

Cash flows used in investing activities - non-strategic activities (15) (22) (34) 

Cash flows from (used in) financing activities - non-strategic activities (9) 12 (1) 

Net change in cash and cash equivalents (17) 20 21 

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2.3.3. Balance sheet 



The assets, liabilities and contingent liabilities acquired or sold in financial years 2007, 2006 and 2005, as measured at their date of entry into 

the Group or exit from the Group, are analyzed below and reconciled with the corresponding cash flows: 

(In millions of euros) 

Disposal 

of Wiring 

Harness 

activity 

2007 2006 2005 

Acquisitions 

and other 

disposals 

Goodwill related to businesses sold (212) - (212) (26) - 

Other intangible assets (12) 1 (11) (13) 198 

Property, plant and equipment (70) 16 (54) (56) 150 

Investments in associates (1) - (1) 3 8 

Deferred tax assets (3) - (3) (2) 1 

Current assets (227) 13 (214) (61) 298 

Stockholders’ equity (1) 50 12 62 (63) 48 

Long-term debt 1 - 1 1 (54) 

Other non-current liabilities 22 - 22 33 (218) 

Current liabilities 215 (18) 197 48 (244) 

Net assets acquired (sold) (237) 24 (213) (136) 187 

Minority interests - - - 4 19 

Total net assets acquired (sold) after minority 

interests (237) 24 (213) (132) 206 

Goodwill on entities acquired - 5 5 8 260 

Impact of changes in scope of consolidation (237) 29 (208) (124) 466 

(1) This item is shown net of the (sale)/acquisition price. 

In 2007, the impact of changes in scope of consolidation is essentially 

attributable to the sale of the Wiring H arness activity to German 

Group Leoni. 

The impact of changes in scope of consolidation in 2006 amounts 

to (124) million euros, after deducting costs paid on the sale of the 

Electric Motors & Actuators business. 

Total 

The impact of changes in scope of consolidation in 2005 on the 

Group’s cash position of 466 million euros is mainly due to the 

following two transactions: 

■ 

■ 

< Contents > 

acquisition of the Engine Electronics business of Johnson Controls 

Inc. for a total cost of 321 million euros; and 

acquisition of the remainder of the shares of ZVCC (Zexel Valeo 

Climate Control) and VZCCC (Valeo Zexel China Climate Control) for 

a total cost of 104 million euros. 


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3. Notes to the statement of income 

To enable a meaningful comparison between the three periods 

presented, the figures for 2005 and 2006 published in February 2007 

have been adjusted to reflect the sale of the Wiring H arness activity 

(see note 2.1.1). 

3.1. Net sales 

Group net sales advanced 1.3% to 9,555 million euros in 2007 from 

9,436 million euros in 2006, despite a negative 1.5% net currency 

impact. Changes in the scope of consolidation did not have a material 

impact on net sales. 

3.2. Personnel expenses 


Consolidated net sales advanced by 2.9% between 2006 and 2007 

on a comparable Group structure and exchange rate basis. 

The above figures do not include net sales for the Wiring H arness 

activity sold in December 2007. These are presented under “Income/ 

(loss) from non-strategic activities” in 2007, 2006 and 2005, and 

totaled 551 million euros, 545 million euros and 571 million euros, 

respectively. 

2007 2006 

As restated 

2005 

As restated 

Total employees (excluding non-strategic activities) (1) 61,200 58,700 56,900 

(1) Including temporary staff. 

The statement of income presents operating expenses by function. Operating expenses include the following personnel-related expenses: 



As restated 

2005 

As restated 

Wages and salaries (1) 1,686 1,699 1,636 


Share-based payments (2) 11 11 7 

Pension expenses in respect of defined contribution schemes 96 105 116 

(1) Including temporary staff. 

(2) Including employer taxes in respect of stock options and free share awards. 

Pension costs under defined benefit plans are set out in note 4.9.2. 

3.3. Other income and expenses 


< Contents > 


As restated 

2005 

As restated 

Claims and litigation 25 (3) (9) 

Restructuring costs (37) (36) (15) 

Impairment of fixed assets (26) (14) (11) 

Other 11 4 - 

Other income and expenses (27) (49) (35) 

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3 

4 

5 

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3.3.1. Claims and litigation 

In the year ended December 31, 2007, the Group wrote back 

a provision for 22 million euros following the settlement of a 

commercial dispute. 

In 2006, this caption mainly included costs relating to commercial 

and labor disputes in progress. 

3.3.2. Restructuring costs 

Restructuring expenses of 37 million euros and 36 million euros 

were recognized in 2007 and 2006, respectively, comprising costs 

relating to the streamlining and closure of industrial sites, mainly 

in Western Europe. 

3.3.3. Impairment of fixed assets 

■ Property, plant and equipment and intangible assets 

(excluding goodwill) 

Impairment losses on property, plant and equipment and intangible 

assets mainly result from impairment tests carried out at the level 

of C ash-G enerating U nits (CGUs) in accordance with the following 

methodology: 

■ the value in use of CGUs is calculated using post-tax cash flow 

projections covering a period of five years, prepared on the basis of 

the budgets and medium-term plans drawn up by Group divisions. 

The projections are based on past experience, macroeconomic 

data for the automobile market, order books and products under 

development; 

■ cash flows beyond the five-year period are extrapolated using 

a growth rate of 1%. This rate is the same as that used in 2006 

and 2005, and is below the average long-term growth rate for 

the Group’s business sector; 

■ in 2007, cash flows were discounted based on a weighted average 

cost of capital (WACC) of 7.5% after tax (7.5% in 2006 and 7% 

in 2005). An independent expert was consulted in determining 

the method to be used to compute WACC. In 2007, WACC was 

calculated based on a sample of 20 automotive parts suppliers 

and a market risk premium of 4.5% (4.9% in 2006 and 4.8% 

in 2005). 

As a result of these tests, the Group recognized impairment losses 

of 26 million euros in 2007. These reflect changes to medium-term 



business forecasts as a result of a more pessimistic or uncertain sales 

outlook and mainly concern one CGU within each of the Interior 

Controls and Compressors P roduct F amilies, and an Engine Cooling 

CGU based in Iran. 

The impairment losses were recognized against property, plant and 

equipment and intangible assets (24 million euros) and against 

goodwill (2 million euros) relating to the Engine Cooling CGU in 

Iran. 

In 2006 and 2005, impairment losses were recognized against 

a Lighting Systems CGU for an amount of 14 million euros and 

11 million euros, respectively. 

■ Sensitivity of CGU impairment tests to discount and growth 

rates 

An increase of 0.5% in the discount rate would result in an additional 

impairment loss of 7 million euros being recognized against 

intangible and tangible assets. A 0.5% decrease in the discount rate 

would lead to a reversal of 6 million euros in impairment recognized 

against fixed assets. 

A 0.5% increase in the growth rate would lead to the reversal of 

5 million euros in impairment losses taken in 2007. 

■ Goodwill 

Goodwill is allocated to C ash-G enerating U nits (CGUs) on the basis 

of the P roduct F amily to which it relates. Goodwill is tested for 

impairment at least once a year, using the same method as that 

used for the CGUs described above. 

No impairment losses were recognized by the Group in 2007 as a 

result of these tests other than the write-down on goodwill relating 

to the CGU in Iran. 

A 0.5% increase in the discount rate would have no impact on 

goodwill impairment tests. 

3.3.4. Other 

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In 2007, this caption mainly includes capital gains on disposals of 

property assets amounting to 27 million euros. The balance includes 

costs relating to strategic transactions. 

In 2006, this caption includes the capital gain on the sale of Zexel 

Logitec Company for an amount of 14 million euros, as well as costs 

relating to strategic transactions. 


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3.4. Cost of net debt 




As restated 

2005 

As restated 

Interest expense (82) (83) (76) 

Interest income 31 32 31 

Cost of net debt (51) (51) (45) 

The cost of net debt for the Group remained stable year-on-year despite the rise in interest rates in 2007. 

The negative impact of the rise in interest rates was offset by the fall in interest expense over 2007 following the redemption of 500 million 

euros in bonds in July 2006. The redemption was partly funded by commercial paper issued at variable interest below the rate accruing on 

the bonds. 

3.5. Other fi nancial income and expenses 



As restated 

2005 

As restated 

Interest expense on unwinding of discount on pension obligations (1) (48) (49) (54) 

Expected return on pension plan assets (1) 21 19 17 

Currency gains (losses) on cash flow hedges - - - 

Currency losses on other transactions (9) - (6) 

Ineffective portion of cash flow hedges (commodities) - 1 2 

Gains (losses) from fair value hedges (interest rate) - - - 

Charges to provisions for credit risk (4) (4) (6) 

Gains (losses) on disposal of financial assets - 27 - 

Unwinding of discount on provisions (excluding pension obligations) (4) (4) (1) 

Miscellaneous (2) 2 (2) 

Other financial income and expenses (46) (8) (50) 

(1) See note 4.9.2. 

Currency losses incurred on other transactions in 2007 chiefly arose on operations carried out by the Group in Eastern Europe and Turkey. 

The “Gains (losses) on disposal of financial assets” caption in 2006 mainly includes proceeds from the sale of Parrot amounting to 24 million 

euros (see note 2.2.2). 

3.6. Income taxes 

3.6.1. Income tax expense 


< Contents > 


As restated 

2005 

As restated 

Current taxes (84) (75) (67) 

Deferred taxes 1 8 7 

Income taxes (83) (67) (60) 

1 

2 

3 

4 

5 

6

3.6.2. Effective tax rate 

The effective Group tax rate for 2007 was 37%, versus 32% in 2006 and 29% in 2005. 

(% of income before tax) 




As restated 

2005 

As restated 

Standard tax rate in France 

Impact of: 

(34.4) (34.4) (34.9) 

▪ income taxed at other rates 

12.9 8.2 6.8 

▪ unused tax losses (current year) and unrecognized deferred tax assets 

(37.1) (21.6) (20.0) 

▪ utilization of prior-year tax losses 

0.1 5.6 5.7 

▪ permanent differences between book income and taxable income 

16.5 7.3 4.9 

▪ tax credits 

4.8 3.4 8.7 

Effective Group tax rate (37.2) (31.5) (28.8) 

3.7. Earnings per share 

3.7.1. Basic earnings per share 


As restated 

2005 

As restated 

Net income attributable to equity holders of the Company (in millions of euros) 81 161 142 

Weighted average number of shares outstanding (in thousands of shares) 76,951 76,795 79,320 

Basic earnings per share (in euros) 1.06 2.10 1.80 

3.7.2. Diluted earnings per share 

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As restated 

2005 

As restated 

Net income attributable to equity holders of the Company (in millions of euros) 81 161 142 

Weighted average number of shares outstanding (in thousands of shares) 76,951 76,795 79,320 

Stock options (in thousands of options) 

Weighted average number of shares used for the calculation of diluted earnings 

445 199 330 

per share (in thousands of shares) 77,396 76,994 79,650 

Diluted earnings per share (in euros) 1.05 2.09 1.79 


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4. Notes to the balance sheet 

4.1. Goodwill 


Net goodwill at January 1 1,415 1,484 1,158 

Acquisitions during the year 5 8 260 

Additional purchase consideration in respect of acquisitions made in previous years 2 - - 

Disposals, net (212) (26) - 

Translation adjustments (43) (51) 66 

Impairment losses (2) - - 

Net goodwill at December 31 1,165 1,415 1,484 

Accumulated impairment losses at December 31 (2) (32) (33) 

In the years ended December 31, 2007 and 2006, changes in 

goodwill excluding the effect of foreign currency movements are 

mainly due to the sale of: 

■ the Wiring H arness activity in December 2007 (see note 2.1.1); 

■ the Motors & Actuators business in December 2006 (see 

note 2.2.1). 

The 2 million euro impairment loss recognized in 2007 reflects the 

full write-down taken against goodwill assigned to the Iranian CGU 

(see note 3.3.3). 

The main goodwill balances are broken down by group of CGUs as follows: 

At December 31 


< Contents > 

In 2005, Valeo notably carried out the following transactions: 

■ acquisition of the Engine Electronics business of Johnson Controls 

Inc.; 

■ purchase of the entire share capital of Japanese company Valeo 

Thermal Systems Japan Corp.; 

■ increase of its interest in two Thai companies, Valeo Siam Thermal 

Systems Co. Ltd. and Valeo Thermal Systems Sales Thailand Co. Ltd. 


Wiper Systems 208 221 236 

Electronics & Connective Systems - 213 217 

Climate Control 207 209 223 

Interior Controls 172 170 175 

Engine Management Systems 181 181 181 

Security Systems 129 127 127 

Electrical Systems 100 108 111 

Other 168 186 214 

TOTAL 1,165 1,415 1,484 

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4 

5 

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4.2. Other intangible assets 



Gross carrying 

amount 



2007 2006 2005 

Amortization 

and 

impairment 

losses 

Net carrying 

amount 

Net carrying 

amount 

Net carrying 

amount 

Software 146 (111) 35 35 32 

Patents and licenses 80 (59) 21 31 56 

Capitalized development expenditure 636 (334) 302 292 279 

Other 179 (23) 156 170 155 

Intangible assets 1,041 (527) 514 528 522 

Other intangible assets include customer relationship intangibles resulting mainly from acquisitions carried out in 2005. Patents and licenses 

include assets relating to technology intangibles acquired. 

Changes in other intangible assets over 2007, 2006 and 2005 are analyzed below: 



2006 


Software Patents and 

licenses 


licenses 

Capitalized 

development 

expenditure 

Capitalized 

development 

expenditure 

< Contents > 

Other 

intangible 

assets 

Gross at January 1, 2007 132 85 550 187 954 

Accumulated amortization and impairment (97) (54) (258) (17) (426) 

Net at January 1, 2007 35 31 292 170 528 

Acquisitions 7 1 122 7 137 

Disposals - (1) (4) (2) (7) 

Changes in scope of consolidation - 1 (11) (1) (11) 

Impairment losses - - - - - 

Amortization (19) (10) (95) (6) (130) 

Translation adjustments - - (3) - (3) 

Reclassifications 12 (1) 1 (12) - 

Net at December 31, 2007 35 21 302 156 514 

Other 

intangible 

assets 

Gross at January 1, 2006 119 96 458 171 844 


Net at January 1, 2006 32 56 279 155 522 


Disposals - - (2) - (2) 

Changes in scope of consolidation (2) (2) (8) (1) (13) 

Impairment losses - - (10) - (10) 

Amortization (19) (9) (85) (8) (121) 

Translation adjustments (1) (1) (4) (1) (7) 

Reclassifications 12 (17) (6) 6 (5) 

Net at December 31, 2006 35 31 292 170 528 


Total 

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2005 




licenses 

Capitalized 

development 

expenditure 

Other 

intangible 

assets 

Gross at January 1, 2005 94 41 325 27 487 


Net at January 1, 2005 29 11 222 19 281 


Disposals 2 (1) - (3) (2) 

Changes in scope of consolidation 1 53 3 141 198 

Impairment losses - - (7) (1) (8) 

Amortization (19) (10) (65) (7) (101) 

Translation adjustments 1 (1) 8 (1) 7 

Reclassifications 6 2 - (6) 2 

Net at December 31, 2005 32 56 279 155 522 

4.3. Property, plant and equipment 



Gross 

carrying 

amount 

Depreciation 

and 

impairment 

losses 

2007 2006 2005 

Net 

carrying 

amount 

Of which 

finance 

leases 

Net carrying 

amount 

Of which 

finance 

leases 

Net carrying 

amount 

Total 

Of which 

finance 

leases 

Land 149 (13) 136 - 146 - 167 - 

Buildings 939 (549) 390 6 419 6 458 15 

Plant and 

equipment 3,259 (2,459) 800 3 870 4 933 5 

Specific tooling 1,211 (1,062) 149 1 146 3 155 9 

Other 

Fixed assets in 

452 (352) 100 4 98 5 123 6 

progress 

Property, plant 

215 - 215 - 239 - 205 - 

and equipment 6,225 (4,435) 1,790 14 1,918 18 2,041 35 

Property, plant and equipment pledged as security amounted to 2 million euros at December 31, 2007. 

< Contents > 

1 

2 

3 

4 

5 

6

Changes in property, plant and equipment over 2007, 2006 and 2005 are analyzed below: 



Land Buildings Plant and 

equipment 



Specific 

tooling 

Other Fixed assets 

in progress 

Gross at January 1, 2007 156 971 3,322 1,169 468 239 6,325 

Accumulated 

depreciation 

and impairment (10) (552) (2,452) (1,023) (370) - (4,407) 

Net at January 1, 2007 146 419 870 146 98 239 1,918 

Capital expenditure 1 16 129 60 28 211 445 

Disposals - (2) (5) (3) (2) (2) (14) 

Assets held for sale (1) Changes in scope of 

- (1) - - - - (1) 

consolidation (3) (18) (40) (2) 12 (3) (54) 

Impairment losses (1) (1) (8) (9) (3) - (22) 

Depreciation (3) (51) (265) (99) (43) - (461) 

Translation adjustments (5) (2) (8) (2) - (4) (21) 

Reclassifications 

Net at December 31, 

1 30 127 58 10 (226) - 

2007 136 390 800 149 100 215 1,790 

(1) In accordance with IFRS 5, buildings for which the Group is actively seeking buyers are classified in “Assets held for sale”. 

2006 



equipment 

Specific 

tooling 


in progress 

Gross at January 1, 2006 

Accumulated 

depreciation 

178 1,012 3,346 1,155 538 205 6,434 

and impairment (11) (554) (2,413) (1,000) (415) - (4,393) 

Net at January 1, 2006 167 458 933 155 123 205 2,041 


Disposals - (1) (1) (2) (3) (8) (15) 

Assets held for sale (1) Changes in scope of 

- (9) - - - - (9) 

consolidation (8) (17) (20) (4) (3) (4) (56) 

Impairment losses (1) - (5) (1) (1) - (8) 

Depreciation (1) (50) (284) (103) (46) - (484) 

Translation adjustments (8) (6) (13) (3) (3) (6) (39) 

Reclassifications 

Net at December 31, 

(5) 20 81 41 (2) (139) (4) 

2006 146 419 870 146 98 239 1,918 


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Total 

Total 

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2005 




equipment 

Specific 

tooling 


in progress 

Gross at January 1, 2005 155 934 2,977 1,021 489 192 5,768 

Accumulated 

depreciation 

and impairment (10) (478) (2,097) (869) (369) - (3,823) 

Net at January 1, 2005 145 456 880 152 120 192 1,945 


Disposals (10) (13) (8) (2) - (12) (45) 

Assets held for sale (1) Changes in scope 

(2) (9) - - - - (11) 

of consolidation 30 20 71 4 7 18 150 

Impairment losses (1) (2) (12) (2) (9) - (26) 

Depreciation - (50) (286) (113) (55) - (504) 

Translation adjustments 6 20 40 9 6 7 88 

Reclassifications (2) 17 94 42 11 (165) (3) 

Net at December 31, 2005 167 458 933 155 123 205 2,041 


4.4. Investments in associates 

Changes in the “Investments in associates” caption can be analyzed as follows: 


Investments in associates at January 1 103 116 96 

Share in net earnings (losses) of associates 8 (1) 6 

Dividend payments (2) (4) (4) 

Impact of changes in scope of consolidation 1 3 8 

Translation adjustments (1) (12) 7 

Other (6) 1 3 

Investments in associates at December 31 103 103 116 


Ownership interest 

(%) 

< Contents > 

Carrying amount 


Ichikoh is a company listed on the Tokyo Stock Exchange. At December 31, 2007, the market capitalization of the shares held by the Valeo 

Group was 49 million euros. The carrying amount of the investment is supported by its value in use. 

Total 

2007 2006 2005 2007 2006 2005 

Ichikoh 31.6 29.4 28.2 74 72 80 

Faw Valeo Climate Control 36.5 36.5 36.5 23 23 25 

Other - - - 6 8 11 

Investments in associates - - - 103 103 116 

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2 

3 

4 

5 

6

Summarized financial data in respect of associates are set out below: 




Total assets 655 703 754 

Total liabilities 433 483 509 

Total operating revenues 841 950 1,011 

Net income (loss) for the year 30 (3) 20 

4.5. Deferred taxes 

Deferred tax assets and liabilities are offset when a legally enforceable right exists to set off current tax assets against current tax liabilities and 

the deferred tax assets and liabilities concern income taxes levied by the same taxation authority. In France, Valeo elected for tax consolidation. 

The tax group includes the parent company and its principal French subsidiaries that are eligible for tax consolidation. 

Valeo also elected for tax consolidation for its subsidiaries in other countries where this is permitted by local legislation (Germany, Spain, Italy, 

the United Kingdom and the United States). 



2005 2006 Recognized 

through 

income (2) 

< Contents > 

Other 

movements (3) 

Loss carry forwards (1) 12 33 6 (17) 22 

Capitalized development expenditure (82) (92) 3 9 (80) 

Pensions and other employee benefits 63 67 3 (19) 51 

Other provisions 62 65 (4) 3 64 

Inventories 15 15 1 (2) 14 

Provisions for reorganization expenses 11 20 - (5) 15 

Tooling 8 7 1 (2) 6 

Non-current assets (4) (1) 8 4 11 

Other 6 (19) (19) (13 ) (25) 

Total deferred taxes 

Of which: 

91 95 (1) (16) 78 

▪ d eferred tax assets 

100 96 99 

▪ d eferred tax liabilities 

(9) (1) (21) 

(1) 

Deferred tax assets are recognized in respect of tax loss carry forwards to the extent that it is probable that future profits will be available against which they may be 

offset. 

(2) 

Including non-strategic activities. 

(3) 

Other movements total 16 million euros and relate mainly to deferred taxes arising on actuarial gains and losses and cash flow hedges recognized directly through equity. 



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At December 31, 2007, deferred tax assets not recognized by the Group are broken down as follows: 



Tax basis Potential tax 

saving 

Tax loss carry forwards - expiration date 2008 to 2011 85 29 

Tax loss carry forwards - expiration date 2011 and beyond 765 263 

Tax loss carry forwards - available indefinitely 879 303 

Current tax loss carry forwards 1,729 595 

Unrecognized deferred tax assets on temporary differences 166 

Total unrecognized deferred tax assets 761 

At December 31, 2006 and 2005, the total amount of unrecognized deferred tax assets came to 778 million euros and 849 million euros, 

respectively. 

4.6. Inventories 

At December 31 , inventories are broken down as follows: 


2007 2006 2005 

Gross Provisions Net Net Net 

Raw materials 261 (44) 217 231 221 

Work-in-progress 73 (7) 66 74 81 

Finished goods, supplies and specific tooling 398 (59) 339 342 352 

Inventories - net 732 (110) 622 647 654 

Provisions for impairment in the value of inventories amounted 

to 110 million euros at December 31, 2007 (109 million euros at 

December 31, 2006), including an allowance of 35 million euros in 

the year (excluding non-strategic activities). 

4.7. Accounts and notes receivable 


< Contents > 

Allowances to provisions for impairment in 2006 and 2005 amounted 

to 19 million euros and 32 million euros, respectively (excluding 

non-strategic activities). 


Accounts and notes receivable 1,728 1,864 1,938 

Less provisions (29) (30) (32) 

Accounts and notes receivable - net 1,699 1,834 1,906 

Allowances to provisions against accounts and notes receivable are recognized in “Other financial income and expenses” where such a provision 

results from a risk of client default (see note 3.5), and in administrative expenses in other cases. 

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2 

3 

4 

5 

6

4.8. Stockholders’ equity 

4.8.1. Share capital 

At December 31, 2007, Valeo’s share capital totaled 235 million 

euros, comprising 78,209,617 shares of common stock with a par 

value of 3 euros, all fully paid-up, excluding treasury stock - see 

note 4.8.6. Shares that have been registered in the name of the 

same holder for at least four years carry double voting rights 

(2,206,124 shares at December 31, 2007). 

Valeo’s potential share capital would amount to 274 million euros, 

representing 91,184,612 shares, in the event of: 

■ 

■ 

the exercise of stock subscription options granted to Valeo Group 

employees; 

the conversion of bonds issued as part of the OCEANE program 

into new shares (see note 4.10.2). 



The Group seeks to maintain a solid capital base in order to retain the 

confidence of investors, creditors and the market, and to secure its 

future development. Its policy is to strike a balance between levels of 

debt and equity, and in particular to prevent net debt from exceeding 

100% of stockholders’ equity for any prolonged period of time. 

Employee-shareholders currently represent 1% of the Group’s share 

capital. The Group aims to increase this percentage by regularly 

implementing company savings plans and by extending stock option 

plans and free share awards to a broader section of the workforce. 

The Group buys back treasury stock on the market to cover its 

obligations with regard to stock option plans and free share awards, 

as well as the company savings awards and liquidity contract (see 

section 4.2.2 of the Management Report). 

The following employee stock subscription and stock option plans and free share plans approved by the Annual General Meeting were 

outstanding at December 31, 2007: 

■ Terms and conditions of stock subscription plans 

Year in which 

the plan was set up 

Number of shares 

subject to options 

Exercise price 

of options (1) 

(in euros) 

Number of options 

outstanding at 

December 31, 2007 (2) 

< Contents > 

Expiration date 

2000 1,300,000 48.00 393,413 2008 

2001 80,000 55.82 80,800 2009 

2001 600,000 42.48 303,000 2009 

2001 442,875 42.69 273,777 2009 

2002 420,000 43.84 212,908 2010 

2002 600,000 28.3 116,867 2010 

2003 700,000 23.51 237,795 2011 

2003 780,000 32.91 441,215 2011 

2004 1,123,200 28.46 809,781 2012 

TOTAL 6,046,075 2,869,556 

(1) 

Exercise price equals to 100% of the average Valeo share price over the 20 trading days preceding the meeting of the Board of Directors or Management Board granting 

the stock subscription options. 

(2) 

The number of shares includes the impact of the public share buyback offer and simplified public tender offer, which increased the share allocation ratio to 1.01 Valeo share 

from 1 Valeo share. 


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■ Terms and conditions of stock option plans 

Year in which 


■ Terms and conditions of free share awards 

Movements in stock option plans can be analyzed as follows: 



Number of shares 

subject to options 

Exercise price 

of options (1) 

(in euros) 


outstanding at 

December 31, 2007 (2) 


and free shares 

Expiration date 

2003 500,000 32.91 283,327 2011 

2004 280,800 32.74 204,200 2012 

2005 650,000 32.32 517,695 2013 

2006 187,000 33.75 187,000 2014 

2006 1,309,250 32.63 1,127,750 2014 

2007 250,000 36.97 250,000 2015 

2007 1,677,000 (3) 36.82 1,677,000 2015 

TOTAL 4,854,050 4,246,972 

(1) 

Exercise price equals to 100% of the average Valeo share price over the 20 trading days preceding the meeting of the Board of Directors or Management Board, or 100% 

of the average purchase price of treasury stock held if greater than the Valeo quoted share price. 

(2) 

The number of shares includes the impact of the public share buyback offer and simplified public tender offer, applicable to grants prior to 2005, which increased the share 

allocation ratio to 1.01 Valeo share from 1 Valeo share. 

(3) 

Including 174,250 shares granted subject to the Group achieving certain profitability criteria. 

Year in which 


Number of free 

shares granted 

Number of shares not yet issued 

at December 31, 2007 

Year of 

vesting 

2005 600,000 (1) 232,135 2008 

2006 63,000 (2) 26,500 2008 

2006 100,000 89,000 2009 

2007 100,000 96,250 2010 

TOTAL 863,000 443,885 

(1) Including 300,000 shares granted subject to the Group achieving certain profitability criteria, cancelled in 2007. 

(2) Including 36,500 shares granted subject to the Group achieving certain profitability criteria, cancelled in 2007. 

< Contents > 

Weighted average 

exercise price 

Options not exercised at January 1, 2007 7,109,400 30.50 

Options granted/free shares to be issued 2,027,000 35.02 

Options cancelled (914,920) 20.21 

Options expired - - 

Options exercised (694,972) 27.7 

Options not exercised/free shares not issued at December 31 7,526,508 33.13 

Options which can be exercised at December 31, 2007 3,582,026 35.43 

1 

2 

3 

4 

5 

6

2006 







Options not exercised at January 1, 2006 6,442,405 31.82 



Options expired (432,125) 50.01 



Options which can be exercised at December 31, 2006 3,759,575 35.21 

2005 



< Contents > 

The principal data and assumptions underlying the valuation of equity instruments at fair value can be analyzed as follows: 




Options not exercised at January 1, 2005 6,476,975 38.23 



Options expired (485,250) 70.32 



Options which can be exercised at December 31, 2005 3,099,668 39.50 

March November 

Free shares 

and stock options Stock options 

Share price at date of grant (euros) 37.03 36.93 

Expected volatility (%) - and 27.8 32.2 

Risk-free rate (%) 4.1 4.4 

Dividend rate (%) 3.2 3.2 

Duration of the option (years) 3 and 4 4 

Fair value of the equity instrument (euros) 32.21 and 7.63 8.85 


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Free shares and stock 

options 

2006 

March November 


options 


Expected volatility (%) - and 24.6 - and 29.0 

Risk-free rate (%) 3.3 and 3.5 3.9 


Duration of the option (years) 2.25 and 4 3 and 4 

Fair value of the equity instrument (euros) 29.28 and 4.92 26.32 and 5.54 


options 

2005 2004 

Subscription options 

and stock options 


Expected volatility (%) - and 26.4 25.80 

Risk-free rate (%) 2.9 and 3.1 3.1 


Duration of the option (years) 2.25 and 4 4 

Fair value of the equity instrument (euros) 28.65 and 5.52 5.67 and 4.26 

Expected volatility is determined as being the implicit volatility at 

the date of grant of the plan. The maturity of four years used for 

stock option and stock subscription plans corresponds to the period 

for which the availability of options is restricted by tax legislation, 

which is deemed to represent the duration of the option. 

An expense of 11 million euros was booked in 2007 (including 

employer taxes in respect of stock options and free share awards), 

unchanged from 2006 (expense of 7 million euros in 2005). 

4.8.2. Additional paid-in capital 

Additional paid-in capital represents the net amount received, either 

in cash or in assets, in excess of the par value on issuance of Valeo 

shares. 

4.8.3. Translation adjustment 

The translation adjustment reserve at December 31, 2007 primarily 

includes gains and losses arising from the translation of the net 

assets of Valeo’s Brazilian, Japanese, Mexican and South Korean 

subsidiaries. 

4.8.4. Retained earnings 

Retained earnings include net income for the year amounting to 

88 million euros (before appropriation of the dividend to be proposed 

at the Annual General Meeting). 

4.8.5. Dividends per share 

The balance of the parent company’s distributable retained earnings 

amounts to 1,592 million euros, before appropriation of 2007 net 

income (1,589 million euros in 2006 and 1,593 million euros 

in 2005). 

Dividends paid in 2007 amounted to 85 million euros, representing 

1.10 euro per share. 

Dividends paid in 2006 and 2005 respectively totaled 84 million 

euros and 91 million euros, also representing 1.10 euro per share 

for both years. A dividend of 1.20 euro per share for the year ended 

December 31, 2007 will be proposed at the Annual General Meeting. 

This distribution is not recognized in accrued liabilities in the financial 

statements at December 31, 2007. 

4.8.6. Treasury stock 

< Contents > 

At December 31, 2007, Valeo owns 1,432,804 of its own shares, 

representing 1.83% of share capital, versus 686,704 shares 

(0.89%) at December 31, 2006 and 807,704 shares (1.04%) 

at December 31, 2005. 

1 

2 

3 

4 

5 

6

4.8.7. Minority interests 

Changes in minority interests can be analyzed as follows: 




Minority interests at January 1 38 43 57 

Equity in net earnings 7 5 6 

Dividends paid (4) (4) (5) 

Translation adjustments - (3) 4 

Changes in scope of consolidation 3 (3) (19) 

Minority interests at December 31 44 38 43 

4.9. Provisions 

Changes in provisions can be analyzed as follows: 


Provisions for 

reorganization 

expenses 

Provisions for 

pensions and 

other employee 

benefits 

< Contents > 

Other 

provisions 

Provisions at January 1, 2005 165 856 277 1,298 

Amounts used during the year (103) (89) (91) (283) 

Impact of changes in scope of consolidation 10 15 192 217 

Translation adjustments 10 62 13 85 

Reclassification (6) 13 (6) 1 

Additions 108 89 154 351 

Unwinding of discount 1 39 - 40 

Reversals (1) (4) (152) (49) (205) 

Actuarial gains and losses recognized through equity - 50 - 50 

Provisions at December 31, 2005 181 883 490 1,554 


Impact of changes in scope of consolidation (3) (27) (3) (33) 

Translation adjustments (10) (33) (6) (49) 

Reclassification (2) 42 (41) 3 4 

Additions 55 28 105 188 


Reversals (11) (3) (51) (65) 

Actuarial gains and losses recognized through equity - (27) - (27) 

Provisions at December 31, 2006 176 748 431 1,355 


Impact of changes in scope of consolidation (16) (13) (5) (34) 

Translation adjustments (8) (26) (5) (39) 

Additions 39 33 149 221 


Reversals (9) (4) (91) (104) 

Actuarial gains and losses recognized through equity - (79) - (79) 

Provisions at December 31, 2007 127 608 367 1,102 

Of which current portion (less than 1 year) 53 57 214 324 

(1) 

For the year ended December 31, 2005, reversals of provisions for pensions and other employee benefits include (127) million euros relating to amendments to the healthcare 

insurance plan in the United States, and an amount of (20) million euros in connection with the reduction in benefit entitlement due to the closure of the Rochester site. 

(2) 

Including, in 2006, a reclassification of 41 million euros from provisions for pensions to provisions for reorganization expenses in connection with healthcare plans for early 

retirees in the United States. 


Total 

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4.9.1. Provisions for reorganization expenses 

Provisions for reorganization expenses correspond to a series 

of measures adopted by the Group as part of an industrial 

streamlining plan aimed at tailoring Valeo’s industrial base more 

closely to customer requirements, in terms of cost competitiveness 

and geographical location. The provisions include costs relating 

primarily to: 

■ 

■ 

continued rightsizing and production streamlining measures; 

specific severance payments (CATS) applicable at certain French 

sites, in accordance with the industry agreement signed in 

March 2001. 

4.9.2. Provisions for pensions and other 

employee benefits 

■ Description of the plans in force within the Group 

The Group’s commitments in relation to pensions and other employee 

benefits primarily concern the following defined benefit plans: 

■ 

termination benefits (France, Italy, South Korea, Mexico); 


■ 

supplementary pension benefits (France, Germany, Japan, United 

Kingdom , United States) which top up the statutory pension 

schemes in force in those countries; 

■ the payment of certain medical and life insurance costs for retired 

employees (United States); 

■ certain of the above-mentioned benefits granted specifically under 

early retirement schemes (France, Germany and United States); 

■ other long-term benefits (long-service bonuses in France and 

Germany). 

The costs relating to all of these benefits are accounted for in 

accordance with the accounting policy described in note 1.17. 

■ Actuarial assumptions 

The actuarial assumptions used by the Group to calculate its 

obligations relating to pensions and other employee benefits take 

into account the specific demographic and financial conditions of each 

Group company and each country in which the Group operates. 

Discount rates are determined by reference to market yields at 

the valuation date on high quality corporate bonds with a term 

consistent with that of the employee benefits concerned. 

In 2007, the average discount rates used in the countries representing the Group’s most significant obligations were as follows: 


(In %) 2007 2006 2005 

Euro zone 5.3 4.5 4.2 

United Kingdom 5.8 5.0 4.8 

United States 6.3 5.9 5.6 

South Korea 5.5 5.3 5.8 

The rise in the discount rates used to measure pensions and other post-employment obligations reflects higher long-term interest rates at 

end-2007 compared with end-2006. 

The expected long-term return on plan assets has been calculated taking into account the structure of the investment portfolio in each country, 

and is as follows for the Group’s principal plans: 


< Contents > 

(In %) 2007 2006 2005 

United States 8.5 8,5 8.5 

United Kingdom 6.4 6.4 6.7 

Japan 2.7 2,0 2 

South Korea 4.5 4,5 4.5 

The weighted long-term salary increase rate was 3.5% at December 31, 2007, unchanged from December 31, 2006 and 2005. 

The rate of increase for medical costs in the United States used to value the Group’s obligations at December 31, 2007 was 10% up to the 

end of 2008, reducing by one percentage point a year for the following five years to 5% at December 31, 2013. 

1 

2 

3 

4 

5 

6

■ Breakdown of obligations 

At December 31, 2007 


France Other 

European 

countries 



North 

America 

Other 

countries 

Present value of unfunded obligations 169 231 113 41 554 

Present value of funded obligations 21 64 253 41 379 

Market value of plan assets (6) (44) (211) (39) (300) 

Deficit 184 251 155 43 633 

Unrecognized past service cost (25) - - - (25) 

Provisions recognized at December 31, 2007 159 251 155 43 608 

At December 31, 2006 


France Other 

European 

countries 

North 

America 

Other 

countries 




Deficit 203 298 224 48 773 

Unrecognized past service cost (26) - 1 - (25) 

Provisions recognized at December 31, 2006 177 298 225 48 748 



France Other 

European 

countries 

North 

America 

< Contents > 

Other 

countries 




Deficit 200 317 329 48 894 

Unrecognized past service cost (31) - 20 - (11) 

Provisions recognized at December 31, 2005 169 317 349 48 883 


Total 

Total 

Total 

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4 

5 

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■ Movements in provisions 



France Other 

European 

countries 

North 

America 

Other 

countries 

Provisions at January 1, 2005 152 269 393 42 856 

Actuarial gains and losses recognized through equity 7 40 15 (12) 50 

Amounts used during the year (1) (19) (14) (49) (7) (89) 

Impact of changes in scope of consolidation 5 1 2 7 15 

Reclassification: pensions/reorganization expenses - - 13 - 13 

Translation adjustments - 1 54 7 62 

Expense/(income) for the year 24 20 (79) (2) 11 (24) 

Provisions at December 31, 2005 169 317 349 48 883 

Actuarial gains and losses recognized through equity 3 (4) (28) 2 (27) 


Impact of changes in scope of consolidation - (25) (1) (1) (27) 

Reclassification: pensions/reorganization expenses - 1 (42) - (41) 

Translation adjustments - 1 (32) (2) (33) 

Expense/(income) for the year 27 22 (3) 9 55 

Provisions at December 31, 2006 177 298 225 48 748 

Actuarial gains and losses recognized through equity (3) (7) (42) (29) (1) (79) 


Impact of changes in scope of consolidation (7) (6) - - (13) 

Translation adjustments - (2) (20) (4) (26) 

Expense/(income) for the year 21 20 8 8 57 

Provisions at December 31, 2007 159 251 155 43 608 

Of which current portion (less than 1 year) 14 13 26 4 57 

(1) 

Including benefits paid directly to beneficiaries or contributions paid to external funds, depending on the plan concerned. 

(2) 

Income booked for 2005 results mainly from amendments to healthcare insurance plans. 

(3) 

Actuarial gains and losses recognized through equity for the year ended December 31, 2007 chiefly reflect the rise in discount rates (see above – Actuarial assumptions). 

Actuarial gains and losses arising on experience adjustments amount to 11 million euros. 

■ Movements in obligations 


France Other 

European 

countries 

North 

America 

< Contents > 

Other 

countries 

Obligations at January 1, 2007 208 343 429 94 1,074 

Service cost 9 9 2 6 26 

Interest cost 9 13 23 3 48 

Benefits paid (24) (15) (18) (14) (71) 

Actuarial gains and losses (7) (41) (28) (1) (77) 

Plan amendments - - - - - 

Impact of changes in scope of consolidation (7) (6) - - (13) 

Other 2 (2) 1 - 1 


Obligations at December 31, 2007 190 295 366 82 933 

Total 

Total 

1 

2 

3 

4 

5 

6


France Other 

European 

countries 



North 

America 

Other 

countries 

Obligations at January 1, 2006 203 359 526 100 1,188 



Benefits paid (21) (15) (10) (10) (56) 

Actuarial gains and losses 3 (4) (28) 2 (27) 

Plan amendments - - (19) - (19) 

Impact of changes in scope of consolidation - (25) (1) (1) (27) 

Other (2) 2 (18) - (18) 


Obligations at December 31, 2006 208 343 429 94 1,074 


France Other 

European 

countries 

North 

America 

< Contents > 

Other 

countries 

Obligations at January 1, 2005 187 306 533 67 1,093 



Benefits paid (18) (15) (42) (10) (85) 

Actuarial gains and losses 9 43 16 (7) 61 

Plan amendments 2 (1) (116) - (115) 

Impact of changes in scope of consolidation 5 1 4 31 41 

Other - - 13 - 13 


Obligations at December 31, 2005 203 359 526 100 1,188 


Total 

Total 

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4 

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■ Movements in plan assets 



France Other 

European 

countries 

North 

America 

Other 

countries 

Plan assets at January 1, 2005 1 37 148 25 211 

Expected return on plan assets - 2 14 1 17 

Contributions paid to external funds 2 - 13 4 19 

Benefits paid (1) (1) (6) (7) (15) 

Actuarial gains and losses 1 3 - 5 9 

Impact of changes in scope of consolidation - - 3 23 26 

Other - - - - - 


Plan assets at December 31, 2005 3 42 197 52 294 


Contributions paid to external funds 2 1 9 3 15 

Benefits paid - (1) (1) (5) (7) 

Actuarial gains and losses - - 1 - 1 

Impact of changes in scope of consolidation - - - - - 

Other - - 5 - 5 


Plan assets at December 31, 2006 5 45 205 46 301 


Contributions paid to external funds 2 1 21 1 25 

Benefits paid (1) (2) (10) (7) (20) 

Actuarial gains and losses - 1 1 - 2 


Plan assets at December 31, 2007 6 44 211 39 300 

■ Breakdown of plan assets 


France Other 

European 

countries 

North 

America 

< Contents > 

Other 

countries 

Cash at bank - - 5 4 9 

Shares 2 29 163 19 213 

Government bonds - 7 22 25 54 

Corporate bonds 1 6 7 4 18 

Breakdown of plan assets at December 31, 2005 3 42 197 52 294 


Shares 3 44 167 15 229 

Government bonds - 1 22 23 46 

Corporate bonds 2 - 10 - 12 

Breakdown of plan assets at December 31, 2006 5 45 205 46 301 


Shares 6 44 156 11 217 

Government bonds - - 27 20 47 

Corporate bonds - - 12 - 12 

Breakdown of plan assets at December 31, 2007 6 44 211 39 300 

Total 

Total 

1 

2 

3 

4 

5 

6



Contributions of 25 million euros were paid to external funds in 2007. Contributions in 2008 are estimated at 18 million euros. The effective 

return on plan assets amounted to 23 million euros in 2007, versus 20 million euros in 2006 and 26 million euros in 2005. 

The effects of a one-point change in the rate of increase in medical costs in the United States are as follows: 


2007 2006 2005 

Increase Decrease Increase Decrease Increase Decrease 

Effect on service cost and interest cost - - - - 2 (2) 

Effect on obligations 1 (1) 2 (2) 3 (3) 

■ Actuarial gains and losses recognized through equity 

Since opting to publish a statement of recognized income and 

expense (SORIE) as permitted under IAS 19 (see note 1.1), actuarial 

differences recognized in equity before deferred taxes represent: 

■ 

actuarial losses of 42 million euros for the year ended 

December 31, 2004; 

4.9.3. Other provisions 


■ 

■ 

■ 

actuarial losses of 50 million euros for the year ended 


actuarial gains of 27 million euros for the year ended 


actuarial gains of 79 million euros for the year ended 

December 31, 2007. 


Provisions for product warranties 164 180 226 

Other (1) 204 251 264 

Other provisions 368 431 490 

(1) Other provisions mainly concern contractual, labor, environmental or tax risks and litigation. 

4.10. Debt 

4.10.1. Gross debt 


< Contents > 


Long-term debt (note 4.10.2) 1,283 1,274 1,303 

Current maturities of long-term debt (note 4.10.2) 29 54 581 

Short-term debt (note 4.10.3) 260 274 157 

Gross debt 1,572 1,602 2,041 


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4.10.2. Long-term debt 

■ Analysis of long-term debt 



Bonds 596 595 1,094 

OCEANE (1) 435 427 419 

Syndicated loans 219 216 221 

Lease obligations 9 15 25 

Other borrowings 28 49 86 

Accrued interest 25 26 39 

Long-term debt 1,312 1,328 1,884 

(1) The carrying amount of the OCEANE bonds was reduced from 463 million euros to 419 million euros following the application of IAS 32 at January 1, 2005. 

Long-term debt includes: 

■ 

■ 

600 million euros worth of eight-year fixed rate bonds issued by 

Valeo on June 24, 2005. The interest rate on these bonds is 3.75% 

of the nominal amount. These bonds were issued in the context 

of the Euro Medium Term Notes program. The effective interest 

rate on these bonds is 3.89%; 

463 million euros worth of bonds convertible for new shares 

and/or exchangeable for existing shares (OCEANE) issued on 

August 4, 2003, representing 9,975,754 bonds with a nominal 

value of 46.4 euros each. The interest on these bonds is 2.375% 

per annum payable in arrears on January 1 of each year. Bearers 

of the bonds may request conversion and/or exchange into 

common stock at any time, on the basis of 1.013 Valeo share 

for one bond. 

In addition, Valeo has a call option that may be exercised between 

January 31, 2007 and December 31, 2010 if the Valeo share is 

valued at an average price of 60 euros. The effective interest 

■ Maturities of long-term debt 




■ 

− 

− 

rate of the OCEANE bonds amounts to 4.54% (4.46% excluding 

the call); 

two seven-year syndicated loans for a total amount of 225 million 

euros issued on July 29, 2005, hedged by two interest rate swaps 

which are perfectly matched in both amount and duration. These 

loans and the related hedges have the following characteristics: 

the first loan is at a variable rate and incorporates a cap which 

limits the interest rate to a maximum of 4.735%. It is hedged by 

a derivative which offsets the option included in the loan, 

the second loan is at a fixed rate of 3.62% and incorporates a 

swaption that enables the Group to opt for a variable rate in 2009. 

It is hedged by a derivative which has identical characteristics to 

those of the call option included in the loan. 

2009 2010 2011 2012 2013 and 

beyond 

< Contents > 

Bond issues - - - - 596 596 

OCEANE - - 435 - - 435 

Syndicated loans - - - 219 - 219 

Lease obligations 1 1 1 1 1 5 

Other borrowings 2 4 4 3 15 28 

TOTAL 3 5 440 223 612 1,283 

Total 

1 

2 

3 

4 

5 

6

4.10.3. Short-term debt 





Commercial paper 50 140 - 

Short-term loans and overdrafts 210 134 157 

Short-term debt 260 274 157 

4.10.4. Cash and cash equivalents 



Marketable securities 328 97 454 

Cash 443 521 495 

Cash and cash equivalents 771 618 949 

4.10.5. Net debt 

Net debt is defined as all long-term debt (including current maturities thereof) and short-term debt, less loans, other non-current financial 

assets and cash and cash equivalents. 

■ Breakdown of net debt 

< Contents > 


Long-term debt (note 4.10.2) 1,283 1,274 1,303 

Current maturities of long-term debt (note 4.10.2) 29 54 581 

Loans and other non-current financial assets (note 5.2.1) (2) (16) (12) 

Total long-term debt 1,310 1,312 1,872 

Short-term debt (note 4.10.3) 260 274 157 

Cash and cash equivalents (note 4.10.4) (771) (618) (949) 

Net cash and cash equivalents (511) (344) (792) 

Net debt 799 968 1,080 


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4.10.6. Analysis of net debt by currency 

Net debt can be analyzed as follows by currency: 



Euro 895 1,151 1,179 

US dollar (34) (52) (64) 

Yen 12 34 110 

Brazilian real (7) (22) (25) 

Korean won (18) (59) (44) 

Chinese yuan (24) (24) (21) 

Other currencies (25) (60) (55) 

TOTAL 799 968 1,080 

4.11. Notes to the statements of cash fl ows 

4.11.1. Expenses (income) with no cash effect 


Expenses (income) with no cash effect 

Depreciation, amortization and impairment 615 623 639 

Net charges to/(reversals from) provisions (117) (96) (99) 

Customer contributions (56) (51) (35) 

Losses (gains) on sales of non-current assets 30 (74) 6 

Expenses related to share-based payment 11 11 7 

Other expenses (income) with no cash effect (4) (2) - 

TOTAL 479 411 518 

4.11.2. Changes in working capital 


Changes in working capital 

Inventories (22) (17) 3 

Accounts and notes receivable (40) 5 53 

Accounts and notes payable 35 88 30 

Other receivables and payables (15) (28) 21 

TOTAL (42) 48 107 


< Contents > 

1 

2 

3 

4 

5 

6

5. Additional disclosures 

5.1. Segment reporting 



The Valeo Group comprises a single business segment (“Automotive equipment”). The Group’s secondary reporting level – geographical areas 

– corresponds to production areas. Additional information is provided based on an appropriate breakdown to permit a more accurate analysis 

of the Group’s business. 

Balance sheet and statement of income items relating to non-strategic activities have been restated as indicated in note 2.1. 

5.1.1. Reporting by geographic area 


Net sales by market Net sales by 

production area 

Total assets at 

December 31 

< Contents > 

Capital expenditure 

for the year (1) 

Number of 

employees 


Europe 6,458 6,873 3,652 365 41,397 

North America 1,293 1,224 457 64 6,826 

South America 559 522 253 32 4,206 

Asia 1,245 1,264 778 92 8,771 

Eliminations - (328) (144) - - 

TOTAL 

2006 

9,555 9,555 4,996 553 61,200 

Europe 6,398 6,903 3,966 437 40,261 

North America 1,325 1,318 539 86 7,179 

South America 468 454 210 39 3,550 

Asia 1,245 1,238 754 87 7,710 

Eliminations - (477) (147) (2) - 

TOTAL 

2005 

9,436 9,436 5,322 647 58,700 

Europe 6,242 6,740 4,048 436 39,622 

North America 1,364 1,366 575 67 6,776 

South America 429 402 195 35 3,418 

Asia 1,156 1,134 759 59 7,084 

Eliminations - (451) (149) (5) - 

TOTAL 9,191 9,191 5,428 592 56,900 

(1) 

Capital expenditure in 2007 does not include investments related to the Wiring H arness activity which was sold during that year. Capital expenditure in 2006 does not 

include expenditure related to the Electric Motors & Actuators business which was sold during that year. 


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4 

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Total segment assets reconcile to total Group assets as follows: 


Total segment assets 4,996 5,322 5,428 

Financial assets 896 755 1,117 

Deferred tax assets 99 96 100 

Goodwill 1,165 1,415 1,484 

TOTAL 7,156 7,588 8,129 

Goodwill balances cannot be broken down by geographical area as they are allocated to groups of CGUs which belong to several areas. 

5.1.2. Research and development expenditure by Domain of innovation and sales by Product Family 

The objective of the domains of innovation is to enhance and support innovation by bringing together different technologies and Product 

Families in order to propose integrated solutions to the market in terms of comfort, safety and the environment. 


Driving Assistance 193 188 175 

Propulsion Efficiency 230 214 204 

Comfort Enhancement 242 232 231 

Other 3 6 - 

TOTAL 668 640 610 

The Domains of innovation aim to boost sales of the product portfolio, the production and sale of which is placed under the responsibility of 

the Group’s divisions. The product portfolio is broken down into the following Product Families: 


Transmissions 784 761 742 

Climate Control 1,436 1,485 1,463 

Engine Cooling 1,353 1,301 1,227 

Lighting Systems 1,198 1,189 1,151 

Electrical Systems 1,154 1,084 1,041 

Wiper Systems 1,052 1,027 1,056 

Security Systems 726 719 676 

Interior Controls 983 943 969 

Compressors 414 396 403 

Engine Management Systems 339 405 366 

Other and eliminations 116 126 97 

TOTAL 9,555 9,436 9,191 

During the first half of 2007, the Group reallocated businesses between certain P roduct F amilies. These reclassifications mainly concern Climate 

Control, Engine Cooling and Interior Controls (previously known as Switches & Detection Systems). Sales by P roduct F amily previously reported 

for the years ended December 31, 2006 and December 31, 2005 have therefore been adjusted in order to facilitate comparison with sales 

by P roduct F amily for the year ended December 31, 2007. 


< Contents > 

1 

2 

3 

4 

5 

6

5.2. Financial instruments 

5.2.1. Fair value of financial instruments 



Recognition and measurement principles regarding financial assets and liabilities are defined in IAS 32 and IAS 39. The classification of financial 

instruments into specific categories is described in note 1.13. 



2007 Carrying amount under IAS 39 2007 

Carrying 

amount 

Amortized 

cost 

Loans and 

receivables 

Fair value 

through 

equity 

< Contents > 

Fair value 

through 

income 

ASSETS 

Non-current financial assets: 

▪ i nvestments in non-consolidated companies 

4 - - 4 - 4 

▪ l oans 

2 2 - - - 2 

▪ d eposits and guarantees 

6 - 6 - - 6 

▪ o ther non-current financial assets 

6 - 6 - - 6 

Accounts and notes receivable 

Other current financial assets: 

1,699 1,699 - - - 1,699 

▪ d erivative instruments (assets) eligible for 

hedge accounting 

1 - - 1 - 1 

▪ d erivative instruments (assets) ineligible for 

hedge accounting 

3 - - - 3 3 

Cash and cash equivalents 

LIABILITIES 

771 - - - 771 771 

Bonds 608 608 - - - 560 

OCEANE (debt component) 446 446 - - - 437 

Syndicated loans 221 - - - 221 221 

Other long-term debt 37 - - - 37 37 

Accounts and notes payable 

Other current financial liabilities: 

1,836 1836 - - - 1836 

▪ d erivative instruments (liabilities) eligible 

for hedge accounting 

19 - - 13 6 19 

▪ d erivative instruments (liabilities) ineligible 

for hedge accounting 

2 - - - 2 2 

Short-term debt 260 260 - - - 260 


Fair 

value 

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2 

3 

4 

5 

6


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Carrying 

amount 

2006 2005 

Fair 

value 

Carrying 

amount 

ASSETS 

Non-current financial assets: 

▪ i nvestments in non-consolidated companies 

2 2 9 9 

▪ l oans 

16 16 12 12 

▪ d eposits and guarantees 

3 3 3 3 

▪ o ther non-current financial assets 

3 3 4 4 

Accounts and notes receivable 

Other current financial assets: 

1,834 1,834 1,906 1,906 

▪ d erivative instruments (assets) eligible for hedge accounting 

7 7 22 22 

▪ d erivative instruments (assets) ineligible for hedge accounting 

2 2 1 1 

▪ o ther 

1 1 1 1 


LIABILITIES 

618 618 949 949 

Bonds 607 576 1,119 1,126 

OCEANE (debt component) 438 433 430 440 

Syndicated loans 219 221 224 225 

Other long-term debt 64 64 111 111 

Accounts and notes payable 

Other current financial liabilities: 

1,955 1,955 1,925 1,925 

▪ d erivative instruments (liabilities) eligible for hedge accounting 

10 10 5 5 

▪ d erivative instruments (liabilities) ineligible for hedge accounting 

1 1 3 3 

▪ o ther 

- - 1 1 

Short-term debt 274 274 157 157 

The principal terms and conditions of borrowings (bonds, 

OCEANE convertible bonds and syndicated loans) are described 

in section 4.10.2, while the basis for recognition is set out in 

note 1.13. 

The fair value of bonds is calculated on the basis of listed prices on 

active markets. For the debt component of the OCEANE convertible 

bonds and for the syndicated loans, fair value is estimated by 

< Contents > 

Fair 

value 

discounting future cash flows at the market interest rate applicable at 

year-end, using an issuer spread for the Group estimated at 0.596% 

for the OCEANE and at 0.87% for the syndicated loans. The fair value 

of other debt is equal to its carrying amount. 

1 

2 

3 

4 

5 

6

5.2.2. Fair value of derivatives 





ASSETS 

Hedging derivatives: 

▪ c ommodity derivatives 

1 7 22 

Trading derivatives: 

▪ c urrency derivatives 

3 2 1 

Other - 1 1 

Total other current financial assets 

LIABILITIES 

Hedging derivatives: 

4 10 24 

▪ i nterest rate derivatives 

(6) (9) (5) 

▪ c ommodity derivatives 

(13) (1) - 

Trading derivatives: 

▪ c urrency derivatives 

(2) (1) (3) 

Other - - (1) 

Total other current financial liabilities (21) (11) (9) 

The impact of financial instruments on income for the years ended December 31, 2007, 2006 and 2005 is set out in note 3.5. 

■ Fair value of f oreign currency derivatives 



< Contents > 

2007 2006 2005 

Nominal Fair value Nominal Fair value Nominal Fair value 

Forward foreign currency purchases 2 - 24 - 28 1 

Forward foreign currency sales (76) 2 (48) 1 (10) - 

Currency swaps (132) 1 (120) 1 (15) - 

Total assets (206) 3 (144) 2 3 1 

Forward foreign currency purchases 29 - 33 (1) 19 - 

Forward foreign currency sales (14) (1) (30) - (104) (2) 

Currency swaps (3) (1) (22) - (18) (1) 

Total liabilities 12 (2) (19) (1) (103) (3) 

Net impact 1 1 (2) 

The fair value of foreign currency hedges is computed using the following valuation method: future cash flows are calculated using forward 

exchange rates at year-end and are discounted using the interest rate of the functional currency. 


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■ Fair value of c ommodity (metals) derivatives 




2007 2006 2005 


Swaps – Purchases 2 - 81 7 125 22 

Swaps – Sales (8) 1 (2) - (2) - 

Total assets (6) 1 79 7 123 22 

Swaps – Purchases 146 (13) 36 (1) 1 - 

Swaps – Sales - - (3) - (2) - 

Total liabilities 146 (13) 33 (1) (1) - 

Net impact (12) 6 22 

The fair value of metals derivatives is computed using the following valuation method: future cash flows are calculated using forward commodity 

prices and forward exchange rates at year-end and are then discounted using the interest rate of the functional currency. 

■ Fair value of i nterest rate derivatives 



2007 2006 2005 


Interest rate swaps 225 (6) 227 (9) 732 (5) 

Total liabilities 225 (6) 227 (9) 732 (5) 

The fair value of interest rate swaps is computed by discounting future cash flows at market interest rates at year-end. 

5.3. Risk management policy 

In the context of its industrial and sales activity, the Group operates 

in an international environment in which it is confronted with market 

risks, specifically foreign currency risk, price risk and interest rate risk. 

It uses derivatives to manage and reduce its exposure to changes in 

foreign exchange rates, commodity prices and interest rates. 

In general, foreign currency risks, price risks in respect of base metals 

and interest rate risks for all Group companies are managed centrally 

by Valeo. 

In addition to market risks, the Group is also exposed to liquidity 

risk, financial instrument counterparty risk and credit risk in respect 

of its accounts and notes receivable. 

Each month, the Financial Control Department provides the Chairman 

with a report on exposure to financial risks managed by the parent 

company and an analysis of credit risk arising on accounts and notes 

receivable. This information establishes the greater part of the Group’s 

exposure to market, liquidity and counterparty risk to be identified. 

Recommendations based on the findings of the reports are then 

submitted to the Chairman by the Financial Affairs Department. 

5.3.1. Market risk 

■ Foreign currency risk 

< Contents > 

Exposure to foreign currency risk 

Group subsidiaries may be exposed to transaction risk in respect of 

purchases or sales transacted in currencies other than their functional 

currency, regardless of whether or not such transactions are already 

recognized in the balance sheet or are simply forecast future 

transactions. Hedges of subsidiaries’ current and future commercial 

transactions and investments are generally for durations of less than 

six months. 

Subsidiaries principally hedge their transactions with Valeo, which 

hedges net Group positions with external counterparties. 

The principal hedging instruments used by the Group are forward 

purchases and sales of foreign currencies, as well as swaps and 

options. No foreign currency derivative is recognized as a hedging 

instrument within the meaning of IAS 39. Exceptionally, the Group 

applies hedge accounting to highly probable future cash flows from 

the date the derivatives are contracted. 

1 

2 

3 

4 

5 

6



Based on notional amounts, most of the Group’s net exposure to foreign currency risk arises on the following currencies (excluding entities’ 

functional currencies): 



2007 2006 2005 

USD JPY Euro Total Total Total 

Accounts and notes receivable 72 18 350 440 526 130 

Other financial assets 162 50 102 314 198 59 

Accounts and notes payable (33) (14) (321) (368) (485) (53) 

Long-term debt (8) - (520) (528) (109) - 

Gross exposure recognized on the 

balance sheet at December 31 193 54 (389) (142) 130 136 

Forward sales 34 20 39 93 (276) (161) 

Forward purchases (215) (56) (22) (293) 83 29 

Net exposure at December 31 12 18 (372) (342) (63) 4 

At December 31, 2006, the breakdown by currency of the net exposure recognized in the balance sheet for (63) million euros is as follows: 

■ 

■ 

■ 

26 million euros relating to the US dollar; 

11 million euros relating to the Japanese yen; 

(100) million euros relating to the euro. 

Analysis of the sensitivity of net income to foreign currency risk 

The sensitivity analysis was based on an exchange rate of 1.47 US dollar and 164.93 Japanese yen to 1 euro at December 31, 2007 (1.32 and 

156.93, respectively, at December 31, 2006). 

At December 31, 2007, an appreciation of 10% in the euro against these currencies would reduce income by the amounts shown in the 

table below. A sensitivity analysis is also provided for 2006. For the purpose of the analysis, it is assumed that all other variables, including 

interest rates, remain unchanged. 


(In millions of euros) (losses) 

USD (3) 

JPY (2) 

TOTAL FOR 2007 (5) 

USD (3) 

JPY (1) 

TOTAL FOR 2006 (4) 

Assuming that all other variables remain unchanged, 10% depreciation of the euro against the US dollar and Japanese yen at December 31, 2007 

would increase income by the amounts shown in the table above. 

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4 

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Net investment risk 

The Group is also exposed to foreign currency risk through its 

investments in its foreign subsidiaries, particularly risks of movements 

in the exchange rate of the currency of the country in which a 

subsidiary is located against the euro, which is the Group’s functional 

currency. Such movements can impact Group stockholders’ equity. 

The Group can thus decide, on a case-by-case basis, to hedge the net 

investment. Any gain or loss resulting from such a hedge is deferred 

and recognized through stockholders’ equity until such time as all 

or part of the foreign investment is sold. 

No derivative instrument hedging a net investment in 

a foreign operation is recognized in the Group balance sheet 

at December 31, 2007. 

■ Metal price risk 

Exposure to metal price risk 

The Group is exposed to the risk of fluctuations in the price of 

non-ferrous metals when its purchase contracts with suppliers are 

indexed whereas the sale contracts entered into with customers 

do not provide for any such price escalation clauses. In most cases, 

the Group hedges its future purchases of base metals over a period 

which is generally less than six months. The commodities currently 

hedged (copper, zinc, aluminum, processed aluminum) are quoted 

on organized markets. 

The Group favors hedging instruments which do not involve physical 

delivery of the underlying commodity, such as swaps and options 

based on the average monthly price. 

The volume of non-ferrous metals hedged at December 31, 2007, 

2006 and 2005 was 63,000 tons, 53,000 tons, and 56,400 tons, 

respectively. 

Base metals derivatives used by the Group are designated as 

cash flow hedges under IAS 39. An unrealized loss of 12 million 

euros related to hedges in place at December 31, 2007 has been 

recognized through Group stockholders’ equity. 


The unrealized gain of 6 million euros recognized in stockholders’ 

equity at December 31, 2006 arose on hedges of commodity 

purchases in the second-half of 2006 and was fully taken to 

operating income during the first half of 2007. 

Analysis of the sensitivity of net equity to metal price risk 

A 10% increase in metal futures prices at December 31, 2007 would 

increase net equity by 9 million euros due to the recognition of 

derivatives as cash flow hedges. The same calculation for the year 

ending December 31, 2006 would also lead to a 9 million euro 

increase in net equity. 

A fall of 10% in metal futures prices would lead to a 9 million euro 

decrease in net equity. 

For the purposes of the sensitivity analysis, it is assumed that all 

other variables remain unchanged over the period. 

■ Interest rate risk 

At year-end, the Group’s net interest rate position based on nominal values can be analyzed as follows: 



Exposure to interest rate risk 

The Group uses interest rate swaps to convert rates on its debt 

into either a variable or a fixed rate, either as from origination or 

during the term of the loan. Cash and cash equivalents are mainly 

invested in variable-rate instruments. Long-term debt is essentially 

at fixed rates. 

The interest rate derivatives used by the Group to hedge against 

changes in value of its fixed-rate debt are designated as fair value 

hedges under IAS 39. These derivatives are recorded at fair value in 

the balance sheet, with changes in fair value taken to income. For 

the effective portion of the hedge, the impact on income is offset 

by a symmetrical revaluation of the hedged item. The interest rate 

derivatives used by the Group to hedge its variable-rate debt do not 

qualify as hedging instruments within the meaning of IAS 39. 

The Group’s financing rate was 4.6% in 2007 (4.7% in 2006 excluding 

non-strategic activities). 

Less than 1 year 1 to 5 years More than 5 years Total 

Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

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Fixed 

portion 

Variable 

portion 

Financial liabilities 27 262 698 3 614 1 1,339 266 1,605 


Net position before 

- (771) - (2) - - - (773) (773) 

hedging 27 (509) 698 1 614 1 1,339 (507) 832 

Derivative instruments - 225 (225) - - - (225) 225 - 

Net position after hedging 27 (284) 473 1 614 1 1,114 (282) 832 

Total 

1 

2 

3 

4 

5 

6



Analysis of sensitivity to interest rate risk 

At December 31, 2007, 83% of long-term debt is at a fixed rate 

(82% at December 31, 2006). 

Accordingly, fixed-rate debt carried at amortized cost is not included 

in the calculation of sensitivity to interest rate risk. The Group’s 

exposure to interest rate risk arises solely on its variable-rate debt. 

Taking into account the derivatives, the maximum impact on 

consolidated income before tax of a sudden 1% rise in shortterm 

interest rates applied to financial assets and liabilities 

at variable rates is a gain of 3 million euros (2006: gain of 1 

million euros). 

Similarly, a sudden 1% fall in short-term interest rates would 

have a negative 3 million euro impact on consolidated income 

before tax. 




Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

5.3.2. Liquidity risk 

Fixed 

portion 

Variable 

portion 

Financial liabilities 53 276 474 2 826 1 1,353 279 1,632 



- (618) - (16) - - - (634) (634) 

hedging 53 (342) 474 (14) 826 1 1,353 (355) 998 

Derivative instruments 2 223 - - (225) - (223) 223 - 

Net position after hedging 55 (119) 474 (14) 601 1 1,130 (132) 998 




Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

Fixed 

portion 

Variable 

portion 

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Fixed 

portion 

Variable 

portion 

Financial liabilities 529 159 50 4 1,290 1 1,869 164 2,033 



- (949) - (12) - - - (961) (961) 

hedging 529 (790) 50 (8) 1,290 1 1,869 (797) 1,072 

Derivative instruments (493) 722 - (4) (225) - (718) 718 - 

Net position after hedging 36 (68) 50 (12) 1,065 1 1,151 (79) 1,072 

The Group aims to maximize operating cash flows in order to be in a 

position to finance both the investments required for its development 

and growth and the dividend paid to its stockholders. 

The Group’s strategy also aims to ensure that it has the cash 

resources necessary to meet all circumstances. For these reasons, the 

Group borrows long-term funds either through banks or public debt 

markets. In 2003, Valeo issued 463 million euros worth of bonds 

convertible into shares (OCEANE) maturing in 2011, and in 2005, it 

issued a 600 million euros Medium Term Note maturing in 2013. It 

also took out two syndicated loans for a total amount of 225 million 

euros maturing in 2012. 

Valeo also has several confirmed bank credit lines available for 

an average period of two years in a total amount of 1.3 billion 

euros. None of these credit lines had been drawn down at 

December 31, 2007. 


Total 

Total 

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4 

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The Group also has a short-term commercial paper financing program 

of a maximum amount of 1.2 billion euros and a medium- and longterm 

Euro Medium Term Note financing program of a maximum 

amount of 2 billion euros. 

Covenants: existing credit lines have an early repayment clause 

related to the Group’s debt/equity ratio. This clause stipulates that 

the Group’s net debt should not exceed 120% of stockholders’ 

equity. Non-compliance with this ratio would cause the credit 

lines to be suspended and would lead to early repayment of 

Residual contractual maturity of non-derivative financial instruments can be analyzed as follows: 



Carrying 

amount 


Contractual 

cash flows 

prior drawdowns. At December 31, 2007, the Group’s ratio is 

45% (55% at December 31, 2006). 

The Euro Medium Term Note includes an option granted to the 

bondholders who can request early redemption of their bonds 

in the event of a change of control of Valeo which leads to a 

downgrade in the bond’s rating to below investment grade. Such 

a change of control is deemed to occur if a stockholder (or several 

stockholders acting together) acquires more than 50% of Valeo’s 

share capital or holds more than 50% of voting rights. 

Contractual cash flows 

Payment schedule 

Total < 6 months 6 to 12 months 1 to 2 years 2 to 5 years > 5 years 

Bond issues 1,054 1,264 11 22 67 542 622 

Syndicated loans 219 267 3 6 8 250 - 

Other long-term debt 

Accounts and notes 

39 39 - 6 8 9 16 

payable 1,836 1,836 1,836 - - - - 

Short-term debt 260 260 260 - - - - 

Residual contractual maturities of derivative financial instruments can be analyzed as follows: 



Forward currency contracts used as hedges: 

Carrying 

amount 

Contractual 

cash flows 

Contractual cash flows 

Payment schedule 

Total < 6 months 6 to 12 months 1 to 2 years 2 to 5 years 

▪ Assets 

2 2 2 - - - 

▪ Liabilities 

(1) (1) (1) - - - 

Currency swaps used as hedges: 

▪ Assets 

1 1 1 - - - 


(1) (1) (1) - - - 

Commodity derivatives: 

▪ Assets 

1 1 1 - - - 


(13) (13) (13) - - - 

Interest rate swaps: 

< Contents > 

▪ Assets 

- - - - - - 


(6) (8) (3) 1 (2) (4) 

1 

2 

3 

4 

5 

6



■ Credit risk 

Commercial credit risk 

Financial credit risk 

The Group is exposed to financial counterparty risk in the context of 

Valeo is exposed to credit risk arising on its commercial operations, 

particularly the risk of default by its customers. 

financial market transactions carried out for the purposes of risk and Valeo operates exclusively in the automotive sector and is thus 

treasury management. Limits have been set by counterparty, taking dependent on the sector’s performance. Valeo works with all 

into account the ratings of the counterparties provided by rating automakers in the sector. At December 31, 2007, Valeo’s largest 

agencies. This also has the effect of avoiding excessive concentration customer accounts for 18% of the Group’s accounts and notes 

of market transactions with a limited number of banks. 

receivable. Approximately 10% of receivables relate to the three 

largest US automakers. 

The table below presents an aged analysis of accounts and notes receivable: 






2006 


2005 

Not yet due 1,617 1,754 1,814 

Less than 1 month past due 67 60 72 

More than 1 month but less than 12 months past due 34 34 40 

More than 1 year past due 10 16 12 

TOTAL 1,728 1,864 1,938 

5.4. Commitments given 

To the best of Valeo’s knowledge, no other significant commitments exist or exceptional events have occurred other than those disclosed 

in the notes to the financial statements, that are likely to have a material impact on the business, financial position, results or assets and 

liabilities of the Group. 

5.4.1. Lease commitments 

Future minimum lease commitments existing at December 31, 2007 (excluding capital leases) are as follows: 



Less than 1 year 32 34 38 

1 to 5 years 29 33 31 

More than 5 years 10 9 10 

TOTAL 71 76 79 

Lease rentals recognized in expenses in the year were as follows: 

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Rent 56 53 56 


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Lease commitments in respect of capital leases are as follows: 



Future minimum lease payments 


1 to 5 years 5 7 10 


Total future minimum lease payments 9 17 28 

Of which interest charges 

Present value of future lease payments 

(1) (2) (3) 


1 to 5 years 5 6 9 


Total present value of future lease payments 9 16 25 

5.4.2. Other commitments given 

Valeo has also given the following commitments: 



Guarantees given 19 29 30 

Non-cancelable purchase commitments for fixed assets 108 72 57 

Other commitments given 124 101 66 

TOTAL 251 202 153 

Other commitments correspond to warranties granted by Valeo in the context of sale transactions. 

The following items recognized in assets in the Group’s balance sheet have been pledged as security: 



Property, plant and equipment 2 24 84 

Financial assets 12 12 12 

TOTAL 14 36 96 

5.4.3. Claims and litigation 

Known claims and litigation involving Valeo or its subsidiaries have 

been reviewed as of the issuance date of these financial statements. 

Based on the advice of counsel, all necessary provisions have been 

made to cover the estimated contingencies and potential losses. 


5.5. Commitments received 

< Contents > 

When Valeo purchased the Engine Electronics business of Johnson 

Controls Inc. on March 1, 2005, Johnson Controls granted a warranty 

concerning the division’s liabilities, including a four-year warranty in 

respect of quality and product liability claims related to the activities 

of this division. 

1 

2 

3 

4 

5 

6

5.6. Contingent liabilities 

The Group has contingent liabilities relating to legal proceedings 

arising in the normal course of its business. 

The Group does not expect these items to give rise to material 

liabilities other than those for which a provision has already been 

recognized in its financial statements. 

5.8. Related party transactions 

5.8.1. Management remuneration 



5.7. French statutory training entitlement 

Under the French law of May 4, 2004 relating to professional training, 

all French employees of the Group, regardless of qualifications, 

obtained a statutory training entitlement which can be accumulated 

and used at the employees’ initiative, subject to the employer’s 

agreement. As of 2004, each employee is entitled to at least 

20 hours’ training per year. 

The cumulative volume of training hours corresponding to Group 

employees’ vested rights under French statutory training entitlement 

was 1,008,800 hours at December 31, 2007, representing a usage 

rate of around 5%. 

Management is comprised of the members of the Group’s Management Committee. Remuneration paid during the year is broken 

down as follows: 


Salaries and other short-term benefits 13 12 12 

Contract termination payments - - - 

TOTAL 13 12 12 

The Group recognized 3 million euros related to stock subscription 

and stock options plans in 2007 (unchanged from 2006). It also 

recorded expenses in relation to pension obligations in an amount 

of 3 million euros (unchanged from 2006). At December 31, 2007, 

5.8.2. Transactions with associates 

< Contents > 

provisions included in the Group balance sheet in respect of these 

pension obligations amounted to 15 million euros (14 million euros 

as at December 31, 2006). 

The consolidated financial statements include transactions carried out in the normal course of business between the Group and its associates. 

These transactions are carried out at market prices. 


Sales of goods and services 22 17 13 

Purchases of goods and services (6) (7) (18) 

Interest and dividends received 2 3 4 


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2 

3 

4 

5 

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Operating receivables 3 4 4 

Operating payables 4 1 1 

5.8.3. Transactions with joint ventures 

The consolidated financial statements include transactions carried out in the normal course of business between the Group and its joint 

ventures. These transactions are carried out at market prices. 


Sales of goods and services 31 28 25 

Purchases of goods and services (9) (11) (9) 

Interest and dividends received 6 2 4 



Operating receivables 15 13 10 

Operating payables 6 5 4 

5.9. Joint ventures 

The following amounts are recorded in the Group’s consolidated financial statements in respect of proportionally consolidated joint 

ventures: 



Non-current assets 70 70 51 

Current assets 113 101 86 

Non-current liabilities 9 12 15 

Current liabilities 107 88 75 

Total operating revenues 285 251 334 

Total operating expenses 280 244 321 


< Contents > 

1 

2 

3 

4 

5 

6

6. Restatement of prior year financial information 

IFRS requires previously published comparative periods to be 

retrospectively restated in the event of: 

■ 

■ 

operations meeting the criteria set out in IFRS 5 on non-current 

assets held for sale and discontinued operations; 

business combinations (recognition of the definitive fair value of 

assets acquired and liabilities and contingent liabilities assumed 

if fair value had been estimated on a provisional basis at the 

previous balance sheet date); 

■ 

■ 



changes in accounting policies (subject to the transitional provisions 

applicable upon first-time adoption of new standards); and 

corrections of accounting errors. 

< Contents > 

In accordance with IFRS 5, the statements of income for the years 

ended December 31, 2006 and 2005 published in February 2007 

were restated to reflect the sale of the Wiring H arness activity (see 

note 2.1.1), in order to provide a meaningful comparison between 

the three periods presented. 


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7. List of consolidated companies 

Companies Countries % voting 

rights 

Valeo S.A. (parent company) France 


2007 2006 2005 

% interest % voting 

rights 


rights 

% interest 

EUROPE 

DAV France 100 100 100 100 100 100 

Equipement 11 France 100 100 100 100 100 100 

Equipement 7 (merged into Valeo Finance) France - - 100 100 100 100 

Valeo Câblage (4) France - - 100 100 100 100 

SC2N France 100 100 100 100 100 100 

Société de Participations Valeo France 100 100 100 100 100 100 

Telma France 100 100 100 100 100 100 

Valeo Bayen France 100 100 100 100 100 100 

Valeo Systèmes de Liaison (4) France - - 100 100 100 100 

Valeo Embrayages France 100 100 100 100 100 100 

Valeo Equipements Electriques Moteur France 100 100 100 100 100 100 

Valeo Etudes Electroniques France 100 100 - - - - 

Valeo Finance France 100 100 100 100 100 100 

Valeo Four Seasons (2) France 50 50 50 50 50 50 

Valeo Furukawa Wiring Systems (4) France - - 50 50 50 50 

Valeo Liaisons Electriques (4) France - - 100 100 100 100 

Valeo Management Services France 100 100 100 100 100 100 

Valeo Matériaux de Friction France 100 100 100 100 100 100 

Valeo Plastic Omnium S N C (2) France 50 50 50 50 50 50 

Valeo Sécurité Habitacle France 100 100 100 100 100 100 

Valeo Service 

Valeo Switches and Detection Systems 

France 100 100 100 100 100 100 

- VSDS France 100 100 100 100 100 100 

Valeo Systèmes de Contrôle Moteur France 100 100 100 100 100 100 

Valeo Systèmes d’Essuyage France 100 100 100 100 100 100 

Valeo Systèmes Thermiques France 100 100 100 100 100 100 

Valeo Thermique Habitacle France 100 100 100 100 100 100 

Valeo Ventures France 100 100 100 100 100 100 

Valeo Vision France 100 100 100 100 100 100 

Valeo Componentes Automó viles (3) Spain - - - - 100 100 

Valeo España, SA Spain 100 100 100 100 100 100 

Telma Retarder España, SA Spain 100 100 100 100 100 100 

Valeo Climatización, SA Spain 100 100 100 100 100 100 

Valeo Iluminación, SA Spain 99.8 99.8 99.8 99.8 99.8 99.8 

Valeo Materiales de Fricción, SA Spain 100 100 100 100 100 100 

Valeo Plastic Omnium SL (2) Spain 50 50 50 50 50 50 

Valeo Service España, SA Spain 100 100 100 100 100 100 

Valeo Sistemas de Conexión Eléctrica SL (4) Spain 100 100 100 100 100 100 

(1) Company accounted for by the equity method. 

(2) Company consolidated on a proportional basis. 

(3) Company sold in 2006. 

(4) Company sold in 2007. 

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1 

2 

3 

4 

5 

6


rights 



2007 2006 2005 


rights 


rights 

% interest 

Valeo Sistemas de Seguridad y de Cierre, SA Spain 100 100 100 100 100 100 

Valeo Sistemas Elé ctricos, SL Spain 100 100 100 100 100 100 

Valeo Té rmico, SA Spain 100 100 100 100 100 100 

Valeo Cableados SL Spain 100 100 - - - - 

Cablagens do Ave Portugal 100 100 100 100 100 100 

Valeo Viana (4) Portugal - - 100 100 100 100 

Cablauto, S.r.l. (4) Cavisud, S.r.l. (merged with Valeo Sistemi di 

Italy - - 100 100 100 100 

Climatizzazione, S.p.A .) Italy - - 100 100 100 100 

Valeo Service Italia, S.p.A . Italy 99.9 99.9 99.9 99.9 99.9 99.9 

Valeo, S.p.A. Italy 99.9 99.9 99.9 99.9 99.9 99.9 

Valeo Cablaggi e Commutazione, S.p.A. (4) Italy - - 100 100 100 100 

Valeo Sicurezza Abitacolo, S.p.A . Italy 100 100 100 99.9 100 99.9 

Valeo Sistemi di Climatizzazione, S.p.A . Italy 99.9 99.9 100 100 100 100 

Valeo Commutazione S.r.l. Italy 99.9 99.9 99.9 99.9 - - 

Valeo Auto-Electric GmbH Germany 100 100 100 100 100 100 

Valeo Auto-Electric Beteiligungs GmbH Germany 100 100 100 100 100 100 

Valeo Germany Holding GmbH Germany 100 100 100 100 100 100 

Valeo Holding Deutschland GmbH Germany 100 100 100 100 100 100 

Valeo Grundvermogen Verwaltung GmbH Germany 100 100 100 100 100 100 

Telma Retarder Deutschland GmbH Germany - - 100 100 100 100 

Sylea GmbH Germany 100 100 100 100 100 100 

Valeo Beleuchtung Deutschland GmbH Germany 100 100 100 100 100 100 

Valeo Klimasysteme GmbH Germany 100 100 100 100 100 100 

Valeo Klimasysteme Verwaltung SAS & Co. KG Germany 100 100 100 100 - - 

Valeo Motoren und Aktuatoren GmbH (3) Germany - - - - 100 100 

Valeo Schalter und Sensoren GmbH Germany 100 100 100 100 100 100 

Valeo Service Deutschland GmbH Germany 100 100 100 100 100 100 

Valeo Sicherheitssysteme GmbH Germany 100 100 100 100 100 100 

Valeo Verwaltungsbeteiligungs GmbH Co. KG Germany 100 100 100 100 100 100 

Valeo Wischersysteme GmbH Germany 100 100 100 100 100 100 

Valeo Compressor Europe GmbH Germany 

United 

100 100 100 100 100 100 

Valeo UK Limited 

Kingdom 

United 

100 100 100 100 100 100 

Labauto Ltd 

Kingdom 

United 

100 100 100 100 100 100 

Telma Retarder Ltd 

Kingdom 

United 

100 100 100 100 100 100 

Valeo Climate Control Ltd 

Kingdom 100 100 100 100 100 100 

Valeo Engine Cooling UK Ltd 

United 

(formerly Valeo Security Systems Ltd) 

Kingdom 100 100 100 100 100 100 





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rights 

Valeo Service UK Ltd 


2007 2006 2005 


rights 


rights 

% interest 

United 

Kingdom 100 100 100 100 100 100 

Connaught Electronics Limited (CEL) Ireland 100 100 - - - - 

HI-KEY Limited Ireland 100 100 - - - - 

C.E.L. (Sales) Limited Ireland 10 0 100 - - - - 

CEL Limited Ireland 10 0 100 - - - - 

Valeo Vision Belgique Belgium 100 100 100 100 100 100 

Valeo Service Belgique Belgium 100 100 100 100 100 100 

Coreval Luxembourg 100 100 100 100 100 100 

Valeo Holding Netherlands B V Netherlands 100 100 100 100 100 100 

Valeo International Holding B V Netherlands 100 100 100 100 100 100 

Valeo Service Benelux B V Netherlands 100 100 100 100 100 100 

Valeo Vymeniky Tepla S.r.o. 

Sylea Tchequia S.r.o. 

Valeo Autoklimatizace S.r.o. 

Valeo Compressor Europe S.r.o. 

Connaught Electronics CZ Spol S.r.o. 

Czech 

Republic 100 100 100 100 100 100 

Czech 

Republic 100 100 100 100 100 100 

Czech 

Republic 100 100 100 100 100 100 

Czech 

Republic 100 100 100 100 100 100 

Czech 

Republic 90 100 - - - - 

Valeo Slovakia S.r.o. Slovakia 100 100 100 100 100 100 

Valeo Engine Cooling A.B. Sweden 100 100 100 100 100 100 

Valeo Autosystemy Sp.zo.o. Poland 100 100 100 100 100 100 

Valeo Service Eastern Europe Sp.zo.o. Poland 100 100 100 100 100 100 

Valeo Electric and Electronic Systems Sp.zo.o. 

Valeo Auto Electric Hungary Spare Parts 

Poland 100 100 100 100 100 100 

Production LLC Hungary 100 100 100 100 100 100 

Valeo Kabli, d.o.o. Slovenia 100 100 100 100 100 100 

Valeo Cablaje S.r.l. (4) Romania - - 100 100 100 100 

Valeo Lighting Assembly S.r.l Romania 100 100 100 100 100 100 

Valeo Lighting Injection S.A Romania 51 51 - - - - 

Valeo Sisteme Termice S.r.l. Romania 100 100 - - - - 

Cablea Tunisie, SA (4) Tunisia - - 100 100 100 100 

DAV Tunisie, SA Tunisia 100 100 100 100 100 100 

Société Tunisienne de Câblages S.T.C. (4) Tunisia - - 100 100 100 100 

Valeo Mateur (4) Tunisia - - 100 100 100 100 

Valeo Embrayages Tunisie SA Tunisia 100 100 100 100 100 100 

Valeo Bouskoura (4) Morocco - - 100 100 100 100 

Valeo Aim Sebaa (4) Morocco - - 100 100 100 100 

Cablinal Maroc, SA Morocco 100 100 100 100 100 100 

Valeo Bouznika, SA (4) Morocco - - 100 100 100 100 

Nursan ED (4) Turkey - - 40 40 40 40 





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rights 



2007 2006 2005 


rights 


rights 

% interest 

Nursan OK (1) Turkey 40 40 40 40 40 40 

Valeo Otomotiv Dagitim A S Turkey 100 100 100 100 100 100 

Valeo Otomotiv Sistemleri Endustrisi A S Turkey 100 100 100 100 100 100 

Valeo Interbranch Automotive Software 

(Egypt) Egypt 100 100 100 100 - - 

Valeo Systems South Africa (Proprietary) Ltd 

NORTH AMERICA 

South Africa 

United 

51 51 51 51 51 51 

Valeo Aftermarket, Inc. 

States 

United 

100 100 100 100 100 100 

Valeo Electrical Systems, Inc. 

States 

United 

100 100 100 100 100 100 

Valeo Investment Holdings, Inc. 

States 100 100 100 100 100 100 

Valeo Raytheon Systems, Inc. (2) 

United 

States 

United 

77.8 77.8 77.2 77.2 73.1 73.1 

Valeo Compressor North America, Inc. 

States 

United 

100 100 100 100 100 100 

Telma Retarder Inc. 

States 

United 

100 100 100 100 100 100 

Valeo Acustar Thermal Systems, Inc. 

States 

United 

51 51 51 51 51 51 

Valeo Climate Control Corp. 

States 

United 

100 100 100 100 100 100 

Valeo Friction Materials, Inc. 

States 

United 

100 100 100 100 100 100 

Valeo, Inc. 

States 

United 

100 100 100 100 100 100 

Valeo Switches and Detection Systems, Inc. States 100 100 100 100 100 100 

Valeo Sylvania, LLC (2) 

United 

States 

United 

50 50 50 50 50 50 

Valeo Thermal Systems NA, Inc 

States 100 100 - - - - 

Delmex de Juarez S de RL de CV Mexico 100 100 100 100 100 100 

Telma Retarder de Mé xico, SA de CV 

Valeo Automotive Electrical Systems de 

Mexico 100 100 100 100 100 100 

Mé xico, SA de CV Mexico 100 100 100 100 100 100 

Valeo Sistemas Elé ctricos, SA de CV 

Valeo Sistemas Elé ctricos Servicios S de RL 

Mexico 100 100 100 100 100 100 

de CV Mexico 100 100 100 100 100 100 

Valeo Sistemas Elé ctricos, SA de CV Mexico 100 100 100 100 100 100 

Valeo Sylvania Iluminació n, S de RL de CV (2) Valeo Té rmico, SA de CV (merged in Valeo 

Mexico 50 50 50 50 50 50 

Sistemas Elé ctricos, SA de CV) Mexico - - 100 100 100 100 

Valeo Té rmico Servicios S de RL de CV Mexico 100 100 100 100 100 100 

Valeo Climate Control de Mé xico, SA de CV 

Valeo Climate Control de Mé xico Servicios 

Mexico 100 100 100 100 100 100 

S de RL de CV Mexico 100 100 100 100 100 100 





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rights 


2007 2006 2005 


rights 


rights 

% interest 

Valeo Materiales de Friccion de Mé xico, SA 

de CV Mexico 100 100 100 100 100 100 

Valeo Sylvania Services S de RL de CV (2) Mexico 50 50 50 50 50 50 

SOUTH AMERICA 

Valeo Sistemas Automotivos Ltda Brazil 100 100 100 100 100 100 

Cibie Argentina, SA Argentina 100 100 100 100 100 100 

Emelar Sociedad Anó nima Argentina 100 100 100 100 100 100 

Valeo Embragues Argentina, SA Argentina 100 100 100 100 100 100 

Valeo Té rmico Argentina, SA 

ASIA 

Argentina 100 100 100 100 100 100 

Valeo Compressor (Thailand) Co. Ltd Thailand 98.5 98.5 98.5 98.5 98.5 98.5 

Valeo Compressor Clutch (Thailand) Co. Ltd Thailand 97.3 97.3 97.3 97.3 97.3 97.3 

Valeo Siam Thermal Systems Co. Ltd 

Valeo Thermal Systems Sales (Thaïland) 

Thailand 74.9 74.9 74.9 74.9 74.9 74.9 

Co. Ltd Thailand 74.9 74.9 74.9 74.9 89.9 74.9 

Valeo Electrical Systems Korea Ltd South Korea 100 100 100 100 100 100 

Valeo Pyeong Hwa Co. Ltd (2) South Korea 50 50 50 50 50 50 

Valeo Pyeong Hwa Distribution Co. Ltd (2) South Korea 50 50 50 50 50 50 

Valeo Samsung Thermal Systems Co. Ltd (2) South Korea 50 50 50 50 - - 

Valeo Compressor Korea Co. Ltd South Korea 100 100 100 100 100 100 

Dae Myong Precision Corporation South Korea 100 100 100 100 100 100 

Valeo Thermal Systems Korea Co. Ltd South Korea 100 100 - - - - 

Konnou Sangyo Co. Ltd (3) Japan - - - - 100 100 

Zexel Logistics Compagny (Butsuryu) (3) Japan - - - - 100 100 

Zexel Logitec Company (3) Japan - - - - 100 100 

Ichikoh Industries Ltd (1) Japan 31.6 31.6 29.4 29.4 28.2 28.2 

Valeo Engine Cooling Japan Co. Ltd Japan 100 100 100 100 100 100 

Valeo Unisia Transmissions K K Japan 66 66 66 66 66 66 

Valeo Thermal Systems Japan Corporation 

Valeo Automotive Transmissions Systems 

Japan 100 100 100 100 100 100 

(Nanjing) Co. Ltd China 100 100 100 100 - - 

Hubei Valeo Autolighting Company Ltd 

Valeo Automotive Air Conditioning Hubei 

China 100 100 100 100 75 75 

Co. Ltd China 55 55 55 55 55 55 

Faw Valeo Climate Control System (1) China 36.5 36.5 36.5 36.5 36.5 36.5 

Huada Automotive Air Conditioner Co. Ltd (1) Valeo Lighting Hubei Technical center Co. 

China 30 30 30 30 30 30 

Ltd China 100 100 100 100 100 100 

Nanjing Valeo Clutch Co. Ltd (2) China 55 55 55 55 55 55 





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2 

3 

4 

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rights 



2007 2006 2005 


rights 


rights 

% interest 

Shanghai Valeo Automotive Electrical 

Systems Company Ltd (2) Valeo Shanghai Automotive Electric Motors 

China 50 50 50 50 50 50 

& Wiper Systems Co. Ltd 

Taizhou-Valeo Wenling Automotive Systems 

China 55 55 55 55 55 55 

Company Ltd 

Telma Vehicle Braking System (Shanghai) 

China 100 100 100 100 55 55 

Company Ltd 

Shenzhen Valeo Hangsheng Automotive 

China 70 70 70 70 70 70 

Switches & Detection Systems. Co. Ltd 

Valeo Automotive Security Systems (Wuxi) 

China 75 75 75 75 75 75 

Co. Ltd 

Valeo Fawer Compressor (Changchun) 

China 100 100 100 100 100 100 

Co. Ltd (2) China 60 60 60 60 60 60 

Guangzhou Valeo Engine Cooling Co. Ltd China 100 100 - - - - 

Valeo Auto Parts Trading (Shanghai) Co. Ltd China 100 100 - - - - 

Valeo Management (Beijing) Co. Ltd 

Foshan Ichikoh Valeo Auto Lighting 

China 100 100 100 100 - - 

Systems Co. (2) China 50 50 50 50 - - 

Valeo Engine Cooling (Shashi) Co. Ltd China 100 100 100 100 - - 

PT Valeo AC Indonesia (1) Indonesia 49 49 49 49 49 49 

Valeo Armco Engine Cooling Co. (2) Valeo Minda Electrical Systems India Private 

Iran 51 51 51 51 51 51 

Limited 

Minda Valeo Security Systems Private 

India 66.7 66.7 - - - - 

Limited (Company) (2) Valeo Engineering Center (India) Private 

India 50 50 - - - - 

Limited India 100 100 100 100 - - 

Amalgamations Valeo Clutch Private Ltd (2) India 50 50 50 50 50 50 

Valeo Friction Materials India Limited India 60 60 60 60 60 60 





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Statutory Auditors’ report on the consolidated fi nancial statements 

Statutory A uditors’ report on the consolidated financial 

statements 

Year ended December 31, 2007 

This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English 

speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether qualified 

or not. This information is presented below the opinion on the consolidated financial statements and includes an explanatory paragraph 

discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the 

purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance 

on individual account captions or on information taken outside of the consolidated financial statements. This report should be read in 

conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. 

Following our appointment as Statutory Auditors by your Annual General Meeting, we have audited the accompanying consolidated financial 

statements of Valeo for the year ended December 31, 2007. 

The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated 

financial statements based on our audit. 

1. Opinion on the consolidated fi nancial statements 

We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform 

the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of 

the financial statements. We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the 

consolidated group as at December 31, 2007 and of the results of its operations for the year then ended in accordance with IFRSs as adopted 

by the European Union. 

2. Justifi cation of our assessments 

In accordance with the requirements of article L.823-9 of the French Commercial Code (Code de commerce) relating to the justification of our 

assessments, we bring to your attention the following matters: 

■ 

■ 

the Company records provisions for pension and other employee benefit obligations in accordance with the policy described in note 1.17 to 

the consolidated financial statements. These obligations have generally been determined with the assistance of independent actuaries. We 

have reviewed the data and assumptions used and the calculations made. We have not identified any item that could affect the amounts 

and methods used to account for pension and other employee benefit obligations ; 

at each balance sheet date, the Company performs impairment tests on the amounts recorded as goodwill and also assesses whether 

there is any indication of impairment of fixed assets, in accordance with the methods described in notes 1.12 and 3.3.3 to the consolidated 

financial statements. We have reviewed the methods and assumptions used by the Company in preparing the accounts and have verified 

that such assumptions were reasonable. 


< Contents > 

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3 

4 

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Statutory Auditors’ report on the consolidated fi nancial statements 

These assessments were made in the context of our audit of the consolidated financial statements taken as a whole, and therefore contributed 

to the opinion which is expressed in the first part of this report. 

3. Specifi c verifi cation 

In accordance with professional standards applicable in France, we have also verified the information given in the Group’s management report. 

We have no matters to report as to its fair presentation and consistency with the consolidated financial statements. 

Paris La Défense et Neuilly-sur-Seine, February 12, 2008. 

The Statutory Auditors 

Salustro Reydel PricewaterhouseCoopers Audit 

Member of KPMG International 

< Contents > 

Jean-Pierre Crouzet Emmanuel Paret Serge Villepelet Jean-Christophe Georghiou 


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< Contents > 

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< Contents > 

4 Corporate Governance 

Report of the Chairman of the Board 

of Directors 146 


during the year 2007 157 


of the Chairman of the Board of Directors 160 


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4 Corporate 

PAGE 146 

Governance 

Report of the Chairman of the Board of Directors 


relating to the conditions of preparation and 

organization of the Board’s work, the possible 

limitations to the powers of the Chief Executive Officer 

and the internal control procedures put in place 

by the Valeo Group 

This report of the Chairman of the Board of Directors was presented 

to the Audit Committee. 

The Board of Directors was subsequently informed of the Audit 

Committee’s and the Statutory Auditors’ findings, and the final 


version of the Chairman’s report was presented to the Board 

on February 12, 2008, the issue date of the 2007 financial 

statements. 

1. Preparation and organization of the work of the Board of Directors 

On March 31, 2003, the Board of Directors adopted Internal Rules 

of Operation in line with the recommendations of the Bouton 

Report on corporate governance, aimed at precisely defining the 

operating procedures of the Board, in addition to legal and regulatory 

requirements and the provisions of the Company’s bylaws. These 

Internal Rules were amended on July 24, 2006 in order to authorize 

Directors to participate in Board meetings by videoconference, or 

by any other telecommunication means that enables them to be 

identified and ensures that they actually participate in the meeting. 

On December 14, 2006, the Internal Rules were further amended 

following the merger of the Nomination and Remuneration 

Committees, and the dissolution of the Strategy Committee (see 

“Committees created by the Board” below). The Internal Rules were 

not otherwise amended by the Board of Directors in 2007. 

The Internal Rules can be accessed on the Company’s website. 

< Contents > 

1.1. Rules specifi c to the functioning 

and organization of the Board and 

their application 

1.1.1. Composition of the Board of Directors 

The bylaws provide that the Board of Directors must have between 

3 and 18 members. At the beginning of 2007, the Board had 

11 members. Following the resignation of Véronique Morali 

and Yves-André Istel, the Board appointed Helle Kristoffersen on 

March 22, 2007 and Georges Pauget on April 10, 2007 as Directors 

to serve the unexpired terms of office of their predecessors, i.e., until 

the close of the General Shareholders’ Meeting of May 21, 2007. 

The Combined Annual and Extraordinary Shareholders’ Meeting of 

May 21, 2007 ratified the appointment of both Helle Kristoffersen and 

Georges Pauget, and renewed Helle Kristoffersen’s, Thierry Morin’s, 

Pierre-Alain De Smedt’s, Philippe Guédon’s, Georges Pauget’s and 

Erich Spitz’s terms of office until the close of the Annual Shareholders’ 

Meeting called to approve the 2010 financial statements and 

1 

2 

3 

4 

5 

6

appointed Gérard Blanc, Pascal Colombani and Lord Jay of Ewelme 

as new Directors for four-year terms, which expire at the close of the 

Annual Shareholders’ Meeting called to approve the 2010 financial 

statements, to fill the seats left vacant by François Grappotte, Jean- 

Bernard Lafonta and Alain Minc, whose terms of office expired on 

May 21, 2007. The Board of Directors therefore still has 11 members 

at the present date. 

Details concerning the composition of the Board of Directors are set 

out in the appendix to this report. 

In accordance with the independence criteria set out in the Board’s 

Internal Rules of Operation, the Board of Directors has reviewed 

whether or not its members can still be classified as independent. 

Under these R ules, an independent Director is one who does not 

have any relations whatsoever with the Company, the Group or the 

Group’s management that may compromise his or her ability to 

exercise freedom of judgment. 

In particular, independence is presumed to exist when a Director: 

■ is not an employee or a corporate officer of the Company, or an 

employee or a Director of one of its consolidated subsidiaries, and 

has not been in such a position for the previous five years; 

■ is not a corporate officer of a company in which the Company 

holds a directorship, either directly or indirectly, or in which an 

employee appointed in that role, or a corporate officer of the 

Company (currently in office or having held such office in the past 

five years), is a Director; 

■ is not a customer, supplier, investment banker or commercial 

banker that is material for the Company or Group, or for which the 

Company or Group represents a significant portion of the business 

of the Director concerned; 

■ is not related by close family ties to a corporate officer; 

■ has not been an auditor of the Company in the past five years; 

■ has not been a Director of the Company for more than twelve 

years on the date when he/she was appointed to his/her current 

term of office. 

For Directors holding at least 10% of the Company’s capital or voting 

rights, or representing a legal entity that holds such a stake, the 

classification as independent takes into account the Company’s 

ownership structure and any potential conflict of interests. 

In application of these criteria, the Board of Directors noted that: 

■ one Director holds the positions of Chairman and Chief Executive 

Officer of the Company, and therefore cannot be considered 

independent: Thierry Morin; 

■ one Director has been a member of the Board of Directors (and 

previously the Supervisory Board) for over twelve years, and 

therefore cannot be considered independent: Erich Spitz; 

■ 

Corporate Governance 


nine Directors are independent with respect to the criteria set forth 

in the Internal Rules and in accordance with the recommendations 

set out in the Bouton Report on corporate governance: Gérard 

Blanc, Daniel Camus, Pascal Colombani, Jérôme Contamine, 

Pierre-Alain De Smedt, Helle Kristoffersen, Lord Jay of Ewelme, 

Philippe Guédon, Georges Pauget. 

1.1.2. Average period of notice for 

calling Board meetings 

In accordance with the Internal Rules, each Director is notified of the 

dates of Board meetings at the beginning of each fiscal year at the 

latest. The average period of notice for calling Board of Directors’ 

meetings is approximately eight days. 

1.1.3. Representation of Directors 

A Director may be represented at meetings of the Board of Directors 

by another Director. The proxy must be given in writing. During 

the 2007 fiscal year, four Directors used the possibility of being 

represented at Board meetings. 

1.1.4. Chairman of Board meetings 

< Contents > 

The Board meetings are chaired by the Chairman of the Board or, 

in his/her absence, by a Vice-Chairman or a Director designated by 

the Board of Directors. All sixteen Board meetings held during the 

2007 fiscal year were chaired by the Chairman. 

1.1.5. Directors’ participation in Board meetings 

Following the General Shareholders’ Meeting held on May 17, 2006, 

article 16 of the Company’s bylaws and the Board’s Internal Rules 

of Operation were amended in order to authorize Directors to 

participate in Board meetings by any telecommunication technology 

that enables them to be identified and ensures that they actually 

participate in the meeting. Accordingly, Directors who take part in 

Board meetings through such means are deemed to be present 

for the purposes of calculating the quorum and majority, except at 

meetings dedicated to the preparation of the annual Company and 

consolidated financial statements and the related management 

reports (as provided for in articles L. 232-1 and L. 233-16 of the 

French Commercial Code). The Chairman is required to state in 

the relevant notice of meeting if these methods can be used 

for certain meetings. Directors wishing to participate in a Board 

meeting by these methods must contact the Board Secretary at 

least 2 (two) working days before the meeting date (except in an 

emergency situation) in order to ensure that the relevant technical 

information can be exchanged and tests performed before the 

meeting takes place. 


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PAGE 148 

Governance 


1.2. Directors’ access to information 

1.2.1. Directors’ access to information 

Each Director is given all the information required to perform his or 

her duties. The agenda for any upcoming Board meeting is provided 

within a sufficient timeframe, as well as the fullest possible set of 

relevant materials. 

1.2.2. Guests of the Board 

During the year, the Group Financial Controller attended all Board 

meetings except the one held on May 21, 2007 prior to the Annual 

General Shareholders’ Meeting and the one held on April 10, 2007, 

which were attended by the Vice-President, Financial Affairs and 

Strategic Operations. The Group General Counsel attended all Board 

meetings, acting as Board Secretary. The lawyers and bankers 

representing Valeo as well as the Vice-President, Financial Affairs and 

Strategic Operations, attended those Board meetings held to review 

the Group’s strategic options and the notices of interest received 

in the first half of 2007 from investors targeting the Company’s 

capital. 

1.3. Frequency of Board meetings and average 

attendance rates of the Directors 

In accordance with the Internal Rules of the Board, the Board of 

Directors meets at least four times a year. The Board of Directors 

met on sixteen occasions in 2007. 

The average attendance rate of the members of the Board of 

Directors (in person or via proxy) during 2007 was 93%. The average 

attendance rate of the members of the Board of Directors in person 

during 2007 was 89%. 

1.4. Role of the Board 

The principal role of the Board of Directors is to determine the business 

strategies of the Company and oversee their implementation. 

In 2007, the Board of Directors analyzed the 2006 financial 

statements of the Company and the Group, proposed payment of a 

dividend, assessed the performance of the Board, reviewed whether 

the Directors could still be classified as independent in accordance 

with the criteria set out in the Board’s Internal Rules, examined the 

management forecasts and budget for 2007, reviewed the Group’s 

strategic transactions (particularly disposals and acquisitions), its 

strategic options and the notices of interest received from investors 


targeting the Company’s capital, analyzed the Company’s ownership 

structure, granted stock options and consideration-free shares to the 

employees and corporate officers who had been the most directly 

involved in the Group’s development, reviewed the composition of 

the Board and the various Board Committees, appointed two new 

Directors, called a Combined Annual and Extraordinary Shareholders’ 

Meeting, decided to initiate a share buyback program, authorized 

the Chairman to issue sureties, endorsements and guarantees, 

heard the reports on the work carried out by the various Board 

Committees, renewed the Chairman’s term of office and approved 

the compensation paid to him, and authorized the Chairman to issue 

bonds (either under a renewed EMTN program or otherwise). 

1.5. Committees created by the Board 

In 2003, the Board created four committees to improve its functioning 

and provide effective assistance for preparing its decisions: the 

Strategy Committee, the Audit Committee, the Remuneration 

Committee and the Nomination Committee. 

At the Board meeting of December 14, 2006, the Nomination 

Committee was merged with the Remuneration Committee and the 

Strategy Committee was dissolved. The Board therefore currently has 

two standing committees – the Audit Committee and the Nomination 

and Remuneration Committee. 

The work of the Audit Committee and the Nomination and 

Remuneration Committee in 2007 was presented to the Board 

of Directors throughout the year in the form of reports and is 

summarized below. 

1.5.1. Audit Committee 

< Contents > 

The Audit Committee has three members including a Chairman, 

appointed by the Board of Directors. All members of the Audit 

Committee are independent Directors as defined by the criteria in 

the Internal Rules. 

The members of the Audit Committee are Pierre-Alain De Smedt, 

Daniel Camus and Gérard Blanc (since June 13, 2007). The Audit 

Committee is chaired by Pierre-Alain De Smedt. The Chairman and 

Chief Executive Officer is not a member of the Committee but may 

attend its meetings as a guest. 

The Committee’s roles and responsibilities are: 

■ to ensure the relevance and due application of the accounting and 

financial methods adopted to prepare the consolidated financial 

statements, as well as the appropriate accounting treatment of 

transactions at both P roduct-F amily and Group level; 

1 

2 

3 

4 

5 

6

■ 

to check that internal procedures are defined for compiling and 

controlling financial and accounting information in order to ensure 

its reliability and guarantee rapid reporting, to review the Group’s 

internal audit plan and management’s related comments, and to 

keep informed of the Group’s internal and external audits and 

management’s related comments; 

■ to express an opinion on the choice of Statutory Auditors or the 

renewal of their terms of office; 

■ to review any financial or accounting matter referred to it by 

the Chairman of the Board of Directors as well as any conflict of 

interest issue of which it is aware. 

The Audit Committee met four times in 2007 with a 79% 

attendance rate. During these meetings, the Committee reviewed 

the consolidated financial statements for the year ended 

December 31, 2006 and the interim financial statements for first-half 

2007. In connection with the updated EMTN program, the Committee 

reviewed the first-quarter 2007 accounts and the Statutory Auditors’ 

opinion as to the fairness of the presentation of those accounts. 

The Committee was informed that the new IFRS 8 standard would 

become effective as from the beginning of 2009, deemed the 

internal controls self-assessment system to be satisfactory, and 

noted the application of internal control procedures in line with 

those defined by the COSO (Committee of Sponsoring Organizations 

of the Treadway Commission) in the United States. The members of 

the Audit Committee also reviewed the methodology used for risk 

mapping and the internal audit work schedule for 2008. 

The Audit Committee’s work was conducted in line with its objectives. 

The Statutory Auditors, the Group Financial Controller and the Group 

Accounting Director attended all the meetings (with the exception 

of the Group Accounting Director who did not attend the meeting 

of November 12, 2007 held to review the work of the Internal Audit 

Department in 2007). The Committee was also assisted by the work 

carried out by the Internal Audit Department. The presentations 

made by the Statutory Auditors mainly related to the findings of their 

audit of the annual financial statements of the Company and the 

Group and their limited review of the interim financial statements. 

The Audit Committee did not have any reservations concerning 

the annual consolidated and Company financial statements or the 

interim financial statements presented to it. 

1.5.2. Nomination and Remuneration Committee 

The Nomination and Remuneration Committee has three members 

including a Chairman, appointed by the Board of Directors. 



< Contents > 

The majority of the Committee’s members are independent Directors 

as defined by the criteria in the Internal Rules. The Chairman and 

Chief Executive Officer also takes part in the work of the Committee, 

except when it convenes to discuss the compensation to be paid to 

him or renewal of his term of office. 

The members of the Nomination and Remuneration Committee 

are Jérôme Contamine, Georges Pauget and Philippe Guédon (since 

June 13, 2007). The Committee is chaired by Jérôme Contamine. 

According to the Internal Rules, the roles and responsibilities of the 

Nomination and Remuneration Committee include the following: 

■ concerning compensation: 

− studying and making recommendations concerning the 

compensation paid to corporate officers (particularly in relation 

to the variable portion of their compensation), 

− recommending to the Board an aggregate amount of attendance 

fees payable to Directors and the individual amounts payable to 

each Director, 

− providing recommendations to the Board of Directors on the 

Group’s general stock option policy and specific stock option 

grants; 

■ concerning selections and nominations: 

− preparing the composition of the Company’s management bodies 

by making recommendations for the appointment of corporate 

officers and Directors, 

− reviewing the status of each Director in relation to the 

independence criteria set out in paragraph 1.2 (b) of the Board’s 

Internal Rules. 

The Nomination and Remuneration Committee met four times 

in 2007 with a 79% attendance rate. During its meetings, the 

Committee drew up proposals relating to the compensation to be 

paid to the Chairman and Chief Executive Officer and recommended 

to the Board that Thierry Morin should be granted 350,000 stock 

options (see “Compensation paid to the Chairman and Chief 

Executive Officer”). These recommendations were approved by the 

Board of Directors on March 7, 2007 and November 15, 2007. During 

its meeting of March 7, 2007, the Board also approved the proposal 

by the Nomination and Remuneration Committee to grant a total of 

100,000 consideration-free shares to high potential junior managers, 

and at its meeting of November 15, 2007, the Board likewise 

approved the Committee’s proposal to grant a total of 1,527,000 

stock options to the employees and corporate officers who had been 

the most directly involved in the Group’s development. 


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1.6. Evaluation of the Board of Directors 

In accordance with the Internal Rules, the Board carries out a selfassessment 

to review its modus operandi and to ensure that its 

meetings are properly organized. 

At the Board meeting of November 15, 2007, the Nomination and 

Remuneration Committee recommended that the assessment of 

the Board of Directors’ work in 2007 should be performed with the 

assistance of an external firm. 

A detailed questionnaire was sent to all Directors concerning their 

assessment of the way in which the Board operates and suggestions 

for improvement. The topics covered included the operation and 

composition of the Board, Directors’ access to information, the choice 

of issues discussed, as well as the quality of the discussions and the 

general functioning of the Board Committees. 

The Directors’ replies were analyzed and the findings presented at 

the Board meeting held on February 12, 2008. The Directors indicated 

that they saw steady improvement in the way the Board operates, 

exemplified by a strategy seminar and a general review of the 

Group’s businesses. They put forward a number of recommendations 

on how to achieve further improvement. 

1.7. Shareholdings and securities transactions 

Each Director must hold at least 100 Valeo shares during his or her 

entire term of office. 

On accepting their position, members of the Board of Directors 

and the Executive Management of the Group agreed to a Code of 

Conduct in relation to trading in the Company’s securities. Under the 

terms of the Code, Directors must declare to the Group’s General 

Counsel any transactions that they have entered into involving 

the Company’s securities, within a maximum of five trading days 

following the transaction. In accordance with applicable regulations, 

this information must then be disclosed to the French securities 

regulator (Autorité des marchés financiers – AMF) and subsequently 

made public in accordance with the provisions of the AMF’s General 

Regulations. 

1.8. Agreements governed by Article L. 225-38 

of the French Commercial Code 

The following agreements entered into in previous years remained 

in force during 2007: 

■ 

the agreements authorized by the Board of Directors at its meeting 

of October 18, 2004 and entered into between the Company and 

its Spanish subsidiaries as part of the implementation of the 2004 

Valeorizon international employee stock ownership plan; 


< Contents > 

■ the agreements authorized by the Board of Directors at its 

meeting of December 15, 2005 and entered into between the 

Company and the Group’s operating subsidiaries in connection 

with trademark royalties agreements. 

The Board of Directors authorized two further agreements during 

2007: 

■ the signing of a mandate with the bank Calyon following the 

Board’s analysis of the notices of interest received from several 

investment funds during the first half of 2007. Considering that 

this bank is a Crédit Agricole subsidiary, the proposed mandate 

was submitted for approval at the Board meeting of April 24, 2007 

and the agreement was unanimously approved by the Board 

members, with Georges Pauget abstaining; 

■ the compensation and benefits owed or likely to be owed to 

Thierry Morin as a result of his leaving his position as Chairman 

and Chief Executive Officer or subsequent thereto, which represent 

a renewal of the compensation and benefits authorized by 

the Board of Directors at its meeting of March 21, 2001, were 

authorized by the Board at its meeting of May 21, 2007, which 

renewed Thierry Morin’s term of office as Chairman and Chief 

Executive Officer, and were unanimously approved; Thierry Morin 

did not take part in the vote. The terms and conditions applicable 

to the payment of termination benefits to Thierry Morin were 

approved by the Board of Directors as a related party agreement 

on March 20, 2008. At that meeting, the Board also brought 

the compensation and benefits payable to Thierry Morin and 

contingent on certain criteria into compliance with the provisions 

of French Act 2007-1223 of August 21, 2007 (see Chapter 5, 

page 176 ). For more details on the above information, see 

chapter 6, “General information about the issuer”, section 3.1.1. 

A special report by the Statutory Auditors will be devoted to these 

agreements. 

1.9. Authorization granted regarding sureties, 

endorsements and guarantees governed 

by Article L. 225-35 of the French 

Commercial Code 

During the year, the Board of Directors authorized the Chairman, who 

is entitled to delegate this authority, to issue sureties, endorsements 

and guarantees in the Company’s name up to a maximum amount of 

23 million euros, and to maintain in effect the sureties, endorsements 

and guarantees previously issued. 

This authorization was granted by the Board of Directors for a 

12-month period as from February 12, 2007. No new commitments 

were given by the Chairman under this authorization during 

the year. 

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1.10. General Management of the Company 

and limitations on the powers of the 

Chief Executive Offi cer 

The Company’s Board of Directors has chosen to combine the positions 

of Chairman of the Board of Directors and Chief Executive Officer. This 

choice was reaffirmed during the year when Thierry Morin’s term of 

office as Chairman and Chief Executive Officer was renewed. 

The Board of Directors has not imposed any specific limits on the 

powers of the Chief Executive Officer. The Chairman and Chief 

Executive Officer therefore has the widest possible powers to act in 

any circumstances in the Company’s name. He exercises his powers 

within the scope of the Company’s corporate purpose and subject to 

the powers that the law specifically grants to Shareholders’ Meetings 

or the Board of Directors. The Chairman and Chief Executive Officer 

represents the Company in its relations with third parties. 

1.11. Compensation paid to the Directors 

Since 2006, attendance fees have been allocated among the 

Directors on the following basis: 

■ 20,000 euros to each Director; 

■ an additional 15,000 euros for each Director who is a member of 

one or more Board Committees; 

■ Directors receive the aggregate amount of attendance fees 

provided that their average attendance rate at Board meetings 

or, where applicable, at Committee meetings has been equal to or 

greater than 50% during the preceding half-year. Directors whose 

attendance rate has been lower than 50% during the preceding 

half-year receive no attendance fees. 

In accordance with these rules, the Directors were paid the following 

attendance fees in 2007: 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

■ 

Gérard Blanc 20,000 euros; 

Daniel Camus 35,000 euros; 

Pascal Colombani 12,500 euros; 

Jérôme Contamine 27,500 euros; 

Pierre-Alain De Smedt 35,000 euros; 

François Grappotte 17,500 euros; 

Philippe Guédon 35,000 euros; 

Yves-André Istel (Company Director until April 10, 2007): 0 euro; 

Lord Jay of Ewelme 12,500 euros; 

Helle Kristoffersen 20,000 euros; 

Jean-Bernard Lafonta 10,000 euros; 

Alain Minc 17,500 euros; 

Véronique Morali (Company Director until March 22, 2007): 

0 euro; 



■ Thierry Morin 20,000 euros; 

■ Georges Pauget 27,500 euros; 

■ Erich Spitz 20,000 euros. 

Apart from Thierry Morin, no other compensation or benefits were 

paid to members of the Board of Directors during the year. Other 

than Thierry Morin, no Directors hold stock options or were awarded 

shares free of compensation during the year. 

1.12. Compensation paid to the Chairman and 

Chief Executive Offi cer 

1.12.1. Compensation paid during 2007 

< Contents > 

Acting on the recommendation of the Nomination and Remuneration 

Committee, at its meeting of March 7, 2007, the Board of Directors 

approved the principles for calculating the compensation and benefits 

of any nature granted to the Chairman and Chief Executive Officer. At 

its meeting of May 21, 2007 at which Thierry Morin’s term of office 

as Chairman and Chief Executive Officer was renewed, the Board 

also unanimously voted (with Thierry Morin abstaining) to maintain 

his compensation both as Chairman of the Board of Directors and 

as Chief Executive Officer. 

Fixed compensation 

The total gross fixed compensation paid to Thierry Morin for 2007 was 

set at 1,577,590 euros (including travel expenses) and 19,543 euros 

in benefits-in-kind. 

Exceptional bonus 

Thierry Morin did not receive any exceptional compensation in 2007 

for 2006. 

At its meeting of March 7, 2007, the Board of Directors decided, as 

recommended by the Nomination and Remuneration Committee, 

that any exceptional bonus to be awarded to the Chairman and Chief 

Executive Officer for 2007 would be exclusively contingent on the 

level of gross margin and operating margin achieved by the Group, 

and would be subject to a ceiling set by the Board on the basis of the 

Nomination and Remuneration Committee’s recommendation. 

Attendance fees 

In 2007, Thierry Morin received 20,000 euros in attendance fees in 

his capacity as a Director of Valeo. 

Compensation paid by companies controlled by Valeo 

In 2007, Thierry Morin received total gross compensation of 

45,750 euros in attendance fees from companies controlled by Valeo 

(as defined in article L. 233-16 of the French Commercial Code). 


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Stock options and shares awarded free of consideration 

(share awards) 

During 2007, the Board of Directors granted stock options to 

Thierry Morin. 200,000 stock options were granted at the Board 

meeting of March 7, 2007 and 150,000 at the Board meeting of 

November 15, 2007, in accordance with the following terms and 

conditions: 

■ at its March 7, 2007 meeting, the Board set the purchase price 

of the shares to be issued on exercise of the 200,000 options at 

36.97 euros. Half of the options granted may be exercised as from 

March 7, 2009 and all of the options may be exercised as from 

March 7, 2010. The shares obtained on exercise of the options 

may not be sold before March 7, 2011. If the options are not 

exercised, they will be forfeited on March 6, 2015. If Thierry Morin 

does exercise the stock options granted to him, he will be required 


issued on exercise of said options until such time as he leaves 

his position. The calculation of this 75% holding will be made 

after the sale of the number of shares necessary to finance the 

exercise of the options and pay the related taxes and transaction 

costs. In addition, Thierry Morin must still hold an employment 

contract or a corporate officer’s position within the Valeo Group at 

the date on which the options are exercised, in accordance with 

the provisions of the stock option plan; 

■ at its November 15, 2007 meeting, the Board set the purchase price 

of the shares to be issued on exercise of the 150,000 options at 

36.82 euros. Half of the options granted may be exercised as from 

November 15, 2010. With respect to the remainder, the number 

of options that may be exercised will depend on the operating 

margin achieved in 2008 and will increase or decrease on a linear 

basis in proportion to the operating margin achieved within a 

range set by the Board. The shares obtained on exercise of the 

options may not be sold before November 15, 2011. If the options 

are not exercised, they will be forfeited on November 14, 2015. 

If Thierry Morin does exercise the stock options granted to him, 

he will be required to hold, in registered form, at least 50% of 

the number of shares issued on exercise of said options until such 

time as he leaves his position. The calculation of this 50% holding 

will be made after the sale of the number of shares necessary 

to finance the exercise of the options and pay the related taxes 

and transaction costs. In addition, Thierry Morin must still hold 

an employment contract or a corporate officer’s position within 

the Valeo Group at the date on which the options are exercised, 

in accordance with the provisions of the stock option plan. 

In 2007, Thierry Morin did not exercise any options granted 

in previous years. 


1.12.2. Pension scheme 

Thierry Morin is still a member of the supplementary pension 

scheme set up for members of the former Management Board, as 

approved by the Supervisory Board on October 17, 2002. This system 

is designed to top up existing pensions benefits (statutory pension, 

ARRCO, AGIRC, etc.) to enable beneficiaries to acquire benefits 

representing 2% of their final salary per year of service with the 

Group. The total amount of pension benefits may not exceed 60% of 

a beneficiary’s final salary. The scheme only applies to beneficiaries 

who have a minimum of 15 years’ service in the Valeo Group when 

they retire and for whom Valeo or one of its subsidiaries was their 

last employer at their retirement date. 

Thierry Morin has also benefited from a pension plan held with 

Valeo (UK) Limited since his nomination as Chairman, and which 

will be paid when he leaves his post as corporate officer. This 

supplementary pension provides an additional annual pension 

entitlement set at 60,980 euros when he took up his corporate 

office in March 2001, and which is linked to the annual benchmark 

salary index of the mechanical and electrical industries. The expense 

recorded by Valeo (UK) Limited in respect of this pension plan for 

2007 amounted to 76,364 euros. Compensation and benefits 

payable to Thierry Morin on termination of his corporate duties and 

contingent on certain criteria have been brought into compliance 

with the provisions of French Act 2007-1223 of August 21, 2007 

(see Chapter 5, page 176 ). 

1.12.3. Termination benefits 

< Contents > 

In the event that Thierry Morin leaves the Company, either at his 

own initiative following a difference of opinion concerning the 

strategy implemented by the Board further to a public tender offer, 

or by way of a decision of the Board of Directors, the amount of 

his termination benefits will represent three times his last annual 

compensation, excluding bonuses. Such termination benefits will 

not be payable in the event of gross misconduct (faute grave). 

At its May 21, 2007 meeting, the Board renewed its approval of 

these termination benefits under a regulated agreement . The terms 

and conditions applicable to the payment of the termination benefits 

were amended by the Board of Directors on March 20, 2008 (see 

Chapter 5, “General information about the issuer”, section 3.1.1.). 

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2. Internal control procedures 

2.1. Defi nition and aims of internal control 

procedures 

Internal control as defined by the Valeo Group is the process 

implemented by Management and employees to provide reasonable 

assurance regarding the achievement of objectives in the following 

categories: 

■ reliability of financial and management data; 

■ compliance with laws and regulations; 

■ safeguarding of assets; 

■ effectiveness and efficiency of operations. 

Valeo has adopted a definition of internal control in line with that 

provided by the COSO (Committee of Sponsoring of the Treadway 

Commision), the findings of which were published in 1992 in the 

United States. 

As with any control system, Valeo’s internal control procedures can 

only provide reasonable assurance – and not an absolute guarantee 

– that the Group’s objectives will be achieved and that risks will be 

avoided. The purpose of the system put in place by Valeo is to reduce 

the probability of risks occurring and their potential impact. 

The Valeo Group has become acquainted with the Reference 

Framework established by the Autorité des marchés financiers in 

its report dated January 22, 2007 (supplemented by an Application 

Guide). The Group has judged its own internal control procedures 

against the general principles of internal control and the Application 

Guide set forth in the Reference Framework. To reflect the findings of 

this benchmarking study, Valeo has adapted its approach and above 

all the outlook presented in section 2.6 of this report. 

2.2. Scope of internal control 

Valeo’s internal control procedures are applied to the entire 

Valeo Group, defined as Valeo SA and all of its fully consolidated 

subsidiaries. 

2.3. The components of Valeo’s internal control 

procedures 

Valeo’s internal control procedures are based on the following five 

interrelated components defined in the COSO framework. 



< Contents > 

Control Environment 

The control environment sets the tone of an organization, influencing 

the level of awareness of its people to the need for controls. Valeo’s 

decentralized structure enables it to respond swiftly and locally to 

customer needs, which in turn enables the Group to expand in 

its markets. Against this backdrop, the Group has set up operating 

principles and rules that are applied in all of its companies through 

appropriate delegation of responsibility. 

A Code of Ethics forms the basis of detailed procedures which must 

be applied by all of the Group’s companies. The Code places major 

emphasis on upholding fundamental rights with respect to child labor, 

employment of the disabled, discrimination and harassment, and 

health and safety at work. It also highlights the Group’s commitment 

to sustainable development. F inally, the Code of Ethics deals with 

societal issues and business conduct. Available on the Intranet and 

translated into 19 languages, the Code has been sent out to all of the 

Group’s managers. It was updated in 2004 to include new processes 

relating to human resources management. 

Risk Assessment 

Risk assessment is the ongoing identification and analysis of risks 

that may impact the objectives set by the Group, forming a basis 

for determining how the risks should be managed. By identifying 

possible risk factors, the Group can more accurately define what 

control activities are appropriate. 

The Group’s main risks are described in the section “Risks and 

uncertainties” of the Management Report. 

Control Activities 

Control activities are the policies and procedures that help ensure 

Management directives are carried out. They occur throughout the 

organization, at all levels and in all functions. In this context, the 

Group’s Administrative and Financial Manual serves as the benchmark 

for Valeo’s financial and management operations. The Manual is used 

on a daily basis by all operational staff and comprises two parts: 

■ part one concerns the rules governing management and internal 

control; 

■ part two defines how the main items of the balance sheet and 

statement of income should be measured and presented. 

Every year, the Director and Financial Controller of each Product 

Family and each Division sign a letter of representation in which they 

undertake to ensure compliance with the financial, internal control 

and management rules contained in the Manual. 


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Specific rules and procedures have also been put in place by the 

Group’s various corporate divisions, in line with the Administrative 

and Financial ManuaL. These include: 

■ the Constant Innovation Charter, which provides a strict definition of 

the management principles applicable to development projects; 

■ marketing procedures and sales practices; 

■ human resources procedures; 

■ purchasing procedures, aimed at reducing the number of listed 

suppliers in order to facilitate quality control; 

■ the Risk Management Manual and implementation guides in 

relation to security, safety and the environment, together with 

the Insurance ManuaL. Valeo has undertaken to comply with local 

regulations concerning safety and the environment at a minimum 

and, in certain cases, to comply with even higher standards; 

■ legal procedures that set down the principles with which the Group 

must comply. These mainly concern the laws and regulations 

applicable in the countries where the Group operates as well 

as respecting contractual obligations and protecting the Group’s 

intellectual property. 

The information on these rules and procedures is accessible on the 

Group’s Intranet by the staff concerned. 

In terms of quality, Valeo has set its own benchmarks – Valeo 1000 

and Valeo 5000. In addition, the QRQC (Quick Response Quality 

Control) method ensures the prompt implementation of corrective 

action, and the Lesson Learned Card (LLC) process enables the Group 

to monitor best practices and explore avenues for improvement. 

Since September 2000, the Group has been organizing Valeo Finance 

Academy seminars with the aim of developing internal control and 

financial management skills. By combining modules (on accounting, 

cash flow, management control and internal control) with case 

studies and simulations, these yearly training sessions help the 

Group’s younger financial managers to get better acquainted with 

the methods and tools used in financial control. 

Information and Communication 

Pertinent information must be identified, captured and communicated 

in a form and timeframe that enable all of the Group’s people to 

carry out their responsibilities and perform the controls required 

of them. 

Group Financial Control is responsible for preparing the financial 

statements of the Company and the Group, and reports to the 

Chairman and Product Family Directors on this process. The budget 


< Contents > 

and monthly reporting procedure is a critical tool for Valeo in 

managing its operations. Any variances can be identified, analyzed 

and dealt with during the year, thereby increasing the reliability of the 

interim and annual accounts closing process. The same information 

system is used for the consolidation and reporting processes, thus 

ensuring that the Group has constant control over the preparation 

and processing of financial information. The Group has put in place 

an integrated software application, which is being rolled out to all 

of its operating units. As well as providing a structured framework, 

this software application enables user profiles to be defined and 

access controls to be monitored, enabling the Group to comply with 

regulations concerning the segregation of tasks. 

Finally, an annual Medium-Term Plan examines the Group’s 

competitive position, possible levers for driving growth and 

profitability, and the action plans to be implemented to meet the 

Group’s three-year performance objectives and forecasts (in terms of 

income statement, balance sheet and operating cash flows). 

Monitoring internal control procedures 

The Group’s General Management team oversees the internal control 

system and delegates responsibility to the Financial Control, and Risk 

Insurance Environment Departments as well as to the individual 

Product Families for the management of issues within their remit. 

The internal control system is audited by the Valeo Internal Audit 

Department, whose task is to carry out assignments within the Group 

to ensure that the procedures set up function properly. Based on 

observations made during these assignments, recommendations are 

put forward to the audited operating units, which are subsequently 

required to implement appropriate action plans. The Internal Audit 

team is also called upon at regular intervals to carry out audits 

of performance indicators at various manufacturing sites and 

Divisions, and to coordinate the updates to the Group’s financial and 

management procedures. The Internal Audit Department’s work and 

findings are presented each year to the Audit Committee. 

The application of Valeo’s quality standards is regularly checked via 

VAQ (Valeo Audit Qualité) audits, and the environmental and safety 

aspects are overseen by the Risk Insurance Environment Department. 

Valeo has launched a certification program for its manufacturing sites 

in accordance with the ISO 14001 standard relating to environmental 

management and the OHSAS 18001 standard concerning 

occupational health and safety. At December 31, 2007, these two 

standards had been awarded to 117 and 93 sites respectively, out 

of a total of 125 sites. 

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2.4. Review of work carried out in previous 

years 

Valeo carried out the following tasks at Group level in previous 

years: 

■ an analysis of the existing internal control procedures in light of the 

five main components defined in the COSO Framework (control 

environment, risk assessment, control activities, information and 

communication, and monitoring); 

■ the mapping of major risks and processes based on interviews 

with the Group’s main operational and administrative managers; 

risk mapping is now updated each year; 

■ the identification of material accounts and their interaction 

with the processes, as well as an inventory of existing internal 

control procedures relating to the preparation of the financial 

statements. 

The Group has put in place a specific project designed to improve 

internal control in relation to the reliability of financial information. 

As a result, Valeo now has reliable information for monitoring, 

measuring and assessing the relevance and correct implementation 

of existing internal control procedures in relation to the reliability of 

financial information from all of its operating units. 

In order to achieve this, 131 key control points have been identified 

in relation to the 7 processes set out below: 

■ sales, receivables management and payments received; 

■ procurement, payables management and payments made; 

■ monitoring of assets; 

■ monitoring of inventory; 

■ payroll; 

■ cash flow; 

■ accounts closing policies. 

Rules relating to documentation and testing – particularly regarding 

the size of the sample used – have been defined to ensure uniformity 

between the sites. The process was initially implemented at a 

number of pilot sites in order to enable the approach to be validated, 

forecasts of required resources to be finetuned, and documentation 

and testing for all the sites to be standardized. The approach was 

then rolled out to the Group’s other operating units. A specific 

database of best internal control practices has been posted on the 

Group’s Intranet. In addition, Valeo leverages a tool for reporting 

the findings of its internal control self-assessment procedures to 

centralize documentation relating to the controls and tests performed 

in connection with the French Financial Security Act (LSF project). 

This tool, which is overseen by the Internal Audit team, is also used 

by the Group’s financial controllers to monitor in real time the action 

plans implemented to enhance the internal control system. 



In parallel, Valeo has set up a procedure aimed at reviewing the 

user profiles and access controls for the integrated business software 

package deployed at all of the Group’s main sites. The underlying 

aim of this process is to establish consistent internal control practices 

across all of the operating units. On the basis of matrices showing 

incompatibilities for each of the processes, optimized standard user 

profiles have been identified. With each new deployment of the 

software package, manuals are provided and incompatibility matrices 

are tracked by the Internal Audit team in liaison with each Division. 

The Group also carried out a centralized review of the automatic 

and manual controls in the integrated business software package, 

as well as of the security of its information systems. To supplement 

this effort, a review was conducted within each operating unit that 

included an analysis of how the centrally defined key controls are 

applied at a local level and a verification of the manual controls 

performed by local users. 

The LSF project also included the “Corporate” functions, and the 

internal control procedures for the Valeo Internal Bank were 

documented as part of this process. 

2.5. Work carried out in 2007 

< Contents > 

As part of its risk assessment process, the Group updated and 

enriched its risk mapping process. The risks concerned were 

assessed by combining a scenario-based approach with probability 

of occurrence and impact evaluations. The risk mapping process 

formed a major component of the work undertaken to prepare 

the audit plan, which was presented to the Audit Committee in 

November 2007. During 2007, the Internal Audit team also carried 

out assignments on research and development costs, the reliability 

of order backlog figures, goodwill impairment testing and the Group’s 

retirement commitments in North America. 

With respect to internal control procedures used to monitor the 

reliability of financial information, specific key controls and the 

related operating procedures were defined and deployed at Valeo 

Service in order to deal with the risks related to selling universal 

market spares to the independent aftermarket. For smaller startup 

units, the Group also produced a simplified self-assessment 

questionnaire that includes 68 key control points in relation to the 

seven processes listed above. 

Under a new process, the Internal Audit team now reviews 

integrated business software package access twice a year. Access 

to the system and to sensitive transactions, key users who provide 

first-level support to other users, analysis of incompatibilities and 

action plans implemented to eliminate them are the main areas of 

focus in these reviews. 


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2.6. Outlook for 2008 and 2009 

A two-year audit plan has been drawn up for the Group’s main 

risks, based on the updated findings from the risk mapping process, 

the work conducted by the Internal Audit team and a summary of 

the internal control self-assessments performed by the operating 

units. The plan covers both cross-business and technical risks. 

A special review of access controls and user profiles at Valeo Service 

sites will be conducted once the integrated business software 

package has been deployed. A pilot site has been selected with 

the aim of establishing operating procedures that can gradually be 

rolled out to all Valeo Service divisions. 

A documentation plan will be drawn up for the “Corporate” functions, 

together with a definition of the applicable key controls and a test 

plan based on defined samples, notably for specific holding company 

processes, financial consolidation procedures and tax processes. 


< Contents > 

The risk mapping summary will provide the basis for establishing a 

formal risk monitoring system, one of whose key functions will be 

to ensure that there are adequate risk management procedures. 

During 2008, the Internal Audit Department will be given an audit 

charter which sets out its role, its responsibilities, and the policies 

and procedures under which it operates. 

On a general level, the Group will pursue its ongoing efforts to 

improve its internal control procedures, with the underpinning aim 

of constantly adapting its management and control tools in line with 

changes in the Group’s structure and its objectives. 

These efforts are wholly supported by the Group’s General 

Management team. 

Thierry Morin 

Chairman of the Board of Directors 

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4 

5 

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during the year 2007 

Name First 

appointed 

End of term 

of office 

Thierry Morin March 21, 2001 General 

Shareholders’ 

Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Gérard Blanc May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Daniel Camus May 17, 2006 General 


Meeting to 

be called 

to approve 

the 2009 

financial 

statements 

Pascal 

Colombani 

May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main position 

held within 

the Company 

Chairman 

and Chief 

Executive 

Officer 


Composition of the Board of Directors during the year 2007 

Main position 

held outside 

the Company 

Chief Operating 

Officer in 

charge of 

finance and 

international 

development 

in the EDF 

Group 

Associate 

Director and 

Senior Advisor 

of AT Kearney 

< Contents > 

Other directorships and positions held 

in all companies in 2007 

Valeo Group 

▪ Chairman of Société de Participations Valeo 

(until November 15, 2007), Valeo Bayen (until 

November 16, 2007), Valeo Service, Valeo 

Finance, Valeo Thermique Habitacle, Valeo 

España SA, Valeo SpA, Valeo Japan Co. Ltd, and 

Valeo (UK) Limited 

▪ Legal Manager of Valeo Management Services, 

Valeo Auto-Electric Beteiligungs GmbH, Valeo 

Germany Holding GmbH, Valeo Grundvermögen 

Verwaltung GmbH, and Valeo Holding Deutschland 

GmbH 

▪ Director of Valeo Systèmes de Liaison (until 

January 2, 2008), Valeo Service España SA, Valeo 

Iluminacion, SA, and Valeo Termico SA 

Outside the Valeo Group 

▪ Director of CEDEP and Arkema 

▪ Director of Sogeclair 

EDF Group 

▪ Chairman of the Board of Directors of EDF Energy 

(United Kingdom) and EDF International 

▪ Director of Edison (Italy) and Transalpina di 

Energia (Italy) 

▪ Member of the Supervisory Board of EnBW 

(Germany) 

Outside the EDF Group 

▪ Member of the Supervisory Board of Dalkia SA and 

Morphosys (Germany) 

▪ Director of British Energy Group Plc., Alstom SA, 

Rhodia SA and Technip SA 

▪ Member of the Académie des Technologies 


4 

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1 

2 

3 

4 

5 

6

4 Corporate 

PAGE 158 

Governance 


Name First 

appointed 

Jérôme 

Contamine 

Pierre-Alain 

De Smedt 

Lord Jay of 

Ewelme 

François 

Grappotte 

(until May 21, 

2007) 

Philippe 

Guédon 

Yves-André 

Istel 

(until 

April 10, 


May 17, 

2006 

March 7, 

2005 

May 21, 


March 31, 

2003 

March 31, 

2003 

January 29, 

1992 

End of term 

of office 

General 


Meeting to 

be called 

to approve 

the 2009 

financial 

statements 

General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 


Main position 

held within 

the Company 

Main position 

held outside 

the Company 

Senior 

Executive 

Vice-President 

of Veolia 

Environnement 

Chairman 

of FEBIAC 

(the Belgian 

Federation of 

the Car and 

T wo-wheeler 

Industries) 

and director 

of various 

companies 

Member of the 

House of Lords 

May 21, 2007 Honorary 

Chairman of 

Legrand SA 

General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

April 10, 2007 Senior Advisor 

to Rothschild, 

Inc. 



Veolia Group 

▪ Director of VE Services-Ré, Veolia Transport, 

Veolia Propreté, Veolia Environmental Services Plc 

(United Kingdom), Veetra, and Veolia ES Holdings 

Plc (United Kingdom) 

▪ Chairman of Venao (United States) 

▪ Managing Director and Director of Veolia UK 

(United Kingdom) 

▪ Chairman of VE IT 

▪ Member of the Supervisory Board of Veolia Eau 

and Dalkia France 

▪ Member of Dalkia’s A and B Supervisory Boards 

Outside the Veolia Group 

▪ Director of Rhodia 

▪ Director of Belgacom, CNP (Compagnie Nationale 

à Portefeuille/Albert Frère Group), Deceuninck 

Plastics, Alcopa, and Avis Europe Plc 

▪ Member of the Executive Committee and Director 

of FEBIAC (Belgian Federation of the Car and Twowheeler 

Industries) 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

< Contents > 

Director of Crédit Agricole 

Non-Executive Director of Associated British Food 

(ABF) and Candover Investments Plc 

Independent member of the House of Lords 

Member of House of Lords sub-committee on EU 

law & institutions 

Member of the House of Lords select committee 

on international institutions 

Member of GLOBE, an interparliamentary group on 

climate change 

Vice-Chairman of Business for New Europe 

Chairman of Merlin (international medical charity) 

Legrand Group 

▪ Director of Legrand SA and Legrand France 

Outside the Legrand Group 

Director of BNP Paribas 

▪ Member of the Supervisory Board of Michelin 

▪ Member of the Banque de France Consultative 

Committee 

Managing 

Partner 

of Espace 

Développement 

▪ Director of Compagnie Financière Richemont AG 

and Imperial Sugar Company 

1 

2 

3 

4 

5 

6

Name First 

appointed 

Helle 

Kristoffersen 

Jean-Bernard 

Lafonta 



Alain Minc 



Véronique 

Morali 

(until 

March 22, 


Georges 

Pauget 

March 22, 


December 7, 

2001 

July 4, 

1986 

March 31, 

2003 

April 10, 


Erich Spitz June 24, 

1987 

End of term 

of office 

General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main position 

held within 

the Company 



Main position 

held outside 

the Company 

Vice President 

of Corporate 

Strategy 

Alcatel-Lucent 

May 21, 2007 Chairman 

of the 

Management 

Board of 

Wendel 

Investissement 

May 21, 2007 Chairman of 

A M Conseil 

March 22, 


General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Director and 

Chief Operating 

Officer of 

Fimalac 



Wendel Group 

▪ Chairman of the Supervisory Board of Editis 

Holding 

▪ Chairman of the Supervisory Board of Bureau 

Veritas 

▪ Member of the Supervisory Board of Oranje- 

Nassau Groep B V 

▪ Director of Legrand Holding and Legrand SA 

Outside the Wendel Group 

▪ Chairman of the Board of Directors of Winvest SA 

(Luxembourg) 

▪ Legal Manager of Granit (SARL), JBMN 

(Luxembourg), and Winvest Conseil (Luxembourg) 

▪ Chairman of the Supervisory Board of Le Monde 

▪ Director of FNAC and Vinci 

Fimalac Group 

▪ 

▪ 

< Contents > 

Sole Director of FCBS GIE 

Member of the Board of Fimalac, Inc., Fitch 

Ratings, Inc., and Fitch Risk Management, Inc. 

Outside the Fimalac Group 

▪ Director of Eiffage, Club Méditerranée, and 

Algorithmics (Canada) 

Chief Executive Crédit Agricole Group 

Officer of Crédit ▪ Chairman of the Board of Directors and of the 

Agricole SA Remuneration Committee of Calyon 

▪ Chairman of the Executive Committee of Crédit 

Agricole SA 

▪ Chairman of the Board of Directors of LCL 

– Le Crédit Lyonnais 

Outside the Crédit Agricole Group 

▪ Vice-Chairman and member of the Executive 

Committee of the Fédération Bancaire Française 

(FBF) 

▪ Permanent representative of LCL – Le Crédit 

Lyonnais as a Director of the Fondation de France 

Advisor Thales Group 

▪ Chairman of Thales Avionics Lcd 

▪ Director of Thales Corporate Ventures 

Outside the Thales Group 

▪ Member of the Supervisory Board of Novaled and 

Riber 

▪ Correspondent member of the Académie des 

Sciences 

▪ Member of the Académie des Technologies 

▪ Honorary Chairman of European Industrial 

Research Management Association (EIRMA) 


4 

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1 

2 

3 

4 

5 

6

4 Corporate 

PAGE 160 

Governance 

Statutory Auditors’ report on the report of the Chairman of the Board of Directors 

Year ended December 31, 2007 

This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for the convenience 

of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional 

auditing standards applicable in France. 

In our capacity as Statutory Auditors of Valeo, and in accordance with article L. 225-235 of the French Commercial Code, we hereby report to 

you on the report prepared by the Chairman of your Company in accordance with article L. 225-37 of the French Commercial Code for the 

year ended December 31, 2007. 

It is for the Chairman to give an account, in his report, notably of the conditions in which the duties of the Board of Directors are prepared 

and organized and of the internal control procedures in place within the Company. It is our responsibility to report to you our observations 

on the information set out in the Chairman’s report on the internal control procedures relating to the preparation and processing of financial 

and accounting information. 

We performed our procedures in accordance with professional standards applicable in France. These standards require us to perform procedures 

to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating to the preparation and 

processing of financial and accounting information. The procedures we performed notably consisted of: 

■ obtaining an understanding of the internal control procedures relating to the preparation and processing of the financial and accounting 

information supporting the information set out in the Chairman’s report as well as the existing documentation; 

■ obtaining an understanding of the work performed to support the information given in the report, as well as of the existing 

documentation; 

■ determining if the material internal control weaknesses relating to the preparation and processing of the financial and accounting information 

that we may have identified in the course of our audit are properly described in the Chairman’s report. 

On the basis of these procedures, we have no matters to report in connection with the information given on the internal control procedures 

relating to the preparation and processing of financial and accounting information, contained in the report of the Chairman of the Board of 

Directors, prepared in accordance with article L. 225-37 of the French Commercial Code. 

Paris and Neuilly-sur-Seine, February 12, 2008 

Salustro Reydel 

Member of KPMG International 


The Statutory Auditors 

PricewaterhouseCoopers Audit 

< Contents > 


of the Chairman of the Board of Directors on internal 

control procedures relating to the preparation and 

processing of financial and accounting information 

Jean-Pierre Crouzet Emmanuel Paret Serge Villepelet Jean-Christophe Georghiou 

1 

2 

3 

4 

5 

6


5 

< Contents > 

Information on 

the Company 

and its capital 

General information about the issuer 162 

Fees paid by the Group to the Auditors and 

members of their networks 181 

General information about the Company’s 

capital 182 

Current ownership structure 186 

Market for the Company’s securities 190 

Investor relations 192 

Information on subsidiaries and affiliates 195 


PAGE 161 

1 

2 

3 

4 

5 

6

5 Information 

PAGE 162 

on the Company and its capital 

General information about the issuer 


1. Legal provisions and Company bylaws 

Corporate name and registered offi ce 

The name of the Company is Valeo. Its registered office is at 

43, rue Bayen, 75017 Paris, France. (tel.: +33 (0) 1 40 55 20 20). 

Legal form and governing law – Corporate 

governance 

Valeo is a joint-stock company (“société anonyme”) with a Board 

of Directors. It is governed by French law, notably the French 

Commercial Code. 

With a view to increasing the transparency of information disclosed 

to the public, the Company has set up a number of procedures to 

ensure that it complies with best corporate governance practices. 

Further information is provided on page 146 in the report of the 

Chairman of the Board of Directors on internal control procedures 

and the conditions for preparing and organizing the work conducted 

by the Board. 

Date of incorporation and term 

The Company was incorporated on February 10, 1923 and its term 

was extended for a further 99 years on February 10, 1972. 

Corporate purpose 

The Company’s corporate purpose is as follows (Article 3 of the 

bylaws): 

■ 

the research and development, manufacture, sale, trading or 

supply of any products, equipment or services for industry and 

business purposes which may be manufactured, finished or 

developed by the Company or other Valeo Group companies or 

which may interest their customers; 


■ 

operations of any nature – including industrial, commercial, 

financial and investing activities, or acquisitions and divestments 

– which are directly or indirectly related to the corporate purpose 

or designed to facilitate the development or realization thereof. 

Registration particulars 

The Company is registered at the Paris Companies Registry under 

number 552 030 967. 

Fiscal year 

The Company’s fiscal year covers a twelve-month period from 

January 1 to December 31. 

Consultation of documents 

< Contents > 

The Company’s press releases and annual Reference documents filed 

with the French securities regulator (Autorité des marchés financiers, 

or AMF) (including historical financial information relating to the 

Company and the Group), as well as any updates thereto can be 

accessed on the Company’s website at www.valeo.com. Copies are 

also available on request from the Company’s head office. 

In accordance with Article 221-3 of the General Regulations of the 

AMF, the regulated information defined in Article 221-1 of said 

Regulations is posted on the Company’s website and remains on 

line for at least five years after the related documents are issued. 

As recommended by the AMF in its report on corporate governance 

and internal control issued on January 24, 2008, the Board of Directors’ 

Internal Rules of Operation are also posted on the Company’s 

website. The bylaws, minutes of General Shareholders’ Meetings, 

Statutory Auditors’ reports and all other corporate documents can 

be consulted at Valeo’s head office in accordance with the law and 

the Company’s bylaws. 

1 

2 

3 

4 

5 

6

Auditors 

Statutory Auditors 

■ 

− 

− 

− 

■ 

− 

− 

− 

PricewaterhouseCoopers Audit SA, represented by Serge Villepelet 

and Jean-Christophe Georghiou – 63, rue de Villiers, 92200 Neuillysur-Seine, 

France. 

Member of the Compagnie régionale des Commissaires aux 

comptes de Versailles. 

First appointed on March 31, 2003. 

Current term of office began on April 5, 2004 and expires 

at the close of the General Shareholders’ Meeting to be held 

to approve the financial statements for the year ending 

December 31, 2009. 

Salustro Reydel, Member of KPMG International, represented by 

Jean-Pierre Crouzet and Emmanuel Paret – Immeuble Le Palatin, 

3, cours du Triangle, 92939 Paris La Défense Cedex, France. 



First appointed on May 27, 1998. 

Current term of office began on April 5, 2004 and expires 

at the close of the General Shareholders’ Meeting to be held 

to approve the financial statements for the year ending 


Alternate Statutory Auditors 

■ 

− 

− 

■ 

− 

− 

Yves Nicolas, 63, rue de Villiers, 92200 Neuilly-sur-Seine, France. 



First and current term of office began on April 5, 2004 and 

expires at the close of the General Shareholders’ Meeting to 

be held to approve the financial statements for the year ending 


Philippe Arnaud, 198, boulevard Malesherbes, 75017 Paris, 

France. 


comptes de Paris. 

First and current term of office began on April 5, 2004 and 

expires at the close of the General Shareholders’ Meeting to 

be held to approve the financial statements for the year ending 


Dividends 

Information on the Company and its capital 


Each share entitles its holder to a proportion of income equal to the 

proportion of capital represented by the share. 

Distributable income is composed of net income for the year less 

any prior year losses and amounts appropriated to the legal reserve, 

plus any income carried forward. Subject to the provisions of the law, 

shareholders in a General Meeting may decide to distribute amounts 

taken from available reserves and/or retained earnings. In this case, 

the related resolution approved by the shareholders must clearly 

specify the reserve account from which the distributed amounts are 

to be taken. Shareholders may resolve to pay out a dividend only 

after approving the financial statements for the year and noting that 

amounts are available for distribution. Shareholders or the Board of 

Directors set the applicable conditions for any dividend payments. 

The Board of Directors may decide to pay an interim dividend before 

the financial statements are approved, subject to the conditions set 

down by law. 

At the General Meeting called to approve the financial statements, 

shareholders may decide to offer a stock dividend alternative 

representing all or part of the dividend, or interim dividend, as 

provided for by law. 

Dividends unclaimed after a period of five years from the date they 

were made payable are paid to the French government. 

Liquidation surpluses 

Liquidation surpluses are allocated between the shareholders in 

proportion to their interests in the Company’s capital. 

General Shareholders’ Meetings 

< Contents > 

Ordinary and Extraordinary Shareholders’ Meetings are called and 

conduct business in accordance with the conditions set down 

by law. 

In accordance with Article R 225-85 of the French Commercial 

Code, shareholders may participate in General Meetings subject to 

submitting evidence of ownership of their shares. Share ownership 

is evidenced by an entry in Valeo’s share register in the name of the 

shareholder (or of the intermediary acting on their behalf) or in the 

register of bearer shares held by an accredited intermediary. Such 

entries must be recorded by 0.00 hours (12:00 am) (CET) on the third 

working day preceding the date of the Meeting. In the case of bearer 

shares, the accredited intermediary shall provide a participation 

certificate for the shareholders concerned, which must be attached 

to the corresponding postal voting or proxy form or to the admission 

card made out in the name of the shareholder or in the name of the 

registered intermediary representing the shareholder. 


5 

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1 

2 

3 

4 

5 

6

5 Information 

PAGE 164 



Subject to the above-mentioned conditions, all shareholders are 

entitled to attend General Meetings provided they have settled all 

capital calls related to their shares. 

Shareholders who are unable to attend a meeting in person may 

give proxy to their spouse or another shareholder or may cast 

a postal vote. Alternatively, they may return the signed form of 

proxy to the Company without naming a person to represent them, 

in accordance with the applicable laws and regulations. 

In compliance with the conditions set down by the applicable laws 

and regulations, shareholders may send proxy and postal voting 

forms for General Meetings either in paper format or, if authorized by 

the Board of Directors in the notice of meeting, in electronic form. 

Minutes of Shareholders’ Meetings are drawn up, and copies and 

extracts thereof are certified and delivered, in accordance with 

the law. 

Double voting rights 

Each shareholder has a number of votes corresponding to the number 

of shares held or represented by proxy. 

However, since the General Shareholders’ Meeting of June 16, 1992, 

Article 23 of the Company’s bylaws provides that double voting rights 

2. Corporate governance structure 

2.1. Executive Management 

The Group’s Executive Management team includes the Chairman 

and Chief Executive Officer, and Valeo’s Functional and Operational 

Directors. 

Chairman and Chief Executive Officer: 

Thierry Morin 

Thierry Morin ’s current term of office began on May 21, 2007 and 

expires at the General Shareholders’ Meeting to be called to approve 

the financial statements for the year ending December 31, 2010. 

At its meeting of March 31, 2003, Valeo’s Board of Directors elected 

to combine the roles of Chairman of the Board of Directors and Chief 

Executive Officer. 

In his capacity as Chairman and Chief Executive Officer, Thierry Morin 

has the broadest ranging powers to act in any circumstances in the 

Company’s name. He exercises these powers within the limits of 

the Company’s corporate purpose and subject to the powers that 

the law specifically grants to General Shareholders’ Meetings or to 

the Board of Directors. The Chairman and Chief Executive Officer 

represents the Company in its relations with third parties. 


are attached to all fully-paid shares that have been registered in 

the name of the same holder for at least four years. In the case of 

a capital increase paid up by capitalizing reserves, income or share 

premiums, the new registered shares allocated to a shareholder in 

respect of existing shares with double voting rights will also carry 

double voting rights from the date of issue. Double voting rights are 

automatically stripped from any registered shares that are converted 

into bearer shares or transferred. However, registered shares are not 

stripped of voting rights and the above four-year qualifying period 

continues to run following the transfer of shares included in the estate 

of a deceased shareholder, or in connection with the settlement of 

the marital estate, or an inter vivos gift to a spouse or relative in 

the direct line of succession. Double voting rights may be removed 

at an Extraordinary Shareholders’ Meeting, subject to the approval 

of shareholders entitled to double voting rights, obtained at a special 

meeting held for that purpose. 

Changes in share capital and rights attached to 

shares 

Any changes in the Company’s share capital or voting rights attached 

to shares are subject to the applicable law as the bylaws do not 

contain any specific provisions in relation to such operations. 

Functional Directors 

Michel Boulain 

Vice-President, Human Resources 

Robert Charvier 

Financial Control Director 

Bernard Clapaud 

Vice-President, Strategy 

France Curis 

Tax Director 

Jean-Luc di Paola-Galloni 

Chairman’s Delegate 

Thierry Dreux 

Vice-President, International Development 

Rémy Dumoulin 

Investor Relations Director 

André Gold 

Technical Senior Vice-President 

< Contents > 

1 

2 

3 

4 

5 

6

Martin Haub 

Vice-President, Product Marketing and Research & Development 

Kazuo Kawashima 

Vice-President, Quality 

Hans-Peter Kunze 

Senior Vice-President, Sales and Business Development 

Géric Lebedoff 

General Counsel 

Vincent Marcel 

Vice-President, Financial Affairs and Strategic Operations 

Kate Philipps 

Communication Director 

Operational Directors 

Luc Blériot 

Chief Operating Officer 

Claude Leïchlé 

Vice-President, Lighting Systems Product Family 

Alain Marmugi 

Vice-President, Climate Control Product Family 

Maurizio Martinelli 

Vice-President, Engine Cooling Product Family 

Christophe Périllat-Piratoine 

Vice-President, Interior Controls Product Family 

Didier Pradeilles 

Vice-President, Wiper Systems Product Family 

Orazio Ragni 

Vice-President, Electrical Systems Product Family 



Michael Schwenzer 

Vice-President, Transmissions Product Family 

Jacques Schaffnit 

Vice-President, Security Systems Product Family 

Michel Serre 

Vice-President, Compressors Product Family 

Henri Trintignac 

Vice-President, Engine Management Systems Product Family 

Robert de La Serve 

Senior Vice-President, Valeo Service Activity 

Vice-President, Independent Aftermarket Branch 

Dirk Strothmann 

Vice-President, Original Equipment Spares Branch 

2.2. Board of Directors 

< Contents > 

2.2.1. Composition of the Board of Directors 

The following table includes the names of the members of Valeo’s 

Board of Directors at the filing date of this Reference document, 

together with their age, the date on which they were first 

appointed, and the start and end dates of their current terms of 

office. Information is also provided on the main positions that they 

hold outside the Company and other directorships and positions that 

they have held in companies other than Valeo subsidiaries during 

the past five years. 

Unless otherwise specified, the current directorships and positions 

set out below are those held at January 31, 2008. 


5 

PAGE 165 

1 

2 

3 

4 

5 

6

5 Information 

PAGE 166 



Name/business 

address 

Thierry Morin 

Aged 56 

Valeo 

43, rue Bayen 

75017 Paris 

France 

Gérard Blanc 

Aged 65 

17, rue Joseph 

Marignac 

31300 Toulouse 

France 

Daniel Camus 

Aged 56 

EDF 

22-30 avenue de 

Wagram 

75382 Paris 

Cedex 08 

France 

Pascal Colombani 

Aged 62 

AT Kearney 

44, rue de 

Lisbonne 

75008 Paris 

France 

Number 

of Valeo 

shares 

held 

* Current directorships and positions. 

First 

appointed 

3,895 March 21, 

2001 


Start of 

current term 

of office 

End of 

current term 

of office 



Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

150 May 21, 2007 May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

200 May 17, 2006 May 17, 2006 General 


Meeting to 

be called 

to approve 

the 2009 

financial 

statements 



Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main 

position 

held within 

the Company 

Chairman 

and Chief 

Executive 

Officer 

Main positions 

held outside 

the Company 

Management 

positions and 

directorships 

in several 

Valeo Group 

subsidiaries 

(see page 157 ) 

Other directorships and 

positions held in companies 

other than Valeo subsidiaries 

during the past five years 

▪ Chairman of the Board of Directors 

of INPI* (since March 4, 2008) 

▪ Chairman of Valeo’s Management 

Board from May 9, 2001 to 

March 2003 when the Company 

changed its corporate governance 

structure to a company governed 

by a Board of Directors 

▪ Director of CEDEP* and Arkema* 

▪ 

▪ 

▪ 

< Contents > 

Director of Sogeclair* 

Executive Vice President, 

Programmes at Airbus 

Executive Vice President, 

Operations at Airbus 

Chief Operating EDF Group 

Officer in charge ▪ Chairman of the Board of Directors 

of finance and of EDF Energy (United Kingdom)* 

international and EDF International* 

development in ▪ Director of Edison (Italy)* and 

the EDF group Transalpina di Energia (Italy)* 

▪ Member of the Supervisory Board 

of EnBW (Germany)* 

Outside the EDF Group 


of Dalkia SA* and Morphosys 

(Germany)* 

Associate ▪ Chairman and CEO of CEA-Industries 

Director and ▪ Chairman of the Supervisory Board 

Senior Advisor of Areva 

at AT Kearney ▪ Chairman of the Board of Directors 

of ENS Cachan 

▪ Chairman of the Association 

Française pour l’Avancement des 

Sciences 

▪ Director of British Energy Group 

Plc*, Alstom SA*, Rhodia SA*, 

Technip SA*, EDF, IFP, Framatome, 

Technicatome, and Cogéma 

▪ Member of the Académie des 

Technologies* 

1 

2 

3 

4 

5 

6

Name/business 

address 

Jérôme 

Contamine 

Aged 50 

Veolia 

Environnement 

38, avenue Kléber 

75116 Paris 

France 

Pierre-Alain 

De Smedt 

Aged 64 

46, boulevard de 

la Woluwe 

1200 Brussels 

Belgium 

Number 


shares 

held 


First 

appointed 

Start of 

current term 

of office 

End of 

current term 

of office 

2000 May 17, 2006 May 17, 2006 General 


Meeting to 

be called 

to approve 

the 2009 

financial 

statements 

200 March 7, 2005 May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main 

position 

held within 

the Company 




held outside 

the Company 

< Contents > 


5 





Senior Executive Veolia Group 

Vice-President ▪ Chairman of the Board of Directors 

of Veolia of VE Services-Ré 

Environnement ▪ Chairman of VE Europe Services* 

(Belgium) 

▪ Director of Veolia Transport*, Veolia 

Propreté*, VE Services-Ré*, Veolia 

UK (United Kingdom)*, Veolia 

Environmental Services Plc (United 

Kingdom)*, Veolia ES Holdings Plc 

(United Kingdom)*, Veetra*, and 

Venac (United States) 

▪ President of VENAO (United States) 

▪ Chairman of VENAO (United 

States)* 

▪ Managing Director of Veolia UK* 

(United Kingdom) 

▪ Chairman of VE IT* 

▪ Member of the Management Board 

of Vivendi Environnement 


of Veolia Eau* and Dalkia France* 

▪ Member of Dalkia’s A and B 

Supervisory Boards* 

Outside the Veolia Group 

▪ Director of Rhodia*, FCC Espagne, 

and Cementos Portland Espagne 

Chairman ▪ Executive Vice-President of 

of FEBIAC Renault SA 

(the Belgian ▪ Director of Belgacom*, CNP 

Federation of (Compagnie Nationale à 

the Car and Portefeuille/Albert Frère Group)*, 

Two-wheeler Deceuninck Plastics*, Alcopa*, and 

Industries) Avis Europe Plc* 

and Director ▪ Member of the Executive 

of various Committee and Director of FEBIAC 

companies (Belgian Federation of the Car and 

Two-wheeler Industries)* 

▪ Member of the Management 

Committee of FEB (the Belgian 

Business Federation) 

PAGE 167 

1 

2 

3 

4 

5 

6

5 Information 

PAGE 168 



Name/business 

address 

Lord Jay of 

Ewelme 

Aged 61 


Westminster 

London SW1A 

OPW 

United Kingdom 

Philippe Guédon 

Aged 74 

Espace 


16, rue Troyon 

92316 Sèvres 

France 

Helle 

Kristoffersen 

Aged 44 

Alcatel-Lucent 

54, rue La Boétie 

75008 Paris 

France 

Number 


shares 

held 


First 

appointed 


Start of 

current term 

of office 

End of 

current term 

of office 



Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

100 March 31, 

2003 

100 March 22, 




Meeting to 

be called 

to approve 

the 2010 

financial 

statements 



Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main 

position 

held within 

the Company 


held outside 

the Company 

Member of the 


Managing 

Partner 

of Espace 


Vice President, 

Corporate 

Strategy Alcatel- 

Lucent 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

▪ 

< Contents > 





Director of Crédit Agricole* 

Non-executive Director of 

Associated British Foods (ABF)* and 

Candover Investments Plc* 

Independent member of the House 

of Lords* 

Member of the House of Lords 

Sub-Committee on EU Law & 

Institutions* 

Member of the House of Lords 

Select Committee on International 

Institutions* 

Member of GLOBE, an 

interparliamentary group on 

climate change* 

Vice-Chairman of Business for New 

Europe* 

Chairman of Merlin (international 

medical charity)* 

Permanent Under Secretary to the 

Foreign & Commonwealth Office 

Trustee of the British Council 

▪ Chairman and Chief Executive 

Officer of Matra 

▪ Chairman of the Supervisory Board 

of Matra Automobile 

▪ Vice President, Economic Analysis 

of the Alcatel group 

1 

2 

3 

4 

5 

6

Name/business 

address 

Georges Pauget 

Aged 60 

Crédit Agricole SA 

91/93, Boulevard 

Pasteur 

75015 Paris 

France 

Number 


shares 

held 


First 

appointed 

Start of 

current term 

of office 

End of 

current term 

of office 

100 April 10, 2007 May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Main 

position 

held within 

the Company 




held outside 

the Company 

Chief Executive 

Officer of Crédit 

Agricole SA 

< Contents > 


5 





Crédit Agricole Group 

▪ Chairman of the Board of 

Directors and of the Remuneration 

Committee of Calyon* 

▪ Chairman of the Executive 

Committee of Crédit Agricole SA* 

▪ Chairman of the Board of Directors 

of LCL – Le Crédit Lyonnais* 

▪ Chairman of CEDICAM 

▪ Chairman and Member of the 

Executive Committee of TLJ SAS 

▪ Chairman of Uni-Editions 

▪ Chief Executive Officer and 

Chairman of the Executive 

Committee of LCL – Le Crédit 

Lyonnais 

▪ Chief Operating Officer, Member 

of the Executive Committee and 

Director of the Caisse Régionale 

Division of Crédit Agricole SA 

▪ Director of Bankoa, Foncaris, 

Mercagentes, SA, SVB, SACAM, 

SAPACAM, SCI CAM, Crédit Agricole 

Indosuez, Crédit Agricole Indosuez 

Cheuvreux, Crédit Agricole Indosuez 

Cheuvreux Gestions, Crédit 

Lyonnais, Banca Intesa, Banque 

Gestion Privée Indosuez, Europay 

France, and Holding Eurocard 

▪ Director and Vice-Chairman of 

Pacifica 

▪ Director and Vice-Chairman of 

Predica 

▪ Member of the Executive 

Committee of the FNCA 

Outside the Crédit Agricole Group 

▪ Chairman of Servicam 

▪ Chairman of the Union des 

Assurances Fédérales 

▪ Vice-Chairman and member of the 

Executive Committee of the French 

Banking Federation (Fédération 

Bancaire Française)* 

▪ Permanent representative of Crédit 

Agricole SA as a member of the 

Supervisory Board of Fonds de 

Garantie des Dépôts 

▪ Permanent representative of LCL 

– Le Crédit Lyonnais as a Director of 

the Fondation de France* 

PAGE 169 

1 

2 

3 

4 

5 

6

5 Information 

PAGE 170 



Name/business 

address 

Erich Spitz 

Aged 77 

87, boulevard de 

Port-Royal 

75013 Paris 

France 

Number 


shares 

held 


First 

appointed 


Start of 

current term 

of office 

End of 

current term 

of office 

144 June 24, 1987 May 21, 2007 General 


Meeting to 

be called 

to approve 

the 2010 

financial 

statements 

Thierry Morin joined the Valeo Group in 1989 as Finance Director 

of the Clutches Branch. He then became Finance Director of the 

Engine Cooling Branch and subsequently Group Financial Control 

Director. In 1997, he was appointed Deputy Managing Director and 

Director of Financial and Strategic Operations. On June 5, 2000 he 

was appointed Senior Vice-President in charge of Finance, Strategic 

Operations and Information Systems and became a member of the 

Management Committee. He was named Chairman of the Board of 

Directors on March 21, 2001, Chairman of the Management Board 

on May 9, 2001 and on March 31, 2003 was appointed as Valeo’s 

Chairman and Chief Executive Officer. His term of office was renewed 

for four years on May 21, 2007. 

Before joining Valeo, Thierry Morin was Assistant Director of the 

ISD Division at Thomson Consumer Electronics in Los Angeles. He 

also held various financial positions during ten years spent with 

Schlumberger. 

On March 4, 2008 Thierry Morin appointed Chairman of the Board 

of Directors of the French National Institute for Industrial Property 

(INPI). 

Thierry Morin has a Masters degree in Management from the 

University of Paris-IX Dauphine. 

Gérard Blanc is a Director of Sogeclair. Earlier in his career he held 

the position of Executive Vice President, Programmes at Airbus until 

2003 when he was appointed Executive Vice President, Operations, 

a position he held until 2005. 

Gérard Blanc graduated from HEC business school in Paris in 1965. 

Daniel Camus is Chief Operating Officer in charge of finance and 

international development in the EDF group. He joined the EDF 

Main 

position 

held within 

the Company 


held outside 

the Company 

Advisor Thales Group 

▪ 

▪ 

< Contents > 





Chairman of Thales Avionics Lcd* 

Director of Thales Corporate 

Ventures* 

Outside the Thales Group 

▪ Chairman of the Supervisory Board 

of Novaled* and Riber 

▪ Member of the Management Board 

of ERA 



▪ Correspondent member of the 

Académie des Sciences* 

▪ Member of the Académie des 

Technologies* 

▪ Honorary Chairman of the European 

Industrial Research Management 

Association (EIRMA)* 

group in 2002 after working in the chemicals and pharmaceuticals 

industry for 25 years within the Hoechst-Aventis group in Germany, 

the United States, Canada and France. 

He is a graduate of the Paris Political Studies Institute (Institut 

d’Études Politiques de Paris) and holds a doctorate in Economics. 

He is also an Associate Professor in Management Sciences. 

Pascal Colombani has been an Associate Director and Senior 

Advisor at AT Kearney Paris since 2003 and is in charge of the 

innovation, high technology and energy sectors. Between 2000 

and 2002 he was Chairman of the French Atomic Energy Commission 

(CEA) and since 2004 has been a member of the Académie des 

Technologies. Previously he held a number of different positions 

including Chairman and Chief Executive Officer of CEA-Industries, 

Chairman of the Supervisory Board of Areva, Chairman of the Board 

of Directors of ENS Cachan and Chairman of the Association Française 

pour l’Avancement des Sciences. 

Pascal Colombani graduated from École Normale Supérieure at 

Saint-Cloud in France and holds a doctorate in science. 

Jérôme Contamine joined Veolia in 2000 as Executive Vice- 

President, Finance, before becoming Executive Vice President 

responsible for cross-functional activities in 2002 and Senior Executive 

Vice-President in 2003. 

Between 1988 and 2000, he held several posts within the Elf group 

including Financing and Treasury Director (1991 to 1994), Deputy 

Director, Europe and the USA for the Exploration and Production 

Division, CEO of Elf Norway (1995-1998), and Head of Continental 

European and Central Asian Operations for the Exploration and 

Production Division (2000). 

1 

2 

3 

4 

5 

6

Jérôme Contamine graduated from École Polytechnique and École 

Nationale d’Administration and is a special advisor to the French 

Audit Commission (Cour des Comptes). 

Pierre-Alain De Smedt is qualified as a Sales Engineer and holds 

a Commercial and Financial Sciences degree from the Université 

Libre de Bruxelles in Belgium. He began his career in 1966 in the 

IT Department of Solvay before joining Bosch Belgium in 1971 as 

Financial Director responsible for Purchasing, Logistics, Organization 

and IT. He was appointed to the same position within the Volkswagen 

group in 1973 and in 1985 was nominated Chairman of the Board 

of Directors of the Volkswagen subsidiary responsible for logistics, 

purchasing, organization and IT. In 1988, he became a Director of 

Tractebel and Chairman of the Executive Committee of the electricity 

companies Ebes, Intercom and Unerg. 

In 1991, Pierre-Alain De Smedt was appointed Managing Director of 

Autolatina – the leading Latin American private company and a joint 

venture between Volkswagen and Ford – and in 1997 he was named 

Chairman of Seat, a subsidiary of the Volkswagen group. 

In 1999, he joined Renault as Executive Vice-President, Industry and 

Technology and is currently a member of the Executive Committee 

of the Renault Group and of the Renault/Nissan Alliance Board. 

In 2006, he also took on the role of Chairman of FEBIAC (the Belgian 

Federation of the Car and Two-wheeler Industries). 

Lord Jay of Ewelme is an independent member of the House of 

Lords. He is also a non-executive Director of Associated British Foods 

(ABF) and Candover Investments Plc, a member of the European 

Union Sub-Committee on Law and Institutions and the House of Lords 

Select Committee on International Institutions, a member of GLOBE 

(an interparliamentary group on climate change), Vice-Chairman 

of Business for New Europe, Chairman of the international medical 

charity, Merlin and a Director of Crédit Agricole. 

Between 2002 and 2006 he held the position of Permanent Under- 

Secretary at the United Kingdom Foreign Office and in this role was 

Head of the Diplomatic Service. 

In 2005 and 2006 he served as the UK Prime Minister’s personal 

representative at the G8 summits at Gleneagles and St. 

Petersburg. 

Lord Jay of Ewelme is an Honorary Fellow of Magdalen College, 

Oxford. 

Philippe Guédon has been Managing Partner of Espace 

Développement since 2003. 

He joined Simca in 1956 as an After-Sales Service Engineer and 

went on to become a Research Engineer until 1965. He then 

joined Matra, where he also held the post of Research Engineer, 

and subsequently Technical Director until 1983. In that year he was 

appointed Chairman and Chief Executive Officer of Matra – a post 

he occupied until 2003. 



< Contents > 

Philippe Guédon was the designer of the Matra 530, the Bagheera, 

the Rancho, the Murena, the Espace and the Avantime. 

He graduated as an engineer from the Arts et Métiers school in 

Angers, France in 1956. 

Helle Kristoffersen is Vice President, Corporate Strategy and 

Secretary of the Strategy Committee of the Alcatel-Lucent group. 

In 1994 she joined what was previously the Alcatel group as Head 

of Financial Operations. 

Between 1989 and 1991 she worked as an analyst in the mergers 

and acquisitions department at Banque Lazard & Cie before joining 

the Bolloré group where she held the following positions: Deputy 

Financial Director responsible for mergers and acquisitions, Head of 

Operational Strategy for the Maritime Division and Head of Mergers 

and Acquisitions reporting to the Chairman and CEO. 

Helle Kristoffersen is a graduate of École Normale Supérieure and of 

École Nationale de la Statistique et de l’Administration Économique 

(ENSAE). She also holds a Masters degree in Econometrics from 

Sorbonne University Paris I. 

Georges Pauget has spent his entire career with the Crédit Agricole 

group where he has held the positions of Chief Executive Officer 

and Chairman of the Executive Committee since September 2005. 

He is also Chairman of the Board of Directors of LCL – Le Crédit 

Lyonnais, Chairman of the Board of Directors and the Remuneration 

Committee of Calyon, Vice-Chairman and member of the Executive 

Committee of the French Banking Federation (FBF) and permanent 

representative of Crédit Lyonnais for the Fondation de France. 

Earlier in his career he served as Chairman of the Union des 

Assurances Fédérales, TLJ SAS, Uni-Editions (SAS), CEDICAM (GIE), 

and SERVICAM (SAS). He has also held the following other positions: 

permanent representative of Crédit Agricole SA on the Supervisory 

Board of Fonds de Garantie des Dépôts, Chief Executive Officer of 

Crédit Lyonnais, Chairman of the Executive Committee and Chief 

Operating Officer of LCL – Le Crédit Lyonnais, and member of the 

Executive Committee and Director of the Caisse Régionale Division 

of Crédit Agricole SA. 

Georges Pauget was awarded a doctorate in Economics from the 

University of Bordeaux in 1975 and holds a Masters in Economics 

(with an econometrics option) from the University of Lyon. 

Erich Spitz joined Compagnie Générale de TSF in 1958 (since 

renamed Thomson-CSF). He began his career with the company 

as Director of the Central Research Laboratory before becoming 

Research and Development Director of the Thomson Group from 

1983 to 1994. 

Eric Spitz graduated from Prague Polytechnic University and holds 

a doctorate in science. 


5 

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2.2.2. Declarations concerning members 

of the Board of Directors 

To the best of the Company’s knowledge, there are no family ties 

between the members of the Board of Directors. 

As far as the Company is aware, in the past five years no member of 

the Board of Directors has (i) received a conviction for a fraudulent 

offence; (ii) been involved in any bankruptcies, receiverships or 

liquidations, (iii) been issued any official public incriminations and/or 

sanctions by statutory or regulatory authorities (including designated 

professional bodies); or (iv) been disqualified by a court of law 

from acting as a member of the administrative, management or 

supervisory bodies of an issuer or from acting in the management 

or conduct of the affairs of any issuer. 

To the best of the Company’s knowledge there are no potential 

conflicts of interest between the duties of the members of the 

Board of Directors of Valeo and their private interests and/or any 

other duties. 

As far as the Company is aware, none of the members of the Board 

of Directors has agreed to any restrictions concerning the disposal of 

their interests in the Company’s share capital within a certain period 

of time, other than (i) the restrictions set down by the applicable 

laws and regulations or the Company’s bylaws; (ii) the restrictions 

applicable in the Company’s stock option, stock grant or employee 

stock ownership plans, under which certain members of the 

Board of Directors have acquired shares; and (iii) the compulsory 

holding period imposed by the Board of Directors in relation to 

the shares issued on exercise of options granted to Thierry Morin 

since March 7, 2007. 

To the best of the Company’s knowledge there are no arrangements 

or understandings with major shareholders, customers or suppliers 

pursuant to which any member of the Board of Directors was selected 

as a Director or member of Valeo’s Executive Management. 

2.2.3. Service contracts between the members 

of the Board of Directors and the 

Company or any of its subsidiaries 

No service contracts have been entered into between the members 

of the Board of Directors and the Company or any of its subsidiaries 

providing for the granting of benefits. 


2.3. Organization and operation of the Board 

of Directors 

On March 31, 2003, the Company’s Board of Directors adopted a set 

of Internal Rules of Operation in line with the recommendations set 

out in the Bouton report on promoting better corporate governance 

in French listed companies. 

These I nternal R ules define the Board’s modus operandi and the 

procedures to be followed when appointing Board members. They 

are applied alongside the provisions set down by law, the applicable 

regulations and the Company’s bylaws. 

2.3.1. Composition of the Board and 

appointment of Directors 

The Company’s bylaws provide that the Board of Directors must 

comprise at least three and no more than eighteen members 

(subject to any amendments in line with changes in the applicable 

law). The Board of Directors currently has eleven members. There are 

no Directors elected by employees or any non-voting Directors. 

Directors are appointed by shareholders in a General Meeting on the 

recommendation of the Board of Directors, which in turn receives 

proposals from the Nomination and Remuneration Committee. 

Members of the Board are appointed for renewable four-year terms 

which expire at the close of the General Shareholders’ Meeting 

called to approve the accounts for the year in which their terms 

expire. Where one or more seats on the Board become vacant due 

to the death or resignation of any member or members, the Board 

of Directors may appoint new members on a temporary basis until 

the next General Shareholders’ Meeting, in accordance with the 

applicable legislation. The term of office of the Chairman may not 

exceed his term of office as a Director. 

The proportion of Board members over the age of 70 may not exceed 

one third. This age limit applies both to individuals and to permanent 

representatives of legal entities holding directorships. The Chairman’s 

term of office expires at the latest at the close of the General 

Shareholders’ Meeting held to approve the financial statements for 

the year in which he reaches his seventieth birthday. 

Directors may be removed from office by shareholders in a General 

Meeting at any time. 

2.3.2. Independent Directors 

< Contents > 

In accordance with its Internal Rules of Operation, each year 

prior to the publication of the Annual Report, the Board of 

Directors assesses the position of each Director with respect 

to the independence criteria set out in the Internal Rules of 

Operation, in line with the recommendations of the Bouton report. 

1 

2 

3 

4 

5 

6

Under these R ules, independent Directors are those who do not 

have any relations whatsoever with the Company, the Group or 

the Group’s management that may compromise their ability to 

exercise freedom of judgment. 

In particular, independence is presumed to exist when a Director: 

(i) is not currently and has not been in the past five years, an 

employee or a corporate officer of Valeo, or an employee or Director 

of a company consolidated by Valeo; 

(ii) is not a corporate officer in a company in which the Company 

directly or indirectly holds a directorship, or in which an employee 

appointed in that role or a corporate officer of the Company (current 

or former within the past five years) holds a directorship; 

(iii) is not a customer, supplier, investment banker or commercial 

banker which is material for the Company or the Group, or for 

which the Company or Group represents a material proportion of 

the entity’s activity; 

(iv) does not have any close family ties with a corporate officer of 

the Company; 

(v) has not been an auditor of the Company in the past five years; 

(vi) has not been a Director of the Company for more than twelve 

years on the date on which they were appointed to their current 

term of office. 

For Directors holding at least 10% of the Company’s capital or voting 

rights, or representing a legal entity that holds such a stake, the 

classification as independent takes into account the Company’s 

ownership structure and any potential conflict of interests. 

In application of these criteria, at its meeting of February 12, 2008, 

the Board of Directors noted that: 

■ 

■ 

■ 

one Director holds the positions of Chairman and Chief Executive 

Officer of the Company: Thierry Morin ; 

one Director has been a member of the Board of Directors 

(and previously the Supervisory Board) for over twelve years: 

Erich Spitz; 

nine Directors are independent based on the criteria set out in the 

Board’s Internal Rules of Operation: Gérard Blanc, Daniel Camus, 

Pascal Colombani, Jérôme Contamine, Pierre-Alain De Smedt, 

Philippe Guédon, Lord Jay of Ewelme, Helle Kristoffersen and 

Georges Pauget. 



2.3.3. Roles and responsibilities 


< Contents > 

The Board of Directors represents all shareholders. It determines 

the Company’s overall business strategies and oversees their 

implementation. Subject to the powers directly vested in General 

Shareholders’ Meetings and within the limits of the corporate 

purpose, the Board of Directors deals with any issues relating to 

the efficient functioning of the Company and makes any and all 

decisions relating thereto. The Board devotes one meeting per year 

to reviewing the Group’s overall industrial and financial strategies. 

The Chairman convenes meetings of the Board as often as required 

in the general interest of the Company and at least once a quarter. 

The dates for the quarterly meetings are issued at the beginning of 

each fiscal year at the latest. In 2007, the Board of Directors held 

sixteen meetings with a 93% average attendance rate (in person 

or by proxy). 

Board meetings are chaired by the Chairman of the Board or, in his 

absence, by any Director who has been temporarily authorized to 

chair Board meetings or a Vice-Chairman. 

Board meetings are only validly constituted if at least half of the 

members are present or deemed present (in accordance with the 

law and the Company’s bylaws), excluding members attending by 

proxy. Decisions are taken based on a majority vote of the members 

present, deemed present, or represented, in accordance with the 

law and the Company’s bylaws. Each member who is present or 

represented has one vote and each member present may only 

represent one other member. In the case of a split decision, the 

Chairman has the casting vote. 

Minutes are drawn up after each Board Meeting, which are signed 

by the Chairman and one other Director. 

In accordance with its Internal Rules of Operation, the Board of 

Directors includes an assessment of Board performance on the agenda 

of one meeting per year. For 2007, this assessment was performed 

with the assistance of an external firm during the last quarter of 

the year and in January 2008. A detailed questionnaire was sent to 

all Directors concerning their assessment of the way in which the 

Board operates and suggestions for improvement. The topics covered 

included the operation and composition of the Board, Directors’ access 

to information, the choice of issues discussed, the quality of the 

discussions, and the general running of the Board Committees. 

The Directors’ replies were analyzed and the findings presented at 

the Board meeting held on February 12, 2008. The results of this 

assessment are provided on page 150 in the report of the Chairman of 

the Board of Directors on internal control procedures and the conditions 

for preparing and organizing the work conducted by the Board. 


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2.3.4. Directors’ rights and duties – Compensation 

The Board’s Internal Rules of Operation impose certain duties on 

Directors in order to ensure that they are aware of the rules and 

regulations applicable to them, that conflicts of interest are avoided, 

that they dedicate the necessary time and attention to their duties 

and respect the applicable law relating to multiple directorships. 

Members of the Board of Directors are also responsible for ensuring 

that they have all the necessary information to carry out their duties. 

To this end, the Chairman provides Directors with the data and 

documents required in order for them to fully perform their duties. 

As compensation for the work carried out by Directors, shareholders 

in a General Meeting may grant an annual fixed amount of 

attendance fees which may be freely allocated by the Board 

among its members. The Board may also grant Directors exceptional 

compensation for specific assignments or tasks entrusted to them. 

The Board of Directors is responsible for setting the Chairman’s 

compensation. 

Article 14 of the Company’s bylaws stipulates that each Director 

must hold at least 100 Valeo registered shares throughout his or 

her term of office. 


On accepting their position, each member of the Board of Directors 

and the Group’s Executive Management team agrees to a Code of 

Conduct in relation to trading in the Company’s securities. This Code 

sets out the legal and regulatory provisions applicable to them in 

relation to declaring transactions concerning those securities. It also 

specifies the periods during which members of the Board and the 

Group’s Executive Management team are prohibited from trading in 

the Company’s securities and recalls the fact that they may not carry 

out any such transactions based on insider information. 

2.4. Board Committees 

The Board of Directors has set up committees in order to enhance its 

operation and provide assistance with preparing its decisions. 

The Board currently has two standing committees – the Audit 

Committee and the Nomination and Remuneration Committee. 

Further details relating to the composition and running of these 

standing committees are provided on page 148 in the report of the 

Chairman of the Board of Directors on internal control procedures 

and the preparation and organization of the Board’s work. 

3. Compensation paid to executive management and members 


The Nomination and Remuneration Committee plays a central role in 

determining the compensation paid to Valeo’s executive managers 

and members of the Board of Directors. It reviews the compensation 

paid to executive managers and makes recommendations, especially 

concerning the variable portion. The Committee defines the rules 

used to set this variable compensation, taking into account the 

managers’ performance over the year and the medium-term 

business strategy of the Company and the Group. It is also responsible 

for ensuring that these rules are applied. In addition, the Nomination 

and Remuneration Committee advises the Board of Directors on 

the Group’s stock option policy and stock option grants, as well as 

on pensions granted to executive managers and all other forms of 

benefits. 

The Nomination and Remuneration Committee also recommends to 

the Board the amount of Directors’ attendance fees to be submitted 

to shareholders for approval, as well as procedures for allocating 

these fees and the individual amounts payable to each Director 

based on their attendance record at meetings of the Board, and 

where appropriate, Board Committees. 

Finally, the Nomination and Remuneration Committee is informed 

of the compensation policy applicable to the senior managers of 

the Company and other Group companies who are not corporate 

officers. 

3.1. Executive Management 

< Contents > 

3.1.1. Compensation paid to the Chairman 

and Chief Executive Officer 

The Board of Directors fixes the remuneration paid by Valeo 

to Thierry Morin, the Company’s Chairman and Chief Executive 

Officer, based on recommendations made by the Nomination and 

Remuneration Committee. 

1 

2 

3 

4 

5 

6

Fixed compensation and benefits-in-kind 

The total gross fixed compensation paid to Thierry Morin for 2007 

amounted to 1,577,590 euros (including travel expenses), and 

19,543 euros in benefits-in-kind. 

Exceptional bonus 

Thierry Morin did not receive any exceptional compensation in 2007 

for 2006. 

At its meeting of March 7, 2007, in accordance with recommendations 

made by the Nomination and Remuneration Committee, the Board 

of Directors decided that any exceptional bonus to be awarded 

to the Chairman and Chief Executive Officer for 2007 would be 

exclusively contingent on the level of gross margin and operating 

margin achieved by the Group, and would be capped by the Board 

based on recommendations by the Nomination and Remuneration 

Committee. 

Attendance fees 

In 2007, Thierry Morin received 20,000 euros in attendance fees in 

his capacity as a Director of Valeo. 

Compensation paid by companies controlled by Valeo 

Thierry Morin received gross compensation of 45,750 euros from 

companies controlled by Valeo (as defined in Article L. 233-16 of the 

French Commercial Code), corresponding to attendance fees. 

Stock options 

In 2007, the Board of Directors granted Thierry Morin 200,000 stock 

options at its meeting of March 7 and 150,000 options at its meeting 

of November 15. These options are subject to the following terms 

and conditions: 

■ 

at its meeting of March 7, 2007 the Board set the purchase price 

for the 200,000 shares underlying the stock options at 36.97 euros, 

it being specified that (i) 50% of the options are exercisable from 

March 7, 2009, and all of the options from March 7, 2010, and 

that the shares obtained upon exercise of the options may not 

be sold before March 7, 2011; and (ii) any unexercised options 

will be forfeited on March 6, 2015. Thierry Morin shall continue 

(in euros) 

Compensation paid by the Company Benefitsin-kind 

Fixed portion Variable portion Attendance fees 




issued upon exercise of said options until such time as he leaves 

his position as a corporate officer of the Company. The calculation 

of this 75% holding will be made after the sale of the number 

of shares necessary to finance the exercise of the options and 

pay the related taxes and transaction costs. In accordance with 

the terms of the stock option plan, the exercise of these options 

is contingent on Thierry Morin holding an employment contract 

or a corporate officer’s position within the Valeo Group at the 

exercise date; 

■ at its meeting of November 15, 2007 the Board set the purchase 

price for the 150,000 shares underlying the stock options at 

36.82 euros, it being specified that (i) 50% of the options are 

exercisable from November 15, 2010 and the number of options 

that may be exercised after this date will be contingent on the 

operating margin for 2008 and will vary both proportionally and 

directly with the actual operating margin achieved within a range 

set by the Board, and that the shares obtained upon exercise of 

the options may not be sold before November 15, 2011; and (ii) 

any unexercised options will be forfeited on November 14, 2015. 

Until such time as he leaves his position as a corporate officer of 

the Company, Thierry Morin shall continue to hold, in registered 

form, at least 50% of the number of shares issued upon exercise 

of said options (after the sale of the number of shares necessary to 

finance the exercise of the options and pay the related taxes and 

transaction costs). In accordance with the terms of the stock option 

plan, the exercise of these options is contingent on Thierry Morin 

holding an employment contract or a corporate officer’s position 

within the Valeo Group at the exercise date; 

■ in 2007, Thierry Morin did not exercise any options granted in 

previous years. 

Compensation paid to the Chairman and Chief executive 

Officer over the last three years 

The table below provides a breakdown of the total gross compensation 

and benefits paid to Thierry Morin over the last three years. 

Compensation 

paid by companies 

controlled 

Total gross 

compensation 

and benefits 

2005 1,284,000 0 35,000 18,395 45,750 1,381,145 

2006 1,500,288 0 35,000 19,250 45,750 1,600,288 

2007 1,557,590 0 20,000 19,543 45,750 1,642,883 

* Excluding contributions paid into the pension fund set up for Thierry Morin by Valeo (UK) Limited (see “Pension scheme” below). These contributions amounted to 76,364 euros 

in 2007, 75,133 euros in 2006, and 73,008 euros in 2005. 

< Contents > 


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Pension scheme 

Thierry Morin is still a member of the supplementary pension 

scheme set up for members of Valeo’s former Management Board, 

as approved by the Supervisory Board on October 17, 2002. This 

system is designed to top up existing pension benefits (statutory 

pension, ARRCO, AGIRC, etc.) to enable beneficiaries to acquire 

benefits representing 2% of their final salary per year of service 

within the Group. The total amount of pension benefits may not 

exceed 60% of a beneficiary’s final salary and the scheme will only 

apply to beneficiaries who have a minimum of 15 years’ service in 

the Valeo Group when they retire, and for whom Valeo or one of its 

subsidiaries was their last employer at their retirement date. 

In addition, since Thierry Morin was appointed Chairman of 

Valeo (UK) Limited, contributions have been paid by Valeo (UK) 

Limited into a pension fund to which Thierry Morin will be entitled 

when his duties as Chairman of that company cease. His annual 

supplementary pension benefits under this scheme were set at 

60,980 euros when he took up his chairmanship in March 2001 

and since then have been indexed annually based on the salary 

index for the mechanical and electrical industries. Valeo (UK) Limited 

recorded a 76,364 euro expense in relation to this scheme in 2007. 

Compensation and benefits payable to Thierry Morin on termination 

of his corporate duties and contingent on certain criteria have been 


of August 21, 2007 (see below). 

Termination benefits 

In the event of the termination of his duties as corporate officer, 

Thierry Morin will be awarded a termination benefit contingent on 

certain criteria set at three times his most recent annual salary 

(excluding bonuses). Compensation and benefits payable to 

Thierry Morin on termination of his corporate duties have been 


of August 21, 2007 (see below). 

Compliance with the French Act of August 21, 2007 

In accordance with Article L. 225-42-1 of the French Commercial 

Code and Act 2007-1223 of August 21, 2007, the compensation and 

benefits payable to Thierry Morin on the termination of his duties 

or subsequent thereto must be contingent on criteria based on his 

and the Company’s performance. 

These legal provisions apply to the following benefits: 

1) the lump-sum termination benefits payable to the Chairman, 

corresponding to three times his most recent annual salary excluding 

bonuses. Based on recommendations issued by the Nomination 

and Remuneration Committee on March 19, 2008 the terms and 

conditions applicable to the payment of this amount were amended 

by the Board of Directors on March 20, 2008 and approved by the 

Board as a related party agreement. Following said amendments 


this amount would be payable if the Board of Directors terminates 

Thierry Morin ’s term of office (except on the grounds of gross 

misconduct in the performance of his duties); or if he leaves the 

Company of his own volition due to (i) a change of control or (ii) a 

change in Valeo’s Board of Directors that is not recommended by 

the Board or that would result in the Company implementing a new 

business strategy with which Thierry Morin does not agree; 

2) the benefits payable to Thierry Morin under the pension scheme 

set up by Valeo (UK) Limited for which Valeo (UK) Limited sets 

aside a provision each year (in an amount indexed to a defined 

salary scale). 

In accordance with Act 2007-1223 dated August 21, 2007 and 

based on recommendations by the Nomination and Remuneration 

Committee issued on March 19, 2008, on March 20, 2008 the 

Board of Directors decided that the following performance-related 

conditions must be met at the time of Thierry Morin ’s departure from 

the Company in order for him to be eligible for the above-described 

termination and pension benefits: 

■ he must have received either all or part of his exceptional targetbased 

bonus at least once in the last three years; 

■ Valeo’s attributable net income for the last fiscal year must be 

positive; 

■ Valeo’s operating margin for the last fiscal year must be above 

3%; 

■ Valeo’s gross margin for the last fiscal year must be above 15%; 

■ Valeo’s orders to OE net sales ratio must be above 1 on average 

over the two last fiscal years. 

The total amount received by Thierry Morin at the time of his 

departure from the Company or subsequent thereto will be 

determined as follows, with any reductions deducted first from his 

lump-sum termination benefits and thereafter from the pension 

benefits payable under the scheme set up by Valeo (UK) Limited: 

■ 

■ 

■ 

■ 

< Contents > 

if 4 or 5 of the applicable conditions are met Thierry Morin will 

receive 100% of the amounts concerned; 

if 3 of the applicable conditions are met Thierry Morin will receive 

70% of the amounts concerned; 

if 2 of the applicable conditions are met Thierry Morin will receive 

40% of the amounts concerned; 

if less than 2 of the applicable conditions are met Thierry Morin 

will receive 0% of the amounts concerned. 

3.1.2. Total compensation paid to other 

Group executive managers 

The total gross compensation paid to Valeo’s Functional and 

Operational Directors in 2007 amounted to 11,257,643 euros, 

compared with 10,820,943 in 2006 and 10,438,062 euros in 

2005. Of the 2006 total, 8,938,030 euros corresponded to fixed 

1 

2 

3 

4 

5 

6

compensation, 1,905,169 euros to variable compensation, 307,311 

euros to benefits in kind, 45,735 euros to attendance fees, and 

61,398 euros to profit-sharing. 

During the year, the Group’s Functional and Operating Directors 

(excluding corporate officers) also received a total of 350,000 stock 

options. 

3.2. Members of the Board of Directors 

Directors receive attendance fees, which are paid every six months. 

These fees are not, however, paid to Directors if their average 

rate of attendance at Board Meetings, or where applicable, 



at Committee meetings is lower than 50% during the six months 

in question. 

The General Shareholders’ Meeting of March 31, 2003 set the 

maximum annual total of attendance fees paid to Directors 

at 450,000 euros, an amount which has remained unchanged since 

that date. 

In 2007, attendance fees were allocated as follows by the Board 

of Directors: 20,000 euros to each Director and an additional 

15,000 euros for each Director who is a member of one of the 

Board committees. 

Total attendance fees paid by the Company to Board members in 

2007 amounted to 310,000 euros (305,000 euros in 2006) and can 

be broken down as follows: 

Director Attendance fees paid (in euros) 

Thierry Morin 20,000 

Gérard Blanc 20,000 

Daniel Camus 35,000 

Pascal Colombani 12,500 

Jérôme Contamine 27,500 

Pierre-Alain De Smedt 35,000 

François Grappotte (Director until May 21, 2007) 17,500 

Philippe Guédon 35,000 

Lord Jay of Ewelme 12,500 

Helle Kristoffersen 20,000 

Jean-Bernard Lafonta (Director until May 21, 2007) 10,000 

Alain Minc (Director until May 21, 2007) 17,500 

Georges Pauget 27,500 

Erich Spitz 20,000 

Apart from Thierry Morin (see pages 174 to 176 ) no Board member 

received any other compensation or benefits from the Company 

during the year. With the exception of Thierry Morin , no Directors 

< Contents > 

were awarded any stock options or share grants during the year. 

None of the Directors hold options to purchase newly-issued shares 

(stock subscription options). 


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3.3. Information concerning stock options and share grants 

3.3.1. Stock options granted and exercised during the year 

No stock options were granted to Directors in 2007 apart from Thierry Morin , who did not exercise any stock options during the year. 

Stock options granted to and exercised 

by members of the Board of Directors 

Options granted in 2007 by Valeo* 

and/or other Group companies 


Number of options granted/ 

exercised 

Options exercised in 2007 None 



Expiration 

date 

Date of Board 

meeting 

200,000 stock purchase options** €36.97 March 6, 2015 March 7, 2007 

150,000 stock purchase options*** €36.82 Nov. 14, 2015 Nov. 15, 2007 

* 

No Group companies other than Valeo issued stock options during the year. 

** 

In view of the prohibited periods under the applicable French stock exchange regulations, in 2006 the Board of Directors did not grant any stock options to Thierry Morin 

for that year. The 200,000 stock options set out in the table above were therefore allocated for 2006. 

*** 

Allocated for 2007. 

Stock options granted to and exercised 

by the ten employees with the highest 

number of options 

Options granted in 2007 by Valeo* 

and/or other Group companies to 

the ten employees of Valeo or other 

Group companies receiving the highest 


Options exercised in 2007 by the ten 

employees of Valeo or other Group 

companies exercising the highest 


Number of options granted/ 

exercised 



Expiration 

date 

Date of Board 

meeting 

50,000 stock purchase options 

(1 beneficiary) €36.97 March 6, 2015 March 7, 2007 

230,000 stock purchase options** 

(13 beneficiaries***) €36.82 Nov. 14, 2015 Nov. 15, 2007 

127,000 stock purchase/ 

subscription options €25.87 

* 

No Group companies other than Valeo issued stock options during the year. 

** 

Out of a total of 1,677,000 options allocated by the Board of Directors on November 15, 2007. 

*** 

Twelve beneficiaries received the same number of shares in second position. 

3.3.2. Share grants 

No share grants were made to members of the Board of Directors 

in 2007. 

In accordance with the authorization granted in the fifteenth 

resolution of the May 3, 2005 General Shareholders’ Meeting, on 

March 7, 2007 the Board of Directors granted 100,000 existing Valeo 

shares free of consideration to a restricted number of high-potential 

managers, excluding corporate officers. 

The vesting date for these shares was set by the Board of Directors at 

March 7, 2010 (i.e. three years from the Board meeting at which the 

< Contents > 

Nov. 24, 2010 

March 30, 2011 

Nov. 5, 2011 

Dec. 7, 2012 

Nov. 25, 2002 

March 31, 2003 

Nov. 6, 2003 

Nov. 8, 2004 

share grants were decided), provided that the beneficiaries hold an 

employment contract with a Valeo Group company at that date. 

Provided the above-mentioned condition is met, the beneficiaries 

will become the owners of the shares granted free of consideration 

on the vesting date and will have the same rights in relation thereto 

as all other shareholders. They may not, however, sell the shares 

received for a period of two years as from the vesting date. 

1 

2 

3 

4 

5 

6

Share grants to the ten employees receiving the highest 

number of shares free of consideration 

Shares granted free of consideration in 2007 to the ten 

employees of Valeo or related entities as defined in 

article L. 225-197-2 of the French Commercial Code, who 

received the highest number of such shares 

3.4. Pensions and other post-employment 

benefi ts 

At December 31, 2007, the total amount of provisions set aside by 

Valeo and its subsidiaries for the payment of pensions and other 

post-employment benefits to members of the Board of Directors and 

4. Related party transactions 

4.1. Agreements authorized by the Board of 

Directors in 2007 

In 2007, the Board of Directors authorized an agreement with Calyon 

bank in connection with the process of examining the statements of 

interest received from investment funds and the related financing 

operations. 

In addition, on May 21, 2007, the Board of Directors renewed 

Thierry Morin ’s term of office as Chairman and Chief Executive Officer 

and unanimously approved the terms and conditions applicable to 

any compensation and benefits payable to him on, or subsequent 

to, the termination of his duties. Thierry Morin did not take part in 

the vote on this matter. 

4.2. Agreements entered into in previous 

years which remained in force in 2007 

At its meeting of December 15, 2005, the Board of Directors 

authorized the signature of brand licensing agreements between 

the Company and several of the Group’s operating subsidiaries. 

Number of shares received 

free of consideration 



< Contents > 

Date of Board 

meeting 

59,500 

(77 beneficiaries) 

(including 70 in eigh th position) March 7, 2007 

other members of the Group’s Executive Management team came 

to 15 million euros, versus 14 million euros one year earlier. 

In 2007, total provisions set aside and the total amount recorded 

by Valeo and its subsidiaries for the payment of these benefits to 

former Board members and other Group executive managers came 

to 1.4 million euros and 0.087 million euros respectively. 

On October 18, 2004 the Board of Directors authorized Valeo 

España SA, Valeo Service España SA, Valeo Iluminación SA, and Valeo 

Térmico SA, to grant stock options exercisable for Valeo shares under 

the 2004 Valeorizon international employee stock ownership plan. 

Further details on these transactions can be found in the Statutory 

Auditors’ special reports on regulated agreements relating to 

2005 and 2006 and incorporated by reference in this Reference 

document. 

4.3. Transactions completed in the fi rst quarter 

of 2008 

The terms and conditions applicable to the payment of compensation 

and benefits to Thierry Morin on termination of his corporate duties 

and contingent on certain criteria were amended by the Board of 

Directors on March 20, 2008 and brought into compliance with the 

provisions of French Act 2007-1223 of August 21, 2007 (see below, 

Chapter 5, page 176 ). 


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4 

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6

5 Information 

PAGE 180 



5. Governmental, legal and arbitration proceedings 

To the best of Valeo’s knowledge, during the past twelve months 

there were no governmental, legal or arbitration proceedings, 

including proceedings in process, pending or expected, that may 

6. Insurance and risk coverage 

The Group’s insurance strategy is strongly rooted in risk prevention 

and protection, and is aimed at covering the major risks to which 

it is exposed. The Group self-insures recurring risks with a view to 

optimizing insurance costs. 

All Group companies have taken out insurance policies with first-rate 

insurance companies for all major risks which could have a material 

impact on their business, results, or assets and liabilities. 

The table below provides details of the coverage limits by type of risk: 


have, or have had in the recent past, a significant impact on the 

financial position or profitability of the Company or the Group. 

The risks covered include property damage, business interruption, 

merchandise and equipment transportation, third party liability, 

and occupational illnesses and accidents. 

Type of insurance Coverage limit (in euros) 

Property damage/business interruption 1 billion 

General liability and product and environmental liability 200 million 

Merchandise and equipment transportation 7.5 million 

Directors’ and Officers’ liability 120 million 

Employee-related liability claims 50 million 

Property damage cover is based on replacement value and business interruption cover on the margin lost over one year. 

In 2007, insurance premiums paid out by the Group in connection with its insurance coverage totaled 13.6 million euros. 

< Contents > 

1 

2 

3 

4 

5 

6


Fees paid by the Group to the Auditors and members of their networks 

< Contents > 

Fees paid by the Group to the Auditors and members 

of their networks 

2007 (in millions of euros) PricewaterhouseCoopers % KPMG % 

AUDIT 

Issuer - - 

Consolidated subsidiaires (4.1) (2.3) 

Statutory audit and contractual audits (4.1) (2.3) 

Issuer (2.7) - 

Consolidated subsidia ries (0.5) (0.4) 

Audit-related services (3.2) (0.4) 

Sub-total – Audit 

OTHER SERVICES PROVIDED BY MEMBERS OF THE AUDITORS’ NETWORKS 

TO CONSOLIDATED SUBSIDIARIES 

(7.3) 94% (2.7) 85% 

Legal and tax advisory services (0.5) (0.5) 

Other - - 

Sub-total – Other services (0.7 ) 6% (0.5) 15% 

TOTAL (8 .0 ) 100% (3.2) 100% 

2006 (in millions of euros) PricewaterhouseCoopers % KPMG % 

AUDIT 

Issuer - - 

Consolidated subsidia ries (4.7) (2.7) 

Statutory audit and contractual audits (4.7) (2.7) 

Issuer - - 

Consolidated subsidiaires (1.6) (0.7) 

Audit-related services (1.6) (0.7) 

Sub-total – Audit 

OTHER SERVICES PROVIDED BY MEMBERS OF THE AUDITORS’ NETWORKS 

TO CONSOLIDATED SUBSIDIARIES 

(6.3) 88% (3.4) 89% 

Legal and tax advisory services 

Other 

(0.9) (0.4) 

Sub-total – Other services (0.9) 12% (0.4) 11% 

TOTAL (7.2) 100% (3.8) 100% 


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4 

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5 Information 

PAGE 182 


General information about the Company’s capital 


1. Changes in Valeo’s share capital 

At December 31, 2007, Valeo’s share capital totaled 234,628,851 euros, 

represented by 78,209,617 common shares with a par value of 

3 euros each, all in the same class and all fully paid-up. The Valeo 

share is quoted on the Euronext Paris. 

Changes in the Company’s capital since December 31, 2003 are as follows: 


To the best of the Company’s knowledge, none of these shares 

have been pledged. 

Changes (in millions of euros) 

Number of Total number 

Year Type of operation Par value Premium Total shares of shares 

2003 - - - - - 82,133,728 

2004 Employee share issue 

Issuance of shares on exercise 

5 28 33 1,575,296 83,709,024 

of stock options 

Capital reduction further 

- 1 1 51,333 

2005 

to public tender offers 


(19) (233) (252) (6,250,000) 77,510,357 

2006 

of stock options 


- 2 2 70,260 77,580,617 


of stock options 2 15 17 629,000 78,209,617 

In 2004, Valeo set up an international employee stock ownership 

plan entitled “Valeorizon 2004” and carried out an employee share 

issue under an authorization given at the General Shareholders’ 

Meeting of April 5, 2004. The issue was described in an information 

memorandum registered with the French securities regulator 

(Autorité des marchés financiers – AMF) on August 27, 2004 under 

number 04-738. As a result of this operation, on December 16, 2004, 

Valeo placed on record a capital increase through the issue of 

1,575,296 new shares, including 400,653 subscribed by Société 

Générale in order to offer employees of subsidiaries in certain 

countries outside France a leveraged formula equivalent to that 

offered through a corporate mutual fund. The shares were issued 

without pre-emptive subscription rights for existing shareholders, 

at a price of 23.65 euros per share, representing a 20% discount 

< Contents > 

to the average of the opening prices quoted for Valeo shares over 

the twenty trading days preceding the Board of Directors’ decision 

setting the opening date of the offer period. 

During 2005, Valeo bought back 6,250,000 shares from the 

Company’s shareholders, at a price of 40 euros each, representing 

approximately 7.5% of the Company’s capital. The shares were 

purchased under a public share buyback offer and a simplified 

public tender offer, described in an information memorandum 

registered with the AMF on April 28, 2005 under number 05-323. 

The offer period ended on June 3, 2005 and on June 20, 2005 the 

Board of Directors canceled the acquired shares and reduced the 

Company’s capital by 18,750,000 euros, representing the par value 

of the shares. 

1 

2 

3 

4 

5 

6

2. Authorized, unissued capital 

Securities concerned 

Date of General Shareholders’ Meeting (duration and expiration 

of authorization) Maximum amount of issue 

Issues with pre-emptive subscription rights for existing 

shareholders 

Issuance of shares and/or share equivalents (A) 

AGM of May 21, 2007 – eighteenth resolution (authorization 

given for a maximum of 26 months, expiring on July 21, 2009) 

Capital increase paid up by capitalizing income, retained 

earnings or additional paid-in capital (B) 

AGM of May 21, 2007 – twenty-first resolution (authorization 


Issues without pre-emptive subscription rights for existing 

shareholders 

Issuance of shares to members of the employee stock 

ownership plan (C) 

AGM of May 21, 2007 – twenty-third resolution (authorization 


3. Share equivalents 

3.1. Bonds convertible into new shares and/ 

or exchangeable for existing shares 

(OCEANEs) 

Under the terms of the authorization granted by the General 

Shareholders’ Meeting of June 10, 2002 (and confirmed on 

March 31, 2003 when the Company’s management structure was 

changed), on July 25, 2003 Valeo issued 9,975,754 bonds convertible 

into new shares and/or exchangeable for existing shares (OCEANEs) 

with a nominal value of 46.40 euros each, representing an aggregate 

nominal value of 462,874,985.60 euros. 

These bonds – which mature on January 1, 2011 – are quoted on the 

Euronext Paris. They bear interest at 2.375% per annum and since 

August 4, 2003 may be exercised at any time. The bond issue is 

described in detail in the prospectus registered with the Commission 

des Opérations de Bourse on July 25, 2003 under number 03-707. 

On June 20, 2005, the Board of Directors adjusted the exercise 

conditions of the OCEANE bonds following the public share buyback 

offer and simplified public tender offer carried out in May and 

June 2005, which resulted in Valeo purchasing its own shares at 

an amount higher than the publicly quoted price. This adjustment 

was made in order to maintain the rights of the bondholders in 

accordance with Article 242-11 of the March 23, 1967 Decree and 

with the OCEANE bond issue contract. Consequently, the conversion/ 

exchange ratio applicable to the OCEANE bonds was amended from 

1 share for 1 bond to 1.013 share for 1 bond. 

At March 14, 2008, all of the OCEANE bonds were outstanding and 

were convertible and/or exchangeable for 10,105,439 shares, taking 



Utilizations of authorizations 

during the year 

69.8 million euros; (A)+(B)+(C) 

ceiling = 180 million euros None 





into account the adjustment due to the public share buyback offer 

and simplified public tender offer. 

3.2. Stock option plans 

The table on pages 184 and 185 presents the stock option plans 

set up since 2000. 

In accordance with Article R 225-138 of the French Commercial Code, 

following the public share buyback offer and simplified public tender 

offer, on June 20, 2005 the Board of Directors adjusted the number 

of shares underlying the Company’s stock options. As a result, the 

exercise ratio was raised from 1 share to 1.01 shares for 1 stock 

option, with the number of shares to be allocated on the exercise 

of options rounded up to the nearest whole number. 

At December 31, 2007, 4,242,045 stock purchase options were 

outstanding, exercisable for 4,246,972 existing shares (including 

4,927 related to the public share buyback offer and simplified public 

tender offer). In addition, 2,840,578 stock subscription options 

were outstanding, exercisable for 2,869,556 new shares (including 

28,978 related to the public share buyback offer and simplified 

public tender offer). 

4. Other securities 

< Contents > 

The Company has had access to a Euro Medium Term Notes (EMTN) 

program since October 2002. Valeo issued 600 million euros worth 

of notes under this program on June 24, 2005. The notes have an 

eight-year term and bear fixed interest of 3.75%. 


5 

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2 

3 

4 

5 

6

5 Information 

PAGE 184 



Stock option and share grant plans in force at December 31, 2007 

Shareholders’ Meetings Plan characteristics Options awarded Impact 

Date of 


Meeting 

No. of 

options Term Date (1) 

05/27/1998 500,000 6 years 


Exercise No. of 

price grantees 

No. of 

options 

o/w granted 

to corporate 

officers 

o/w granted 

to Executive 

Man. excl. 

corporate 

officers 

o/w granted 

to top ten 

grantees (2) 

Conditional 

options 

122,875 0 0 

of tender 

offers 

(56,330 at 

June 21, 

2005) 

05/25/1999 500,000 6 years 10/17/2000 €48.00 1084 500,000 0 0 8,287 

05/25/2000 800,000 8 years 677,125 0 210,000 154,000 0 

03/21/2001 €55.82 2 80,000 80,000 0 0 0 800 

12/07/2001 €42.48 5 600,000 600,000 0 0 300,000 3,000 

05/09/2001 1,000,000 8 years 

12/10/2001 €42.69 213 442,875 0 140,000 118,000 0 3,455 

06/10/2002 1,500,000 8 years 07/01/2002 €43.84 699 420,000 0 2,500 96,700 0 2,724 

11/25/2002 €28.30 229 600,000 0 159,500 107,500 0 4,568 

03/31/2003 €23.51 755 700,000 160,000 52,750 44,000 0 6,022 

03/31/2003 1,500,000 8 years 

11/06/2003 €32.91 1005 780,000 61,000 117,766 77,395 0 7,185 

04/05/2004 1,500,000 8 years 11/08/2004 €28.46 1094 1,123,200 160,000 169,600 134,400 0 10,682 

TOTAL STOCK SUBSCRIPTION 

OPTIONS 

6,046,075 1,061,000 852,116 731,995 300,000 46,723 

Stock purchase plans in force at December 31, 2007 

03/31/2003 1,500,000 8 years 11/06/2003 €32.91 1005 500,000 39,000 75,484 49,605 0 4,263 

04/05/2004 1,500,000 8 years 11/08/2004 €32.74 1094 280,800 40,000 42,400 33,600 0 2,787 

05/03/2005 4,500,000 8 years 11/17/2005 €32.32 1082 650,000 0 94,300 48,900 0 

03/03/2006 €33.75 2 187,000 150,000 37,000 0 0 

11/20/2006 €32.63 1298 1,309,250 0 251,000 175,000 0 

03/07/2007 €36.97 2 250,000 200,000 (i) 50,000 0 0 

11/15/2007 €36.82 1330 1,677,000 150,000 (i) (ii) 350,000 (i) 230,000 (ii) 174,250 (ii) 

TOTAL STOCK PURCHASE OPTIONS 4,854,050 579,000 900,184 537,105 174,250 7,050 

Share grant plans in force at December 31, 2007 

03/05/2005 4,500,000 - 17/11/2005 

Price at 

02/17/2008 

03/03/2006 Price at 

06/03/2008 

< Contents > 

10,900,125 1,640,000 1,752,300 1,269,100 53,773 

1082 600,000 0 141,450 73,350 300,000 

2 63,000 50,000 13,000 0 36,500 

20/11/2006 Price at 

11/20/2009 

116 100,000 0 0 18,500 0 

07/03/2007 Price at 

03/07/2010 

155 100,000 0 0 0 0 

TOTAL SHARE GRANTS 863,000 50,000 154,450 91,850 336,500 0 

(1) 

Date of Directors’/Supervisory Board/Management Board meeting. 

(2) 

Including directors who are not corporate officers. 

(i) 

Stock purchase options subject to the holding period described in section 3.1.1. 

(ii) 

Of which conditional (50% for the Chairman and CEO and 25% for other directors) subject to achieving a certain operating margin level in 2008, with proportional and linear 

allocation depending on the operating margin level reached within the price range set by the Board of Directors. 

1 

2 

3 

4 

5 

6

Exercise date and conditions Nbre d’options 

Start of exercise period Expiry date 

Options 

outstanding 

at 12/31/2006 

Options 

exercised 

in 2007 

Options 

exercised at 

12/31/2007 

(aggregate) 



Options 

cancelled 

in 2007 

Options 

cancelled at 

12/31/2007 

(aggregate) 

Options 

outstanding 

at 12/31/2007 

Number of 

shares to be 

subscribed 

or purchased 


Residual 

grantees 

50%-2years; 100%-3 years 10/16/2006 0 0 0 0 

10/16/2006 0 0 0 0 

10/16/2008 415,500 

4,173 

0 0 26,000 

260 

287,625 

4,374 

389,500 

3,913 

393,413 116 

100% immediately 03/20/2009 80,000 0 0 0 0 80,000 80,800 2 

50% immediately; 50% 

conditional 

12/06/2009 300,000 

3,000 

50%-2 years; 100%-3 years 12/09/2009 298,800 

3,008 

50%-2 years; 100%-3 years 06/30/2010 238,800 

2,388 

50%-2 years; 100%-3 years 11/24/2010 349,750 

3,498 

50%-2 years; 100%-3 years 03/30/2011 501,750 

5,067 

50%-2 years; 100%-3 years 11/05/2011 573,953 

6,320 

50%-2 years; 100%-3 years 11/07/2012 947,760 

9,483 

3,706,313 

37,737 

50%-2 years; 100%-3 years 11/05/2011 367,697 

3,760 

50%-2 years; 100%-3 years 11/07/2012 237,890 

2,480 

800 800 

221,040 

2,211 

246,790 

2,492 

91,508 

924 

63,400 

635 

622,738 

6,262 

57,694 

590 

14,075 

188 

0 0 0 300,000 300,000 

3,000 

0 0 27,750 

281 

0 0 28,000 

280 

274,790 

2,596 

309,915 

2,987 

91,508 

924 

67,200 

673 

743,413 

7,180 

57,694 

590 

14,075 

188 

13,000 

130 

19,540 

200 

46,107 

519 

82,600 

827 

242,997 

2,497 

29,543 

303 

21,675 

232 

171,825 

728 

209,200 

616 

209,500 

815 

154,665 

660 

252,154 

1,384 

254,240 

1,988 

1,8 39,209 

10,565 

161,846 

806 

64,585 

539 

271,050 

2,727 

210,800 

2,108 

115,710 

1,157 

235,420 

2,375 

436,338 

4,877 

801,760 

8,021 

2,840,578 

28,978 

280,460 

2,867 

202,140 

2,060 

303,000 5 

273,777 119 

212,908 419 

116,867 48 

237,795 243 

441,215 520 

809,781 788 

2,869,556 

283,327 520 

204,200 788 

50%-2 years; 100%-3 years 11/16/2013 596,380 465 465 78,220 131,840 517,695 517,695 903 

50%-2 years; 100%-3 years 03/02/2014 187,000 0 0 0 0 187,000 187,000 2 

50%-2 years; 100%-3 years 11/19/2014 1,309,250 0 0 181,500 181,500 1,127,750 1,127,750 1,174 

50%-2 years; 100%-3 years 03/06/2015 0 0 0 0 0 250,000 250,000 2 

100% – 3 years 11/14/2015 0 0 0 0 0 1,677,000 1,677,000 1,330 

2,698,217 72,234 72,234 310,938 539,771 4,242,045 4,246,972 

6,240 778 778 535 1,345 

4,927 

6,404,530 694,972 815,647 553,935 2,3 78,980 7,082,623 7,116,528 

Vesting period: 2 years 3 mths 

50% cond. (1/2 based on 2006 

perf.; 1/2 based on 2007 perf * ) 

- 541,870 0 0 309,735 367,865 232,135 232,135 903 

Vesting period: 2 years 3 mths 

50% cond. (1/2 based on 2006 

perf.; 1/2 based on 2007 perf. * ) 

- 63,000 0 0 36,500 36,500 26,500 26,500 2 

Vesting period: 3 years - 100,000 0 0 11,000 11,000 89,000 89,000 105 

Vesting period: 3 years - 0 0 0 3,750 3,750 96,250 96,250 151 

704,870 0 0 360,985 419,115 443,885 443,885 

7,109,400 694,972 815,647 914,920 2,7 98,095 7,526,508 7,560,413 

* 2006 performance: the Group’s consolidated operating margin before non-recurring expenses as a % of total operating revenues > 4.5%. 

2006 performance: the Group’s consolidated operating margin before non-recurring expenses as a % of total operating revenues > 5%. 

< Contents > 

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Current ownership structure 


1. Changes in ownership structure since 2005 

The following table concerning the Company’s capital and voting 

rights was prepared based on disclosures made to the Company 

in accordance with Articles L. 233-7 and L. 233-12 of the French 

Commercial Code, as well as information voluntarily provided by 

Number 

of shares 


shareholders. The percentage of shares and voting rights held by each 

shareholder is based on the Company’s capital at December 31, 2007, 

corresponding to 78,209,617 shares and 78,982,937 voting rights, 

excluding treasury stock. 

December 31, 2005 December 31, 2006 December 31, 2007 

% Number 

of voting 

rights* 

% Number 

of shares 

% Number 

of voting 

rights* 

% Number 

of shares 

% Number 

of voting 

rights* 

M&G 

Investment 

Management 

Limited 

Caisse des 

Dépôts et 

1,631,438 2 .10 1,631,438 2 .06 1,631,438 2.09 1,631,438 2.07 

consignations** 5,061,559 6.53 7,128,860 9.03 5,061,559 6.52 7,128,860 9.01 4,681,559 5.99 6,748,860 8.54 

Morgan Stanley 

The Boston 

Company Asset 

Management 

8,685,926 11.11 8,685,926 11.00 

LLC 

Brandes 

Investment 

4,124,213 5.32 4,124,213 5.23 4,208,278 5.42 4,208,278 5.32 0 0.00 0 0.00 

Partners LP 

Franklin 

3,996,838 5.16 3,996,838 5.06 4,120,338 5.31 4,120,338 5.21 3,572,038 4.57 3,572,038 4.52 

Resources, Inc. 

Pardus 

European 

Special 

Opportunities 

8,323,865 10.74 8,323,865 10.55 3,752,183 4.84 3,752,183 4.74 3,752,183 4.80 3,752,183 4.75 

Master Fund LP 3,450,000 4.45 3,450,000 4.36 14,500,000 18.54 14,500,000 18.36 

Employees 1,418,375 1.83 1,418,375 1.80 1,041,149 1.34 1,041,149 1.32 962,270 1.23 962,270 1.22 

Treasury stock 807,704 1.04 0 0.00 686,704 0.89 0 0.00 1,432,804 1.83 0 0.00 

Other 53,777,803 69,38 53,930,522 68,33 53,628,968 69,13 53,777,208 67,98 38,991,399 49,84 39,130,222 49,54 

TOTAL 77,510,357 100.00 78,922,673 100 77,580,617 100.00 79,109,454 100.00 78,209,617 100.00 78,982,937 100.00 

* Shares registered in the name of the same shareholder for 4 years carry double voting rights (see page 164 ). 

** Caisse des dépôts et consignations’ interest held in its own account. Caisse des dépôts et consignations is the only shareholder owning over 5% of the capital that has double 

voting rights. 

< Contents > 

% 

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4 

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1.1. Major shareholders 

To the best of the Company’s knowledge, the only shareholders 

directly or indirectly holding 5% or more of the Company’s capital or 

voting rights at December 31, 2007 were Pardus European Special 

Opportunities Master Fund LP, Morgan Stanley and Caisse des dépôts 

et consignations. 

As far as the Company is aware, the only shareholders directly or 

indirectly holding 2% or more of the Company’s capital or voting 

rights at December 31, 2007 were Pardus European Special 

Opportunities Master Fund LP, Morgan Stanley, Caisse des dépôts et 

consignations, Franklin Resources, Inc., Brandes Investment Partners 

LP and M&G Investment Management Limited. 

On April 19, 2007 Brandes Investment Partners declared that it had 

reduced its interest to below the statutory 5% disclosure threshold 

and that it held 4.6% of the Company’s capital and 4.5% of the 

voting rights on April 13, 2007. 

On June 19, 2007 the Société Générale group disclosed that as 

part of its trading operations, on June 15, 2007 it had reduced its 

interest to below the statutory 5% disclosure threshold and that it 

held 4.7% of the Company’s capital and 4.6% of the voting rights. 

The Société Générale group subsequently informed the Company 

that at December 28, 2007 it held only 0.8% of Valeo’s capital and 

voting rights. 

On June 20, 2007 Natixis disclosed that as part of its trading 

operations, on June 15, 2007 it had reduced its interest to below 

the statutory 5% disclosure threshold and that it held 2.9% of the 

Company’s capital and 2.8% of the voting rights. Natixis subsequently 

informed the Company that at December 31, 2007 it no longer held 

a significant percentage of Valeo’s capital or voting rights. 

On January 10, February 21 and May 25, 2007, Pardus European 

Special Opportunities Master Fund LP raised its interests to above 

the statutory disclosure thresholds of 5%, 10% and 15% respectively. 

In its statement of intention dated February 26, 2007, drawn up in 

accordance with Article L. 233-7 VII of the French Commercial Code, 

Pardus European Special Opportunities Master Fund LP declared that 

at that date it was not acting in concert with any third party and that 

it had no immediate plans to take over control of Valeo although it did 

reserve the right to continue to purchase or sell Valeo shares based on 

market opportunities and to request the appointment of one or more 

persons of its choosing as members of Valeo’s Board of Directors. In a 

subsequent letter dated August 8, 2007 sent to the C ompany, Pardus 

European Special Opportunities Master Fund LP disclosed that it had 

raised its interest in the Company’s capital and voting rights to above 

the threshold of18% set down by the Company’s by laws. 

In a letter dated November 22, 2007, Morgan Stanley disclosed 

that it had raised its interest to above the statutory 5% disclosure 

threshold and that it held 5.2% of the Company’s capital and 5.1% 



of the voting rights on November 16, 2007. On December 27, 2007, 

Morgan Stanley disclosed that it had increased its interest to above 

the 10% disclosure threshold and that it held 11.1% of the Company’s 

capital and 10.9% of the voting rights. It also declared that it was 

acting individually and that it did not intend to take over control of 

Valeo or request the appointment of any of its representatives on 

Valeo’s Board of Directors. 

On February 7, 2008, Franklin Resources, Inc. has informed the 

C ompany that through its affiliates they manage a position 

equivalent to 3.15% of capital and 3.14% of voting rights as of 

March 31, 2008. 

1.2. Treasury stock 

< Contents > 

At December 31, 2007, Valeo directly or indirectly held 1,432,804 of 

its own shares, representing 1.83% of the Company’s share capital, 

with a value of 34.115 euros per share based on their purchase 

price. At December 31, 2006, Valeo held 686,704 of its own shares 

(0.89% of the share capital). 

Out of the total number of treasury shares held at December 31, 2007, 

993,017 were earmarked for allocation on the exercise of stock 

options, compared with 617,704 at December 31, 2006. This increase 

reflects: (i) 448,325 shares acquired on November 5, 2007 to cover 

the implementation of the agreement for partial management of 

its share buyback program entered into with an investment services 

provider on August 31, 2007; and (ii) the exercise of 72,234 stock 

options by Group employees granting entitlement to 73,012 shares. 

The shares acquired in 2007 were purchased at a price of 38.06 euros 

each. Trading fees for these transactions as well as the fees relating 

to the management agreement entered into with the investment 

services provider totaled 20,400 euros. All of these shares have been 

earmarked (i) for allocation on the exercise of stock options; and 

(ii) for award to employees by way of profit-sharing bonuses and 

in connection with company savings plans in accordance with the 

objectives set out in the share buyback program authorized by the 

General Shareholders’ Meeting of May 21, 2007. 

The remaining treasury shares held (439,787 at December 31, 2007 

versus 69,000 at December 31, 2006) are earmarked for use under 

a liquidity agreement that complies with the Code of Ethics issued 

by the French Association of Investment Companies (Association 

Française des Entreprises d’Investissement), signed with an 

investment services provider on April 22, 2004. 

The total resources allocated for implementing the liquidity 

agreement represented 439,787 shares and 1,665,696 euros 

at December 31, 2007, compared with 69,000 shares and 

13,039,863 euros one year earlier. On the date the liquidity 

agreement was signed, 220,000 Valeo shares and a sum of 

6,600,000 euros were allocated to its implementation. 


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In 2007 Valeo acquired 1,870,234 shares at an average price of 

35.38 euros and sold 1,499,447 shares at an average price of 

36.24 euros. Trading fees for these transactions as well as fees 

relating to the liquidity agreement with the investment services 

provider totaled 282,895 euros, compared with 264,712 euros 

in 2006. 

Under the terms of a contract signed with an investment services 

provider on December 11, 2007 within the scope of the agreement 

for the partial management of the share buyback program, Valeo 

has undertaken to acquire and the investment services provider 

has undertaken to deliver a certain quantity of Valeo shares capped 

at 650,000 shares, representing 15 million euros. All of the shares 

acquired in this way will be earmarked (i) for allocation on the 

exercise of stock options; and (ii) for award to employees by way 

of profit-sharing bonuses and in connection with company savings 

plans in accordance with the objectives set out in the share buyback 

program authorized by the General Shareholders’ Meeting of 

May 21, 2007. On January 16, 2008, Valeo acquired 529,528 shares 

at a price of 28.36 euros each. 

Market transactions were carried out under the authorizations granted 

under the fifth resolution of the General Shareholders’ Meeting of 

May 17, 2006 and the fifth resolution of the General Shareholders’ 

Meeting of May 21, 2007, in accordance with a liquidity agreement 

entered into with an investment services provider in order to provide a 

liquid market for the Company’s shares and stabilize the share price. 

1.3. Directors’ interests 

As part of the employee share issue carried out in 2004 (see 

page 182 ), Thierry Morin , Chairman and Chief Executive Officer of 

Valeo, subscribed to 153,617 units in the Valeorizon mutual fund, 

corresponding to 153.62 Company shares, and 921,702 units in the 

2. Disclosure thresholds 

In accordance with Article L. 233-7 of the French Commercial Code, 

any individual or legal entity, acting alone or in concert that holds 

a number of shares representing over 5%, 10%, 15%, 20%, 25%, 

33.33% , 50%, 66.66% , 90% or 95% of the Company’s capital or 

voting rights, is required to disclose to the Company and the AMF by 

letter that the related disclosure threshold has been exceeded. Said 

disclosure must be made within five trading days from the date when 

the threshold is exceeded and must also state the total number of 

shares and voting rights held by the shareholder concerned. The AMF 

subsequently publishes the disclosures. This disclosure obligation also 

applies when an interest in the Company’s capital and/or voting 

rights is reduced to below the above-mentioned thresholds. 


Valeorizon + mutual fund, entitling him to 7,373.62 shares as a result 

of the applicable leverage effect. Thierry Morin ’s total investment 

in these funds came to 25,431.30 euros, representing 23.65 euros 

per unit. 

At December 31, 2007, Thierry Morin and other members of the 

Board of Directors held less than 1% of Valeo’s capital and voting 

rights in a personal capacity. 

1.4. Employee stock ownership 

At December 31, 2007, employees held a total of 962,270 shares 

under Group employee stock ownership plans, directly or through 

two corporate mutual funds, representing 1.23 % of the Company’s 

capital. At December 31, 2006, employees held 1,041,149 shares, 

representing 1.34% of the capital. 

1.5. Change in control 

To the best of the Company’s knowledge, there are no shareholder 

pacts or agreements in force that could lead to a change in control 

of the Company. 

There are no provisions in the Company’s bylaws or internal rules 

that may delay, postpone or prevent a change in the Company’s 

control. 

1.6. Capital under option 

< Contents > 

At the date of this Reference document, no capital of any member of 

the Group was under option or agreed conditionally or unconditionally 

to be put under option. 

If any shareholder fails to comply with these disclosure requirements, 

the shares in excess of the relevant threshold will be stripped of 

voting rights at any and all General Shareholders’ Meetings held 

within the two-year period from the date when the omission is 

remedied. 

Since the General Shareholders’ Meeting of March 31, 2003, Article 9 

of the Valeo bylaws states that, in addition to the applicable statutory 

disclosure thresholds, any individual or legal entity, acting alone 

or in concert, that raises or reduces its interest in the Company’s 

capital or voting rights, directly or indirectly, to above or below 2% 

respectively (or any multiple thereof), is required to disclose to the 

Company by registered letter with return receipt requested that 

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3 

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the relevant disclosure threshold has been crossed. Said disclosure 

must be made within 15 days from the date when the threshold is 

crossed and the shareholder concerned must state their own identity 

as well as that of any parties acting in concert with the shareholder. 

In accordance with the seventh paragraph of Article L.228-1 of the 

French Commercial Code, this disclosure requirement also applies 

to shares held through an intermediary. 

3. Shareholder identification 

Registered and bearer shares are recorded in shareholders’ accounts 

in accordance with applicable laws and regulations. 

However, a bank, broker or other intermediary may register on behalf 

of shareholders who are domiciled outside France in accordance 

with Article 102 of the French Civil Code. This registration may be 

made in the form of a joint account or several individual accounts, 

each corresponding to one shareholder. Any such intermediary must 

inform the Company or the intermediary managing the Company’s 

account that it is holding the shares on behalf of another party. 

The Company is entitled to identify all holders of shares and other 

securities redeemable, exchangeable, convertible or otherwise 

exercisable for shares carrying rights to vote at General Shareholders’ 

Meetings, in accordance with the procedure provided for in 

Article L. 228-2 et seq. of the French Commercial Code. 

In order to identify holders of bearer shares, in accordance with 

the applicable laws and regulations, the Company is entitled to 

request, at any time, from the central depository responsible for its 

securities issues account, in exchange for a fee, the name – or, in the 

case of corporate shareholders, the company name –, nationality, 

year of birth – or, in the case of corporate shareholders, the year of 

incorporation – and address of holders of bearer shares and other 

securities redeemable, exchangeable, convertible or otherwise 

exercisable for shares carrying rights to vote at General Shareholders’ 

Meetings, together with details of the number of shares held by each 

such shareholder and of any restrictions applicable to the securities 

concerned. 

Based on the list provided by the above-mentioned organization, 

where the Company considers that shares may be held on behalf 

of third parties, it may request, in accordance with the same 

conditions, either through the organization or directly from the 

parties mentioned on the list, the same information concerning the 

holders of the shares. If one of the parties mentioned on the list is 



< Contents > 

Non-compliance with the above obligations is subject to the penalties 

set out in Article L. 233-14 of the French Commercial Code, at the 

request of one or several shareholders together holding at least 2% 

of the Company’s capital or voting rights, as recorded in the minutes 

of the General Shareholders’ Meeting. 

a bank, broker or other intermediary, it must disclose the identity of 

the shareholders for whom it is acting. The information is provided 

directly to the financial intermediary managing the Company’s share 

account, which shall pass on said information either to the Company 

or the above-mentioned central depository, as applicable. 

For registered shares and other securities redeemable, exchangeable, 

convertible or otherwise exercisable for shares, any intermediary 

holding the securities on behalf of a third party must disclose the 

identity of the person or entity for whom it is acting as well as 

the number of shares held by each, upon simple request by the 

Company or its representative, which may be made at any time. 

The Company may also request from any corporate shareholder 

holding over 2.5% of the Company’s capital or voting rights, 

information concerning the identity of persons or companies 

holding either directly or indirectly over one third of the corporate 

shareholder’s capital or voting rights. 

If an individual or corporate shareholder is asked to provide 

information in accordance with the above conditions and fails to 

provide it by the applicable deadline, or provides incomplete or 

incorrect information, the shares or other securities redeemable, 

exchangeable, convertible or otherwise exercisable for shares 

recorded in the shareholder’s account shall be stripped of voting rights 

for all General Shareholders’ Meetings held until the identification 

request has been fulfilled, and the payment of any corresponding 

dividends shall also be deferred until that date. 

In addition, if an individual or company registered in the Company’s 

shareholders’ account deliberately ignores their obligations, the 

Company or one or more shareholders holding at least 5% of the 

Company’s capital may apply to the court of the place in which the 

Company’s registered office is located to obtain an order to totally 

or partially strip the shares concerned of their voting rights and the 

corresponding dividend, for a maximum period of five years. 


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Market for the Company’s securities 


1. Share buyback program and cancellation of treasury shares 

1.1. Share buyback program 

In the fifth resolution of the General Shareholders’ Meeting held 

on May 21, 2007, in accordance with Articles L. 225-209 et seq. of 

the French Commercial Code, the Company’s shareholders granted 

the Board of Directors an eighteen-month authorization from the 

date of said Meeting to trade in the Company’s shares, including 

by delegation. This authorization may be used for the following 

purposes: (i) to allocate shares on the exercise of stock options; 

(ii) to award shares to employees by way of profit-sharing bonuses 

and in connection with company savings plans; (iii) to allocate 

shares on redemption, conversion, exercise or exchange of share 

equivalents; (iv) to purchase shares with a view to canceling some or 

all of them; (v) to allocate shares in exchange for shares in another 

entity in connection with acquisitions; (vi) to ensure liquidity in the 

secondary market for the Company’s shares in accordance with 

a liquidity agreement entered into with an investment services 

provider; and (vii) to enable an investment services provider to carry 

out share purchases, sales or transfers, including through off-market 

transactions. 

The number of shares that may be acquired under this authorization 

may not represent over 10% of the Company’s capital. 

The purchase price may not exceed 60 euros per share. 

This authorization was given for an eighteen-month period as of the 

General Shareholders’ Meeting of May 21, 2007, and superseded 

the unused portion of previous authorizations given to the Board of 

Directors to carry out share buyback programs. 

A description of the 2007 renewal of the Company’s share buyback 

program was drawn up in accordance with Articles 241-1 et seq. of 

the AMF’s General Regulations and published on Valeo’s website 

on May 29, 2007. 


In 2007 Valeo carried out a number of share sale and purchase 

transactions under the above mentioned share buyback program, 

as well as the program authorized at the General Shareholders’ 

Meeting of May 17, 2006. 

During the year the Company purchased 1,870,234 shares at an 

average price of 35.38 euros and sold 1,499,447 shares at an 

average price of 36.24 euros. All of these transactions were carried 

out under the liquidity agreement signed on April 22, 2004 with an 

investment services provider which complies with the Code of Ethics 

of the AFEI (French Association of Investment Companies). 

At December 31, 2007, Valeo held 1,432,804 treasury shares, 

representing 1.83% of the Company’s capital. At that date each of 

the shares had a unit value of 34.115 euros, based on their purchase 

price. At December 31, 2006, Valeo held 686,704 treasury shares, 

representing 0.89% of the Company’s capital. 

The number of shares held in treasury at December 31, 2007 broke 

down as 993,017 to be allocated on the exercise of stock options 

and 439,787 to be used in connection with the above-mentioned 

liquidity agreement. 

1.2. Cancellation of treasury shares 

< Contents > 

In the twenty-fourth resolution of the General Shareholders’ Meeting 

of May 21, 2007, the Company’s shareholders gave the Board of 

Directors a twenty-six month authorization to reduce the Company’s 

capital by canceling treasury shares. Under this authorization, the 

number of shares cancelled in any given twenty-six month period 

may not exceed 10% of the Company’s share capital. 

1 

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3 

4 

5 

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2. Dividends 

Dividends per share over the past three years were as follows: 



Year Dividend per share (in euros) Tax allowance (in euros) Total (in millions of euros) 

2004 1.10 

2005 1.10 

2006 1.10 

In view of the Group’s results in 2007, at the General Shareholders’ 

Meeting to be held to approve the financial statements for the year, 

the Board of Directors will recommend a net dividend of 1.20 euro 

per share. 

For individual shareholders domiciled in France for tax purposes, 

dividends are included in personal taxable income. However, subject 

to certain conditions these shareholders are eligible for a 40% tax 

allowance, irrespective of the amount of the dividend, plus a fixed 

annual tax allowance. All of the Company’s dividends are eligible 

for this tax regime. 

In accordance with Article 117 quater of the French General Tax Code, 

individual shareholders domiciled in France for tax purposes can elect 

to pay an 18% flat-rate withholding tax on their dividends. Where 

< Contents > 


in Article 158-3-2 of the French General Tax Code 91 





shareholders take up this option they must inform the Company or its 

representative at each dividend payout date. If a shareholder elects 

to be subject to this flat-rate withholding tax in a particular year, said 

tax will apply to all dividends received by the shareholder during that 

year and he or she will not be able to claim the above-mentioned 

allowances. Consequently, whether or not this flat-rate withholding 

tax option is advantageous will depend on the shareholder’s tax 

position and it is the responsibility of each shareholder to examine 

with their tax advisors whether it is in their interests to take it up. 

As the dividend payout rate is not fixed, future dividend payments 

will depend on the Group’s results as well as the financing required 

to drive future growth. The Company cannot guarantee the amount 

of dividends to be paid for any particular year. 


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Investor relations 


Valeo aims to provide a steady flow of exhaustive and detailed 

real-time information to its diverse financial community, comprising 

1. Individual shareholder relations 

Based on the Company’s estimates, individual shareholders control 

approximately 5% of Valeo’s share capital. These shareholders, 

who are mostly domiciled in France, have access to the following 

communication tools: 

■ 

■ 

a toll-free line (0 800 814 045) available to individual shareholders 

in France since 1998. In 2007, this service dealt with over 210 

calls, mainly relating to Valeo’s share price and the General 

Shareholders’ Meeting; 

the valeo.com website which is aimed at providing information 

to all shareholders. The Finance section of the site provides realtime 

stock market and shareholder information, including the 

latest share prices, ownership structure, dividends, and documents 

relating to General Shareholders’ Meetings. Financial publications 

can also be consulted on-line, such as annual and interim reports 

2. Institutional shareholder relations 

Valeo places great importance on holding frequent meetings with 

investors and analysts. These meetings are organized in major 

financial centers in Europe, North America and Asia and take various 

forms, including one-on-one meetings, group events, conference 

calls, themed or general investor conferences, and site visits. In 

all, some 400 institutional investors participated in these events, 

either individually or in small groups, with one quarter meeting 

Valeo’s Chairman. 

The objective of the Group’s Investor Relations Department is to 

serve as an interface between the Group and investors and analysts, 

in order to keep them informed of Valeo’s strategy, products, key 

events and financial performance. 


■ 

■ 

■ 

< Contents > 

current and prospective private and institutional shareholders, as 

well as financial analysts. 

and financial presentations, as well as all press releases and 

prospectuses. In addition, visitors to the site can submit financial 

questions to the Group’s spokesperson; 

a shareholders’ newsletter, which was relaunched in 2007 with 

two issues – in April and October; 

the Actionaria investors’ fair in Paris which Valeo attended on 

November 16 and 17, 2007; 

the share registrar service provided by Société Générale since the 

end of 2000. This service, used by some 3,000 shareholders at 

December 31, 2007 – mainly individual shareholders – provides 

a share information line on 0825 820 000 (available in France 

only), for questions concerning dividends, tax issues and placing 

orders. 

Contact 

Rémy Dumoulin 

Investor Relations Director 

Valeo 

43, rue Bayen 

F-75848 Paris Cedex 17 

France 

Tel.: +33 (0)1 40 55 20 39 

Fax: +33 (0)1 40 55 20 40 

email: remy.dumoulin@valeo.com 

Provisional financial communication calendar 

General Shareholders’ Meetings: June 20, 2008 

(Palais Brongniart, 75002 Paris) 

First-half 2008 results: July 28, 2008 

Third-quarter 2008 results: October 20, 2008 

Full-year 2008 results: first half of February 2009 

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2 

3 

4 

5 

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3. Ownership structure 

Primarily on the basis of information voluntarily disclosed by some of the Company’s shareholders. 

3.1. Ownership structure 

at December 31, 2007 

% capital (% voting rights) 

4. Stock market data 

5. Per share data 



3.2. Ownership structure at March 31 , 2008 

% capital (% voting rights) 

< Contents > 

2007 2006 2005 2004 2003 

Market capitalization at year-end 

(in billions of euros) 2.21 2.45 2.43 2.58 2.61 

Number of shares 78,209,617 77,580,617 77,510,357 83,709,024 82,133,728 

Highest share price (in euros) 45.89 35.40 38.20 38.35 36.40 

Lowest share price (in euros) 27.75 25.00 30.25 27.22 19.75 

Average share price (in euros) 37.71 30.58 33.79 32.47 29.27 

Share price at year-end (in euros) 28.20 31.53 31.41 30.80 31.75 

(in euros) 2007 2006 2005 

Earnings per share 1.06 2.10 1.80 

Dividend 1.20 (1) (3) 1.10 (2) 1.10 (2) 

(1) 1.20 euro dividend subject to approval at the General Shareholders’ Meeting to be held to approve the 2007 financial statements. 

(2) Eligible for the 40% tax allowance (for 2005 and 2006) provided for in Article 158-3-2° of the French General Tax Code. 

(3) Eligible for the 40% tax allowance provided for in Article 158-3-2° of the French General Tax Code or, at the choice of the shareholder, subject to the 18% flat-rate withholding 

tax provided for in Article 117 quater i.1 of said Code. For further information on the flat-rate withholding tax option see point 2 (Dividend) in the above section entitled 

“Market for the Company’s securities”. 


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6. Share performance over 18 months 

Date 

7. Share price from January 1, 2003 through April 28 , 2008 


Price (in euros) Trading 

High Low Closing 

(average) 

volume 

(no. of shares) 

Trading volume 

(in millions of euros) 

October 2006 31.30 26.52 27.98 24,508,984 691.80 

November 2006 31.20 28.81 30.09 15,424,406 464.32 

December 2006 32.25 29.26 31.31 13,152,450 410.19 

January 2007 36.77 31.35 34.24 18,429,439 637.83 

February 2007 38.55 34.91 36.88 14,875,097 550.19 

March 2007 45.89 35.71 39.89 25,930,297 1,049.55 

April 2007 45.60 41.36 43.18 17,499,072 755.55 

May 2007 42.68 38.56 41.28 19,219,578 789.75 

June 2007 42.34 38.50 40.15 15,880,262 638.57 

July 2007 40.85 35.70 39.38 13,740,196 536.33 

August 2007 38.12 33.49 35.95 15,691,656 561.47 

September 2007 39.21 33.48 36.48 11,361,699 413.16 

October 2007 42.19 37.02 39.36 13,127,738 518.77 

November 2007 38.30 32.20 34.98 18,407,856 643.61 

December 2007 35.34 27.75 30.76 15,868,385 494.75 

January 2008 28.60 22.05 25.02 26,052,874 653.20 

February 2008 26.59 22.05 24.82 17,375,338 428.37 

March 2008 25.64 21.50 23.62 15,142,049 357.96 

Source: Euronext Paris. 

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8. Monthly trading volumes 

Information on subsidiaries and affiliates 

Following the creation of subsidiaries for industrial activities in 

2002, Valeo is now the Group’s holding and treasury management 

company. As such, Valeo centralizes the management of market 

risks to which its operating subsidiaries are exposed, including 

changes in interest rates as well as fluctuations in exchange rates 

and quoted commodities prices. Valeo also centralizes the financing 

requirements of these subsidiaries and is generally the sole 

counterparty of the financial institutions that provide the funding to 

cover these requirements. The related assets (cash and marketable 

securities) and liabilities (external debt) are included in Valeo’s 

balance sheet. Valeo is also responsible for upholding the image 

of the Valeo brand. To this end, it has entered into brand licensing 


Information on subsidiaries and affi liates 

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agreements with certain of its operating subsidiaries (see “Related 

party transactions” on page 179 ). Group-wide control and support 

functions, encompassing accounting, legal counsel, information 

technology, procurement, real-estate management and supplychain 

management, are performed by Valeo Management Services, 

which bills a fee to the French subsidiaries. The Group’s operating 

assets and liabilities are carried by its 171 subsidiaries, mainly by 

the industrial and commercial entities listed on pages 196 and 197 . 

A list of consolidated companies – including their geographic location 

– is provided in Note 7 to the consolidated financial statements on 

pages 136 to 141 . 


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Other Information 

2008 quaterly financial information 200 

Annual information document 201 

Person responsible for the Reference 

document 207 


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i nformation 

2008 quaterly fi nancial i nformation 

2008 quaterly financial i nformation 

Valeo: 30% increase in net income in the first quarter 2008 

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Third consecutive quarter of improved margins 

Continued refocusing of the product portfolio 

1 January - 31 March 

(In € million) 2008 * 2007 ** Change 

Total operating revenues 2,473 2,499 - 1.0 % 

Gross margin 392 377 + 4.0 % 

% of sales 16.1 % 15.3 % + 0.8 pt 

Operating margin 90 74 + 21.6 % 

% of total operating revenues 3.6 % 3.0 % + 0.6 pt 

Net income (attributable to the company’s shareholders) 43 33 + 30.3 % 

% of total operating revenues 1.7 % 1.3 % + 0.4 pt 

Basic earnings per share from continued operations (€) 0.57 0.42 +35.7 % 

* The first quarter 2008 results were not audited by the Statutory Auditors, nor were they the object of a limited review by these auditors. 

** These figures do not include amounts related to the Wiring Harness activity, which was divested on 31 December 2007, in line with IFRS 5 norms. 

(1) Operating income before other income and expenses. 

The Group’s strategy is confirmed by the continued improvement of 

its performance. Despite a market slowdown, Valeo’s results have 

progressed, thanks to its strategy of operational excellence (cost and 

quality). The Group continued the alignment of its product portfolio 

around its three Domains of Innovation, with the planned divestiture 

of its truck engine cooling activity. 

First quarter 2008 results 

In the first quarter of 2008, total operating revenues stood at 2,473 

million euros, stable at constant reporting entity and exchange rates. 

Volumes increased by 3.7%. At the same time, world automotive 

production rose by only 1.5%, a marked slowdown compared with 

the second half of 2007 (+8%). 

Gross margin totaled 392 million euros or 16.1% of sales. The 0.8 

point increase in the margin rate reflects productivity gains and a 

slight drop in raw material costs. 

Operating margin rose by 21.6% to 90 million euros, compared 

with 74 million euros in 2007. Despite the marked automotive 

market slowdown and an unfavorable calendar impact for the first 

quarter, the operating margin rate was up by 0.6 points, in line with 

progress made during the second half of 2007. 

Net financial debt amounted to 786 million euros, down by 19%, 

versus 966 million euros at 31 March 2007. This was due in part to 

the sale of the W iring H arness business on 31 December 2007. The 

Group’s net debt-to-equity ratio is 44%, down 10 points versus the 

end of the first quarter 2007. 


Highlights 

On 3 April 2008, Valeo announced a project to sell its truck engine 

cooling division to the company EQT. This operation, which aims 

to focus the Group’s engine cooling activity on the passenger car 

segment, is part of the program to divest non-strategic activities. 

Valeo received several awards from its automaker customers 

recognizing the Group’s quality performance, including an Excellent 

Quality Performance Award from Toyota in Nagoya, Japan. The Group 

also received awards from Toyota Europe, TPCA (Toyota Peugeot 

Citroën Automobile) and Renault. For the fourth year in a row, Valeo 

improved its quality performance, recording its lowest ever level of 

customer returns in 2007, with a rate of 10 ppm (defective parts per 

million delivered) versus 185 ppm four years earlier. 

On 10 April 2008, the German insurance company Allianz gave 

Valeo’s Park4UTM system the 2008 Genius Safety Award, recognizing 

innovations that contribute to better road safety. Park4UTM also won 

the automotive industry’s prestigious 2008 PACE Award. This is the 

Group’s fourth consecutive PACE Award, following the blind spot 

detection system in 2007, the StARS micro-hybrid system in 2006 

and the Lane VueTM system in 2005. 

Outlook 

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In the context of an automotive market slowdown, with new tensions 

impacting raw material prices, Valeo confirms an improvement of its 

operating margin in 2008, thanks to the pursuit of its strategy based 

on operational excellence and innovation. 

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Annual information document 

Other i nformation 


This Annual Information Document has been prepared in compliance with Article 451-1-1 of the French Monetary and Financial Code and 

Article 222-7 of the General Regulations of the French securities regulator (Autorité des marchés financiers, AMF). This document lists the 

information published or made public by Valeo from March 16, 2007 through March 17, 2008. 

Annual, interim and quarterly financial information, share buyback programs, Euro 

Medium Term Note (EMTN) programs and other information 

April 25, 2008 - Press release: first-quarter 2008 results (1) 

April 5, 2008 - Monthly press release containing weekly share buyback statements – March statement (1) 

March 7, 2008 - Monthly press release containing weekly share buyback statements – February statement (1) 

February 13, 2008 - Presentation of the 2007 results and outlook (1) 

February 7, 2008 - Monthly press release containing weekly share buyback statements – January statement (1) 

January 18, 2008 - Execution of the agreement for partial management of the share buyback programs (1) 

January 10, 2008 - Interim statement regarding the liquidity agreement (1) 

January 7, 2008 - Monthly press release containing weekly share buyback statements – December statement (1) 

December 7, 2007 - Monthly press release containing weekly share buyback statements – November statement (1) 

November 9, 2007 - Execution of the agreement for the partial management of the share buyback program (1) 

November 7, 2007 - Monthly press release containing weekly share buyback programs – October statement (1) 

October 17, 2007 - Press release: third-quarter 2007 results (1) 

October 5, 2007 - Monthly press release containing weekly share buyback statements – September statement (1) 

September 7, 2007 - Monthly press release containing weekly share buyback statements – August statement (1) 

September 6, 2007 - Agreement for partial management of the share buyback programs (1) 

August 7, 2007 - Monthly press release containing weekly share buyback statements – July statement (1) 

July 26, 2007 - First-half 2007 results (1) 

July 11, 2007 - Interim statement regarding the liquidity agreement (1) 

July 6, 2007 - Monthly press release containing weekly share buyback statements – June statement (1) 

June 7, 2007 - Monthly press release containing weekly share buyback statements – May statement (1) 

May 18, 2007 - Description of the 2007 share buyback program (1) 

May 11, 2007 - Base Prospectus for the EMTN program (2) 

May 7, 2007 - Monthly press release containing weekly share buyback statements – April statement (1) 

April 24, 2007 - Press release: first-quarter 2007 results (1) 

April 6, 2007 - Monthly press release containing weekly share buyback statements – March statement (1) 

March 29, 2007 - 2006 Reference d ocument (1) 

(1) available at www.valeo.com 

(2) available at www.bourse.lu 

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Disclosure thresholds (posted on the AMF website at www.amf-france.org) 

January 3, 2008 - Morgan Stanley filed a statement of intention regarding Valeo 

December 28, 2007 - Morgan Stanley declared that it had indirectly raised its interest in Valeo’s capital and voting rights to above 

the 10% disclosure threshold 

November 28, 2007 - Morgan Stanley declared that it had indirectly reduced its interest in Valeo’s capital and voting rights to below 


November 23, 2007 - Morgan Stanley declared that it had indirectly raised its interest in Valeo’s capital and voting rights to above 


June 20, 2007 - Société Générale declared that it had indirectly reduced its interest in Valeo’s capital and voting rights to 

below the 5% disclosure threshold 

June 20, 2007 - Natixis declared that it had reduced its interest in Valeo’s capital and voting rights to below the 5% disclosure 

threshold 

June 14, 2007 - Société Générale declared that it had indirectly reduced its interest in Valeo’s capital and voting rights to 

below the 5% disclosure threshold 

June 13, 2007 - Natixis declared that it had raised its interest in Valeo’s capital and voting rights to above the 5% disclosure 

threshold 

June 11, 2007 - Pardus European Special Opportunities Master Fund LP declared that it had raised its interest in Valeo’s voting 

rights to above the 15% disclosure threshold 

May 31, 2007 - Société Générale declared that it had directly and indirectly raised its interest in Valeo’s capital and voting 

rights to above the 5% disclosure threshold 

May 29, 2007 - Pardus European Special Opportunities Master Fund LP declared that it had raised its interest in Valeo’s capital 

and voting rights to above the 15% disclosure threshold 

May 2, 2007 - Pardus European Special Opportunities Master Fund LP filed a statement of intention regarding Valeo for the 

next twelve months 

April 20, 2007 - Brandes Investment Partners, LP declared that it had reduced its interest in Valeo’s capital and voting rights 

to below the 5% disclosure threshold 

Monthly Information relating to the Company’s total share capital and voting rights (www.valeo.com) 

Information covering the period from March 31, 2007 through March 31, 2008, updated monthly. 


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Information filed by Valeo with the office of the clerk of the commercial court 

and published in legal gazettes where appropriate 

February 1, 2008 - Increase in capital following the exercise of stock subscription options: 

- minutes of the Board of Directors’ Meeting of January 11, 2008, 

- bylaws updated as of January 11, 2008. 

Legal notice published in La Loi of February 4, 2008 

August 6, 2007 - Increase in capital following the exercise of stock subscription options: 

- minutes of the Board of Directors’ Meeting of July 26, 2007, 

- bylaws updated as of July 26, 2007. 

Legal notice published in La Loi of August 6, 2007 

July 5, 2007 - Change of directors and amendment of the bylaws: 

- minutes of the Shareholders’ Meeting of May 21, 2007, 

- bylaws updated as of May 21, 2007. 

Legal notice published in La Loi of July 5, 2007 

July 4, 2007 - Annual Company and consolidated financial statements for the year ended December 31, 2006 and related reports. 

May 30, 2007 - Resignation of a director; appointment of a director: 

- minutes of the Board of Directors’ Meeting of April 10, 2007. 

Legal notice published in La Loi of May 31, 2007 

April 12, 2007 - Resignation of a director; appointment of a director: 

- minutes of the Board of Directors’ Meeting of March 22, 2007. 

Legal notice published in La Loi of April 11, 2007 

March 22, 2007 - Increase in capital following the exercise of stock subscription options: 

- minutes of the Board of Directors’ Meeting of February 12, 2007, 

- bylaws updated as of February 12, 2007. 

Legal notice published in La Loi of March 20, 2007 

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Information published by V aleo in the Bulletin des annonces lé gales obligatoires 

(BALO) and available on the BALO website (www.balo.journal-officiel.gouv.fr) 

February 18, 2008 - Consolidated net sales for the first, second, third and fourth quarters of 2006 and 2007 and for the first and 

second halves of 2006 and 2007 

November 12, 2007 - Consolidated net sales for the first, second and third quarters of 2007 

August 3, 2007 - Interim financial statements for the six months ended June 30, 2007 

August 3, 2007 - Consolidated net sales for the first and second quarters of 2007 

July 4, 2007 - Approval of the 2006 accounts by the Shareholders’ Meeting of May 21, 2007 

May 4, 2007 - Notice of the Ordinary and Extraordinary Shareholders’ Meeting of May 21, 2007 (also published in Petites 

Affiches of May 4, 2007) 

May 2, 2007 - Consolidated net sales for first-quarter 2007 

April 16, 2007 - Notice of the Ordinary and Extraordinary Shareholders’ Meeting of May 21, 2007 (also published in Petites 

Affiches of April 16, 2007) 

April 16, 2007 - Annual Company and consolidated financial statements for the year ended December 31, 2006 


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Information published by V aleo in financial publications 

April 28, 2008 - Publication of a press release announcing the first-quarter 2008 results in Les Echos 

Publication of a press release announcing the 2007 results on the website www.boursorama.fr 

February 16, 2008 - Publication of a press release announcing the 2007 results in Investir Hebdo 

February 15, 2008 - Publication of a press release announcing the 2007 results in La Vie Financière 

February 14, 2008 - Publication of a press release announcing the 2007 results in Les Échos and Le Figaro Économie 

February 13, 2008 - Publication of a press release announcing the 2007 results on the website www.boursorama.fr 

October 27, 2007 - Publication of a press release announcing the results for the nine months ended September 30, 2007 

in Investir Hebdo 


in Les Échos and Le Figaro Économie 


on the websites www.lesechos.fr and www.boursorama.fr 

August 30, 2007 - Publication of a press release announcing the 2007 interim results in Les Échos 

August 4, 2007 - Publication of a press release announcing the 2007 interim results in Investir Hebdo 

August 2, 2007 - Publication of a press release announcing the 2007 interim results in The Financial Times (Europe) 

July 27, 2007 - Publication of a press release announcing the 2007 interim results on the websites www.lesechos.fr and 

www.boursorama.fr 

May 26, 2007 - Publication of the minutes of the Shareholders’ Meeting in Investir Hebdo 

April 28, 2007 - Publication of a press release announcing the first-quarter 2007 results in Investir Hebdo 

April 26, 2007 - Publication of a press release announcing the first-quarter 2007 results in Les Échos and Le Monde 

April 25, 2007 - Publication of a press release announcing the first-quarter 2007 results on the website www.boursorama.fr 

April 16, 2007 - Publication of a press release announcing the notice of the Shareholders’ Meeting in Les Échos 

Press releases accessible on the Valeo website (www.valeo.com) 

April 2008 

April 25, 2008 - Press release: first-quarter 2008 results 

April 18, 2008 - Valeo Lighting Systems in Spain wins prestigious Prince Felipe Award for Business Competitiveness 

April 15, 2008 - Valeo Park4U System receives 2008 PACE Award: fourth consecutive award for Valeo 

April 11, 2008 - Valeo Park4U system receives Allianz 2008 Genius safety award 

April 3, 2008 - Valeo announces project to sell heavy duty truck engine cooling business 

April 3, 2008 - Valeo present at “Planète Durable”, Paris’ first sustainable development trade show 

March 2008 

March 17, 2008 - Valeo receives quality award from Toyota Group 

March 5, 2008 - Thierry Morin appointed Chairman of the Board of Directors of the French National Institute for Industrial 

Property (INPI) 

February 2008 

February 12, 2008 - Valeo: 2007 results 

February 7, 2008 - Valeo receives 2007 Renault Supplier Quality Award and announces record quality level in 2007 


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November 2007 

November 9, 2007 - Execution of the agreement for partial management of the share buyback program 

November 7, 2007 - Valeo Park4U selected as “Automotive News PACE Award 2008” finalist 



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October 2007 

October 26, 2007 - Valeo receives 2007 Best Innovator award 

October 23, 2007 - Valeo’s commitment toward enhanced air quality inside the cabin: new fragrance diffuser and Vitamin C 

filter 

October 23, 2007 - Park4U , the Valeo art of parking simplicity at the International Tokyo Motor Show 

October 23, 2007 - Green By Nature: Valeo’s Eco-Friendly Technologies exhibited at Tokyo Motor Show 2007 

October 23, 2007 - Valeo Driving Assistance, from innovations to Valeo added applications 

October 17, 2007 - Third-quarter 2007 results 

October 16, 2007 - Valeo wins Gold and Silver International «Grands Prix» awards for Automotive Innovation at Equip’Auto 

October 16, 2007 - Valeo signs contract for the sale of its W iring H arness activity to Leoni 

September 2007 

September 19, 2007 - Valeo Raytheon Systems equips Jaguar with Blind Spot Detection 

September 11, 2007 - Green by nature: Valeo Showcases Eco-Friendly Technology at the Frankfurt Auto Show 

September 11, 2007 - Valeo launches a water-cooled charge air cooler on the Volkswagen Golf 1.4l TSI 

September 11, 2007 - Park4U unveils its latest developments in the art of parking simplicity at the International Frankfurt Auto 

Show 

September 11, 2007 - Valeo presents its two new Comfort Enhancement demo cars at the Frankfurt Motor Show 

September 11, 2007 - Valeo Style Collections: customized designer door handles 

September 11, 2007 - Valeo’s commitment toward enhanced air quality inside the cabin: new fragrance diffuser and Vitamin C 

filter 

September 11, 2007 - Valeo contributes to the campaign “Bester Beifahrer” of the German Road Safety Council/Deutscher 

Verkehrssicherheitsrat (DVR) 

September 4, 2007 - Valeo negotiates the sale of its W iring H arness activity to Leoni 

July 2007 

July 27, 2007 - Valeo acquires Connaught Electronics to reinforce its Driving Assistance Domain 

July 26, 2007 - First-half 2007 results 

July 25, 2007 - Valeo wins 9 new contracts with the Park4U system 

July 24, 2007 - Valeo creates a new joint venture in India with Minda for the production of alternators and starter motors 

July 20, 2007 - Green by nature: Valeo to showcase environmentally friendly technologies, new Park4U features at 

Frankfurt Motor Show 

July 12, 2007 - Valeo’s StARS starter-alternator now equips the new micro-hybrid smart 

July 9, 2007 - Valeo Raytheon Systems equips two General Motors vehicles with Blind Spot Detection 

July 2, 2007 - Valeo ends the process of examining the indications of interest from investment funds 

May 2007 

May 31, 2007 - Valeo Security Systems creates joint venture in India with Minda 

May 21, 2007 - Valeo: Combined Annual General Shareholders’ Meeting 2007 

Recommandation du Conseil d’Administration de Valeo sur les projets de résolutions de Pardus 

May 18, 2007 - Valeo Stop-Start technology equips a Microbus of the Parisian public transport company RATP in the 

“Bièvre-Montsouris” area: when the bus stops, so does the engine. 

May 15, 2007 - Valeo: state of process with investment funds 


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May 9, 2007 - Institutional Shareholder Services (ISS) and Glass Lewis recommend that Valeo shareholders vote against 

Pardus resolutions 

May 2, 2007 - Recommendation of the Valeo Board of Directors regarding the draft resolutions of Pardus 

April 2007 

April 24, 2007 - Valeo first-quarter 2007 results 

April 17, 2007 - Valeo Raytheon Blind Spot Detection System Receives 2007 PACE Award 

April 10, 2007 - Notice of Valeo’s Ordinary and Extraordinary Shareholders’ Meeting. 

[Valeo’s Combined Annual General Shareholders’ Meeting Notice: intitulé du site Valeo] 

Appointment of five new independent Board Members. 

March 2007 

March 22, 2008 - Valeo Board of Directors’ Meeting 1 

Information published by Valeo and accessible on the website of the US securities 

and exchange commission (SEC) (www.sec.gov) 

February 14, 2008 Consolidated financial statements 

February 13, 2008 Full-year 2007 results (press release of February 12, 2008) 

January 23, 2008 Results for third-quarter 2007 (press release of October 17, 2007) 

August 1, 2007 Interim financial results (press release of July 26, 2007) 

June 1, 2007 Translation of the Prospectus relating to the description of the Share Buyback Program (French version 

published on May 11, 2007, on the Bourse du Luxembourg’s website www.bourse.lu) 

Results for third-quarter 2007 (press release of April 25, 2007) 

Full-year 2006 results (press release of February 12, 2008) 

April 19, 2007 Notice of Ordinary and Extraordinary Shareholders’ Meeting to be held on May 21, 2007 


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Person responsible for the Reference d ocument 

Person responsible for the Reference d ocument 

Thierry Morin , Chairman and Chief Executive Officer of Valeo. 

Declaration by the person responsible for the Reference d ocument 

I hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in the Reference d ocument 

is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import. 

I further declare that to the best of my knowledge, the accounts have been prepared in accordance with applicable accounting standards, and 

that they give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings in the 

consolidation taken as a whole, and that the Management Report on pages 36 to 78 of this Reference d ocument includes a fair review of the 

development and performance of the business, profit or loss and financial position of the Company and the undertakings in the consolidation 

taken as a whole, together with a description of the principal risks and uncertainties that they face. 

I obtained a statement from the Statutory Auditors at the end of their engagement affirming that they have read the whole Reference 

d ocument, of which this document is a free translation from the original, and examined the information about the financial position and the 

accounts contained therein. 

Paris, April 30, 2008 

Thierry Morin 

Chairman and Chief Executive Officer 

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The printer of this report is environmentally certified by Imprim’vert. 

This Reference document is printed on paper which is 100% compliant with PEPC and FSC certification standards, 

without use of acid, recyclable, biodegradable, and certified ISO 9001 and 14001. 

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The English language version of this report is a free translation from the original, which was prepared in French. All 

possible care has been taken to ensure that the translation is an accurate presentation of the original. However, in 

all matters of interpretation, views or opinions expressed in the original language version of the document in French 

take precedence over the translation. 

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43, rue Bayen - 75848 Paris cedex 17, France / Tel.: 33 (0)1 40 55 20 20 - Fax: 33 (0)1 40 55 21 71 

Valeo French ”Société Anonyme” with a capital of 234 628 851 euros - 552 030 967 RCS Paris 

valeo.com

2007 Reference document (PDF) - Valeo

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