Valeo's Annual General Meeting And First Supervisory Board Meeting

    PARIS--May 9, 2001--Valeo (Paris: FR)(OTC: VLEEY) today announced that the Ordinary and Extraordinary General Shareholders' Meetings were held in Paris on May 9, 2001 followed by the first meeting of the Supervisory Board.

    2000 Results

    The shareholders approved the 2000 accounts.
    Consolidated sales rose by 18% to 9,120 million euro. Operating income was also up by 18% to 573 million euro. Net income totaled 368 million euro, that is 4% of sales. It fell by 35% against a 1999 net income that was boosted by a significant exceptional capital gain on the sale of Valeo's stake in LuK.
    At December 31, 2000, shareholders' equity totaled 2.92 billion euro. Provisions amounted to 1.29 billion euro, down 9%. The Group's net indebtedness at end 2000 stood at 426 million euro, related mainly to the acquisition of Labinal's automotive activities and to external growth operations in Asia. The debt-to-equity ratio stood at 15%.
    2000 was a year of contrasts. Strong organic growth and an improvement in operating margins in the first half were followed by a decline in margin performance in the second half. The last six months of the year were also impacted by a sharp downturn in the North American market combined with a significant slowdown in growth in Europe and Asia. Moreover, the acquisition of Labinal's automotive activities and other acquisitions in Asia at end 2000 weighed on margins.

    Corporate Governance

    Shareholders also approved the change of Valeo into a company with a Supervisory Board and a Management Board and the appointments of Carlo De Benedetti, Arnaud Fayet, Noel Goutard, Yves-Andre Istel, Jean-Marc Janodet, Alain Minc, Ernest-Antoine Seilliere, Jean-Pierre Souviron, Erich Spitz and Guy de Wouters as members of the Supervisory Board.

    Dividend

    The dividend for 2000 was set at 1.35 euro per share, excluding tax credit, and 2.03 euro, tax credit included. The dividend is payable as from June 1, 2001.

    Turnaround Strategy

    Thierry Morin, Chairman, reviewed Valeo's first quarter 2001 results. Sales amounted to 1,308 million euro, up by 21%, while the operating income fell sharply, resulting in a net loss of 179 million euro. The latter includes 163 million euro in provisions. 2001 is likely to see a significant downturn in the North American and Asian markets and a slight slowdown in Europe.
    Given this, Thierry Morin indicated that he is re-focusing teams on the task of rapidly turning around the Group's results. A series of measures has been launched including more specifically the rationalization of the supplier base, the reduction of over-manning and over-time, the deployment of the Euroland and NAFTA strategy (to redistribute production capacity to low labor cost countries) together with a reduction in administrative costs. A program to significantly improve equipment utilization rates, rigorously select investments and R&D projects, and reduce inventory has been introduced in all plants. The impact of these measures will be a significant cut in costs and capital employed.
    The reduction of over-manning will be carried out in line with the relevant national regulations and in keeping with Valeo's values of dialog and accountability to the community. It will be based notably on a reduction in the number of temporary workers in all the Group's plants.
    At the same time, priority issues such as the Group's Rochester plant in the US, the Lighting and Distribution businesses and the integration of the recently acquired Sylea activities are being tackled head on.
    The Group will rapidly disengage from low growth or shrinking market segments and niche or low technology content activities. These account for over 10% of Group sales. This disengagement is designed to improve the Group's operating margin and free up cash.
    The Group will focus its efforts on improving profitability and enhancing its Electrical and Electronics businesses that account for nearly 6 billion euro in sales, in particular in the areas of "Electrical Energy Management" with the introduction of 42 V electrical architecture and "Life on Board", an innovative concept that groups together all of Valeo's interior systems.
    With its 75,200 high caliber employees, its "5 Axes" method and its sound financial structure, Valeo has the strengths that will enable it to rapidly turn around its results and satisfy its customers' expectations.

    First Meeting of the Supervisory Board

    Valeo's Supervisory Board met for the first time immediately after the AGM.
    Noel Goutard was appointed Chairman of the Supervisory Board and Guy de Wouters Vice Chairman. The Supervisory Board will be supported by three committees composed of its members: a Strategy Committee, an Audit Committee and a Remunerations Committee.
    The Supervisory Board appointed Thierry Morin as Chairman of the Management Board. The other members are: Luc Bleriot, Bernard Geymond, Geric Lebedoff and Vincent Marcel.
    The Supervisory Board recognized that Valeo has been going through a crisis that requires, in addition to urgent measures, a new strategy, with priority being given to the creation of value in the interest of the company and shareholders alike.
    For over a decade, Valeo pursued a profitable growth strategy which was beneficial for both the company and its shareholders. Buoyed over the last few years by a favorable economic climate, the Group has become a major player in world automotive equipment markets.
    The internal and external expansion strategy also enabled the Group to reinforce its historical Thermal and Transmissions businesses and to develop competencies in the Electrical and Electronics areas that now account for 60% of Valeo's consolidated sales and offer excellent prospects for growth.
    However, the current deterioration in the world automotive equipment market together with the situation at Valeo imposes a new value-creating strategy based on four re-orientations: rapid turnaround of the margins and cash flow of all Valeo's Branches; redeployment of the business portfolio; development of high potential Electrical and Electronics activities; an active redistribution policy toward shareholders.
    The Supervisory Board voiced its full support of the new Management Board to implement this strategy and rapidly maximize its impact.

    Valeo is an independent industrial group fully focused on the design, production and sale of components, integrated systems and modules for cars and trucks and ranks among the world's top automotive suppliers. The Group has 167 plants, 49 R&D centers, 10 distribution centers and employs 75,000 people in 24 countries worldwide.
    For more information on the Group and its businesses, please consult our Web site: www.valeo.com