Obbligazione Faurecia Group 2.625% ( XS1785467751 ) in EUR

Emittente Faurecia Group
Prezzo di mercato 100 EUR  ▲ 
Paese  Francia
Codice isin  XS1785467751 ( in EUR )
Tasso d'interesse 2.625% per anno ( pagato 2 volte l'anno)
Scadenza 15/06/2025 - Obbligazione è scaduto



Prospetto opuscolo dell'obbligazione Faurecia SA XS1785467751 in EUR 2.625%, scaduta


Importo minimo 100 000 EUR
Importo totale 700 000 000 EUR
Descrizione dettagliata Faurecia SA è un fornitore globale di componenti e sistemi per l'industria automobilistica, operante nei settori degli interni, dei sedili, delle tecnologie esterne e delle emissioni.

Faurecia SA ha emesso un'obbligazione (XS1785467751) in EUR da 700.000.000, con scadenza 15/06/2025, cedola semestrale al 2,625%, quotazione attuale al 100% e taglio minimo di 100.000.







EXHIBIT A

This document is not an offer of securities for sale in the United States. The notes being offered by Faurecia (the "2025
Notes") may not be sold in the United States unless they are registered under the Securities Act or are exempt from
registration. The offering of 2025 Notes described in this announcement has not been and will not be registered under
the Securities Act, and accordingly any offer or sale of 2025 Notes may be made only in a transaction exempt from the
registration requirements of the Securities Act.

It may be unlawful to distribute this document in certain jurisdictions. This document is not for distribution in Canada,
Japan or Australia. The information in this document does not constitute an offer of securities for sale in Canada, Japan
or Australia.

Promotion of the 2025 Notes in the United Kingdom is restricted by the Financial Services and Markets Act 2000 (the
"FSMA"), and accordingly, the 2025 Notes are not being promoted to the general public in the United Kingdom. This
announcement is for distribution only to, and is only directed at, persons who (i) have professional experience in matters
relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a)
to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Promotion Order, or (iii) are
persons to whom an invitation or inducement to engage in investment activity within the meaning of section 21 of the
FSMA in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as "relevant persons"). This announcement is directed only
at relevant persons and must not be acted on or relied on by anyone who is not a relevant person.

In addition, if and to the extent that this announcement is communicated in, or the offer of securities to which it relates is
made in, any EEA member state that has implemented the Prospectus Directive, this announcement and the offering of
any securities described herein are only addressed to and directed at persons in that member state who are "qualified
investors" within the meaning of the Prospectus Directive or in any other circumstances falling within Article 3(2) of the
Prospectus Directive (or who are other persons to whom the offer may lawfully be addressed) and must not be acted on
or relied on by other persons in that member state. The offer and sale of the 2025 Notes will be made pursuant to an
exception under the Prospectus Directive, as implemented in the EEA member states, from the requirement to produce a
prospectus for offers of securities. This announcement does not constitute a prospectus within the meaning of the
Prospectus Directive or an offer to the public.

MiFID II professionals/ECPs-only/No PRIIPs KID ­ Manufacturer target market (MIFID II product governance) is
eligible counterparties and professional clients only (all distribution channels). No PRIIPs key information document
(KID) has been prepared as the 2025 Notes are not available to retail in EEA.
Neither the content of Faurecia's website nor any website accessible by hyperlinks on Faurecia's website is incorporated
in, or forms part of, this announcement. The distribution of this announcement into jurisdictions other than the United
Kingdom may be restricted by law. Persons into whose possession this announcement comes should inform themselves
about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the
securities laws of any such jurisdiction.

No money, securities or other consideration is being solicited, and, if sent in response to the information contained
herein, no money, securities or other consideration will be accepted.



1


CERTAIN DEFINITIONS
In this Offering Circular (except as otherwise defined in ``Terms and Conditions of the Notes'', for
purposes of that section only, or in our audited consolidated financial statements, which have been
incorporated by reference into this Offering Circular):
*
References to ``our group'' or the ``Group'' are to Faurecia and its consolidated subsidiaries,
whereas references to ``Faurecia'' or the ``Issuer'' are to Faurecia S.A. References to ``us'', ``we''
or ``our'' are to the Group or to Faurecia, as the context requires;
*
``2022 Notes'' refers to A500 million principal amount of 3.125% Senior Notes due 2022, which
we issued on 17 March 2015, and an additional A200 million principal amount of 3.125% Senior
Notes due 2022, which we issued on 9 April 2015 and which were consolidated with, and form
a single series with, the notes issued on 17 March 2015. We have entered into a dealer manager
agreement with BNP Paribas and SocieŽteŽ GeŽneŽrale (as the ``Dealer Managers'' and SocieŽteŽ
GeŽneŽrale as the ``Offeror'') pursuant to which the Offeror will make a cash tender offer for 2022
Notes subject to a maximum acceptance amount (the ``Tender Offer'') that was announced on
21 February 2018. On or about the Issue Date of the Notes offered hereby, the Offeror will
transfer to us all 2022 Notes validly tendered and accepted pursuant to the Tender Offer in
exchange for the Notes offered hereby. We intend to cancel any 2022 Notes which are
transferred to us by the Offeror. In addition, subject to the issuance of New Notes in an
amount which we deem to be sufficient, and to the extent that the proceeds of the New Notes
are greater than the aggregate principal amount of 2022 Notes accepted for purchase pursuant
to the Tender Offer, we intend to redeem in whole or in part, 2022 Notes that are not validly
tendered and accepted pursuant to the Tender Offer (up to the Make-Whole Maximum
Amount) at their principal amount plus the applicable make-whole premium (together with the
Tender Offer, the ``2022 Notes Redemption''). The 2022 Notes Redemption is conditioned on the
satisfaction, or waiver by the Offeror, of certain conditions, including without limitation the
pricing of this Offering;
*
``2023 Notes'' refers to A700 million principal amount of 3.625% Senior Notes due 2023, which
we issued on 1 April 2016;
*
``CO2'' refers to carbon dioxide;
*
``g'' refers to the unit of mass, ``gram'';
*
``g/km'' refers to grams per kilometer;
*
``Initial Purchasers'' refers to BNP Paribas, Banco Santander, S.A., BB Securities Limited,
Commerzbank Aktiengesellschaft, CreŽdit Industriel et Commercial S.A., Landesbank Hessen-
Thušringen Girozentrale, Natixis, Banco de Sabadell, S.A. and SocieŽteŽ GeŽneŽrale;
*
``kg'' refers to the unit of mass, ``kilogram'';
*
``km'' refers to the unit of distance, ``kilometer'';
*
``Make-Whole Maximum Amount'' means the aggregate principal amount of the Notes offered
hereby less the aggregate principal amount of 2022 Notes accepted for purchase pursuant to the
Tender Offer.
*
``NOx'' refers to nitrogen oxide;
*
``Refinancing'' refers to the issuance of the Notes offered hereby and the use of proceeds
therefrom, including the 2022 Notes Redemption; and
*
``Senior Credit Agreement'' means the A1,200 million senior credit agreement among us as
borrower and various lenders, dated 15 December 2014 and amended and restated on 24 June
2016. The Senior Credit Agreement is composed of a five-year facility maturing in 2021 for an
amount of A1,200 million and was undrawn as at 31 December 2017. The facility under the
Senior Credit Agreement is referred to herein as the ``Senior Credit Facility''.
2


PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Faurecia is the parent company of the Group. This Offering Circular includes audited consolidated
financial statements of Faurecia as at and for the years ended 31 December 2017 and 2016. Our
audited consolidated financial statements for the year ended 31 December 2017, incorporated by
reference herein, also present comparable financial data for the year ended 31 December 2016. Our
audited consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (``IFRS'') as adopted by the European Union. Our audited
consolidated financial statements for the year ended 31 December 2017 have been approved by our
Board of Directors on 15 February 2018.
In this Offering Circular, references to ``euro'' and ``E'' refer to the lawful currency of the member
states participating in the third stage of the Economic and Monetary Union under the Treaty
Establishing the European Community, as amended from time to time.
We publish our audited consolidated financial statements in euros. Some financial information in this
Offering Circular has been rounded and, as a result, figures shown as totals in this Offering Circular
may vary slightly from the exact arithmetic aggregation of the figures that precede them.
Constant Basis Presentation and Other Non-IFRS Measures
Figures presented in this Offering Circular are calculated on an actual historical basis and, where
noted, on a constant or ``like-for-like'' basis, which means that comparable items are presented using
a constant consolidation scope but not using constant exchange rates, unless otherwise indicated. The
percent change from one period to another has generally been given on a ``like-for-like'' basis in
order to eliminate the impact of changes in consolidation scope (that is, changes in the entities that
we consolidate in our audited consolidated financial statements due to acquisitions, divestures or
mergers).
For comparison purposes, we restate sales to factor in exchange rates fluctuations and changes in
perimeter, which we refer to as organic growth. Exchange rates are restated only for sales which are
reported in a currency other than euro and where we compare by applying the previous year U.S.
dollar/euro exchange rate to both the previous year and the current year sales. The scope is restated
by calculating this year sales as at the last year perimeter.
In this Offering Circular, we present our estimated order book (calculated on a three-year rolling
basis) as of 31 December 2017, 2016 and 2015. Our order book represents the sales that we expect to
record when we receive firm production orders, under contracts for vehicle programmes that we have
been awarded but which are not yet in production. The value of our order book as of any given date
is based on the estimated production volumes of vehicle programmes as well as their estimated
lifetime. We discount the production volumes indicated by our customers based on factors including
our management's knowledge of such customer, our historical relationship with such customer and
internal and external industry forecasts. We do not increase the estimated production volumes beyond
those estimated provided to us by our customers.
In addition, this Offering Circular includes certain supplemental indicators of performance and
liquidity that we use to monitor our operating performance and debt servicing ability. These
indicators include value added sales (as further described below), EBITDA, net debt, net cash flow
and the value of our order book. These measures are unaudited and we are not required to present
them under IFRS. Such indicators have limitations as analytical tools, and investors should not
consider them in isolation from, or as a substitute for analysis of, related indicators derived in
accordance with IFRS. We use these non-IFRS financial measures in this Offering Circular because
we believe that they can assist investors in comparing our performance to that of other companies on
a consistent basis. However, our computation of value added sales, EBITDA, net cash flow and other
non-IFRS financial measures may not be comparable to similarly titled measures of other companies.
For example, depreciation and amortization can vary significantly among companies depending on
accounting methods, particularly where acquisitions or non-operating factors including historical cost
bases are involved. We believe that value added sales, EBITDA, net debt and net cash flow, order
book and the other non-IFRS financial measures, as we define them, are also useful because they
enable investors to understand our performance over time, without the impact of various items that
we believe do not durably affect our operating performance. However, investors should not consider
these measures as alternatives to measures of financial performance, operating results or cash flows
that are determined in accordance with IFRS.
3


Presentation of Value Added Sales
We report total sales in our audited consolidated financial statements, both for the Group and by
operating segment. Total sales consist of sales of automotive parts and components to customers, or
product sales, sales of tooling, research and development (``R&D''), prototypes and other services and
sales of catalytic converter monoliths. In addition, we report ``value added sales''. Value added sales
consist of our total sales excluding sales of catalytic converter monoliths. Catalytic converter
monoliths are a pre-packaged raw material component for catalytic converters, which is chosen by
customers and sold on a ``pass-through'' basis with no mark-up. There is no difference between value
added sales and total sales for our Faurecia Interiors and Faurecia Seating business groups. Unless
otherwise stated, the information provided in this Offering Circular relating to sales refers to value
added sales.
We present variations of our sales as organic growth in the section headed ``Business Review''
contained in our 2017 Annual Results (as defined below) which is incorporated by reference into this
Offering Circular. Organic growth of sales represents the variation of sales at constant currencies and
scope. Sales of joint ventures which were previously consolidated by the equity method, and which
subsequently become fully consolidated, are included in the organic variation, and not considered as a
variation in scope.
4


SUMMARY
The following summary highlights selected information contained elsewhere in this Offering Circular.
Accordingly, this summary may not contain all of the information that may be important to you. We
urge you to carefully read and review this Offering Circular in full, including the documents incorporated
by reference herein, in order to fully understand the Group. You should also read the ``Risk Factors''
section in this Offering Circular to determine whether an investment in the Notes is appropriate for you.
Our Company
We are one of the world's largest automotive equipment suppliers. We develop, manufacture and sell
high-quality and highly-engineered products and we operate through three business groups: Faurecia
Seating, Faurecia Interiors and Faurecia Clean Mobility. We estimate that at least one third of
vehicles in service in the world were originally equipped with at least one product manufactured by us
and that we were the eighth leading automotive supplier in 2016 based on total sales.
Faurecia Seating. We estimate we are currently the world's leading supplier of seat frames and
mechanisms and number three supplier of complete seats. We design and manufacture seat systems,
as well as components: frames, mechanisms, foam, seat covers, electronic systems, mechatronics and
pneumatics. During the manufacturing process, we assemble the various components to create
complete systems, front seats and rear seats, delivered on a just-in-time basis to our customers' plants.
We develop solutions with an emphasis on safety, comfort, quality and versatility. In 2017, value
added sales reached A7,132.9 million (42.1% of total value added sales).
Faurecia Interiors. We estimate we are currently one of the two global leaders in the supply of
automotive interior systems. We manufacture cockpit modules (instrument panels and central
consoles), door panels, acoustic modules, as well as decorative parts. Our solutions incorporate the
use of natural and recycled materials. In 2017, value added sales reached A5,336.1 million (31.5% of
total value added sales).
Faurecia Clean Mobility. We estimate we are currently the world's leading supplier of exhaust systems
and components (including mufflers, manifolds, particulate filters and catalytic converters). We
develop and manufacture complete exhaust systems, including components reducing emissions as well
as components for exhaust system acoustics. In 2017, value added sales reached A4,493.2 million
(26.5% of total value added sales).
Our strategy seeks to accelerate profitable growth by developing higher value and innovative products
in response to the significant global trends impacting the automotive sector including, in particular,
CO2 and emissions regulation and the increasing electrification, connectedness and autonomy of
vehicles. We refer to our strategic priorities in these areas as ``Sustainable Mobility'' and ``Smart Life
on Board''. We also believe that the Asian markets represent a significant source of growth potential
and high profitability. Our strategy is therefore to continue to expand our portfolio in China with our
current customers and strengthen our relationship with major Chinese automakers to accelerate our
business activity.
We operate 30 research and development centers worldwide and employ approximately 6,500
engineers. In order to develop technology as efficiently as possible, we have developed numerous
partnerships with research institutions, such as Massachusetts Institute of Technology (MIT), Stanford
University and the Colle`ge de France, as well as with technical universities. We identify, incubate and
invest in start-up companies to develop technological innovations and generate long-term value for
Faurecia. We also develop partnerships with other industrial or technology groups in order to
accelerate development in key areas. In particular, with ZF Friedrichshafen AG (``ZF'') for advanced
safety, Mahle GmbH (``Mahle'') for thermal comfort, Stelia Composites for fuel cell tanks and
Accenture PLC (``Accenture'') for data analytics.
We are introducing digital technology to improve operational efficiency and transform working
practices in our production facilities. In 2017, we deployed digital management tools as part of our
Digital Enterprise strategy, including real-time information sharing, collaborative robots and
autonomous guided vehicles, to optimize assembly automation, quality control and production
efficiency.
We maintain close relationships with almost all of the world's leading car manufacturers and work
closely with customers to develop the design and functionality of our products. Each of Ford,
Volkswagen, the Renault-Nissan group, the PSA Peugeot Citroešn group, Daimler, Fiat Chrysler and
General Motors accounted for more than A1.0 billion of our value added sales in 2017. We have a
5


broad geographic footprint, and are one of the few automotive equipment suppliers with the capacity
to supply automakers' global programmes where the same car model is produced throughout several
regions. We have experienced significant growth in Asia with value added sales increasing from
approximately 4% of total value added sales in 2008 to 12.5% of total value added sales in 2013 and
17.3% of total value added sales in 2017.
We are involved in all stages of the automotive equipment development and supply process. We
design and manufacture automotive equipment adapted to each new car model or platform, and
conclude contracts to provide these products throughout the anticipated life of the model or platform
(usually between five and ten years). Our customers rely increasingly on global platforms, based upon
which they will produce a variety of car models. This allows us to decrease costs through a greater
commonality of components, and to benefit from components or modules which can be used in more
than one generation of cars. We participate in this evolution by offering generic products associated
with our customers' platforms, such as standard seats frames. At the end of 2017, we had 700
programmes in the development phase and, in 2017, we successfully launched over 200 programmes in
production, including a major launch by Faurecia Seating for Volkswagen's SUV platform. In
addition, we tend to benefit from a high renewal rate of our programmes.
The quality of our products is widely acknowledged among automakers. We ensure the quality of our
products through our Faurecia Excellence System, a rigorous set of project management procedures
and methodologies, and by the expertise of our engineers and technicians who design products and
develop technological solutions. As a result, for the six months ended 31 December 2017, our
customers rejected only eight defective parts per million parts delivered, which is a record low level
for us.
This enables us to maintain very close relationships and to be strategic suppliers to many of our
customers. Among others, we reached the following milestones:
*
being recognized with over 40 awards for quality and operational performance in 2017, many of
which were awarded by Chinese Original Equipment Manufacturers (``OEMs'');
*
being recognized ``Best supplier'' and being awarded with the ``5 star quality'' award by
Hyundai Kia in 2017;
*
being part of the 44 suppliers selected by Volkswagen as strategic partners, in their FAST
(``Future Automotive Supply Tracks'') corporate initiative;
*
being a member of the ``Supplier Councils'' for Ford, the PSA Peugeot Citroešn group and Fiat
Chrysler; and
*
being awarded with a Supplier Diversity and Inclusion Award by Ford Europe in 2017.
For the year ended 31 December 2017, our value added sales and total sales amounted to
A16,962.2
million
and
A20,181.7
million,
respectively,
compared
to
A15,613.6
million
and
A18,710.5 million, respectively, in 2016 and our EBITDA amounted to A1,889.3 million compared to
A1,639.3 million in 2016. As at 31 December 2017, we employed around 109,300 people (including
temporary workers) in 34 countries, spread over approximately 330 sites.
For the year ended 31 December 2017, our order book for value added sales (calculated over a three-
year rolling basis) was A62 billion, a record level for us, compared to A53 billion in 2016 and
A47 billion in 2015. We have also started receiving orders from new customers for products and
technology which form part of our ``cockpit of the future'' offering.
Our Competitive Strengths
Leading market positions in our business groups
Based on our estimates, we have leading market positions in each of our three business groups. In
2017, we estimate that we were, globally, the leading supplier of frames and mechanisms for seats, the
number three supplier of complete seats, one of the two leading suppliers of interior systems and the
leading supplier of emissions control technologies. In 2017, our business groups achieved the
following results:
*
Faurecia Seating's value added sales reached A7,132.9 million (42.1% of total value added sales).
We believe that in 2016 we had a 17% global market share by value for frames, 20% by value
for mechanisms and 12% by value for complete seats;
*
Faurecia Interiors' value added sales reached A5,336.1 million (31.5% of total value added sales).
We believe that in 2016 we had a 14% global market share by value; and
6


*
Faurecia Clean Mobility's value added sales reached A4,493.2 million (26.5% of total value
added sales). We believe that in 2016 we had a 27% global market share by value (excluding
monoliths, which are components containing precious metals used in catalytic converters for
exhaust systems) for light vehicles.
Our market leadership in each business group and our global platforms are significant strategic
advantages as customers typically look to well-established suppliers when awarding new business. This
has allowed us in recent years to win new business from both existing and new customers. For
instance, we entered into a partnership with Cummins, a leading manufacturer of medium and heavy-
duty engines for on and off-highway commercial vehicles. This partnership provides significant new
opportunities for our Clean Mobility business group in the commercial vehicle market to take
advantage of global regulatory pressure to reduce carbon footprint and toxic emissions. We also
benefit from revenue visibility and stability, due to the difficulty for automakers to change suppliers
in the midst of development and production of a car model, and from a high renewal rate of our
programmes. We believe that our leading market share in each of our business groups positions us
well for future growth, allows us to negotiate favorable terms from our suppliers and to further
diversify our business model.
Highly diversified business model
We believe that the high degree of diversification through our business groups, our geographic
presence, and our number of customers and range of products limits our exposure to adverse changes
in the global or local economic environment and in the various end-markets we serve, while
simultaneously mitigating counterparty risk. This high degree of diversification in turn supports the
resilience of our revenues and our profitability.
We analyze our revenue primarily on the basis of value added sales (sales of parts and components to
automakers and sales of tooling, research and development (``R&D''), prototypes and other services).
Sales of parts and components to automakers are directly linked to the level of car production.
Revenue from the sales of tooling, R&D, prototypes and other services is typically generated when
programmes are launched in production, and can be considered as an indicator of future sales of
parts and components to automakers.
7


Value added sales by region
Value added sales by business group
(2017)
(2017)
South
Rest of the
America
World
4.6%
1.5%
Clean Mobility
Asia
26.5%
17.3%
Seating
42.1%
Europe
50.1%
North America
26.4%
Interiors
31.5%
Value added sales by customer
(2017)
Others
HKMC
Cummins
5.6%
2.0%
2.5%
Ford
Chinese & Japanese
18.3%
OEMs
3.2%
BMW
4.9%
FCA
5.9%
VW
GM
17.8%
5.9%
Daimler
6.2%
PSA
Renault-
13.7%
Nissan
14.0%
In recent years we have further increased our customer diversification. In 2017, our two largest
customers accounted for 36.1% of total value added sales compared to approximately 48% of total
value added sales in 2008. We also further increased our geographic diversification by increasing the
share of our Asian value added sales. In 2017, value added sales in Europe, North America and Asia
were 50.1%, 26.4% and 17.3% of total value added sales, respectively compared to approximately
77%, 15% and 4% of total value added sales, respectively, in 2008. This increased diversification
reduces our exposure to a single geographic area, end-market, automaker or car model.
We benefit from a global customer base. Although Japanese and South Korean automakers tend to
use their own network of suppliers, we managed to become a supplier to Nissan and Hyundai. We
are present on most market segments, from entry-level models to premium and luxury cars, which
make us less vulnerable to the parameters which may affect one particular segment.
Attractive underlying market fundamentals
We believe that our global footprint and technological leadership enable us to benefit from attractive
underlying market fundamentals.
8


Sustainable Mobility
Regulatory changes, which seek to reduce the impact of automobiles on the environment, have had
and will continue to have a significant impact in our markets which creates significant business
opportunities for us. We anticipate such changes will continue to have such an impact and present a
significant business opportunity for us. Increasing regulation tends to increase the added value of our
products. Lower CO2 emissions targets create needs for weight reduction, an opportunity for all our
business groups. Standards imposed on emissions of harmful substances (exhaust gases, particulate
matter or volatile organic compounds) require more sophisticated exhaust systems, and advanced
production processes for painting and foam injection. Recycling requirements create a trend towards
the use of more bio materials.
For example, in 2013, the European Commission tightened average CO2 targets from 150 g/km to
95 g/km for the automotive industry in Europe which are to take effect from the end of 2020. In
China (which we believe is the world's largest on and off highway commercial vehicles' market)
certain cities and provinces have already introduced regulations which require fuel consumption and
CO2 emissions to be reduced for passenger vehicles. India is also considering implementing emissions
standards by 2021 which will be equivalent to Euro-6 emissions standards. The main commercial
vehicle markets that remain to be regulated are China and India which together represent around
50% of global volumes. Regulations in these markets are now converging with Europe. Since
September 2017, a new test protocol called the WLTP (Worldwide harmonized Light vehicles Test
Procedures) has been gradually replacing the existing NEDC (New European Driving Cycle). The new
protocol is more representative of actual driving conditions but will impact the test results by between
5% and 15%. Alongside this, the anticipated reduction from the production of diesel vehicles will
impact the average emission figures because diesel emits between 10% and 15% less CO2 than petrol
engines. Reducing mass will therefore become even more important in terms of a vehicle's overall
performance.
We anticipate that the market for emissions purification systems for high horsepower engines will also
present significant business opportunities for us as regulations come into force which will cover over
approximately 75% of the market as compared to only approximately 25% today. High horsepower
engines are used in marine propulsion, power generation, rail, agricultural and other industries. In
December 2017, we announced that we had entered into an agreement to acquire Hug Engineering, a
leader in gas purification systems for high horsepower engines.
Increasing electrification, the shift from internal combustion engines to hybrid and electrical
powertrains, will also have a significant impact in our markets. This presents a significant business
opportunity for us as it increases the need for technologies such as energy recovery systems,
lightweight battery housing (for improved electric vehicle acceleration) and integrated battery thermal
management as well as efficient emissions control systems for hybrid vehicles, and lightweight
hydrogen tanks for fuel cell powertrains. For example, we developed our Exhaust Heat Recovery
System (``EHRS''), which reduces fuel consumption by up to 7% by recovering heat produced by
drivetrains and lost through the vehicle exhaust system and using the recovered heat to maintain
appropriate engine temperature and heat the cabin, which is particularly important in hybrid vehicles.
Smart Life on Board
The increasing connectedness and autonomy of vehicles will radically alter the driving experience and
as a consequence vehicle seating and interiors. Customers' expectations for infotainment are increasing
and autonomous vehicles will allow the driver to engage in activities not previously possible while
driving such as relaxing, working and socializing. As a result, vehicle seating and interiors will be
substantially redesigned and enhanced to deliver the ``cockpit of the future''. Our Smart Life on
Board strategy is designed to respond to these trends by focusing on pioneering technological
development in the ``cockpit of the future'' which will provide users with versatile architecture,
advanced safety, health and wellbeing, personalized comfort, connectivity, infotainment and human-
machine interfaces (``HMI'') systems. As part of this strategy, in 2017 we signed a strategic
partnership with Parrot Automotive SAS (``Parrot Automotive''), an automotive connectivity and
infotainment specialist for the joint development of integrated smart surfaces manufactured by us,
HMI, infotainment and connectivity solutions.
Additionally, safety standards impose higher levels of performance and seating plays a key role in
driver and passenger safety. As the leading supplier of frames and mechanisms for seats, we continue
to play a key role by working in partnership with automakers on the development of new products
9


and believe we are well positioned to benefit from further requirements in terms of safety applicable
to seats.
We also believe that our global footprint and technological leadership enable us to benefit from
attractive underlying market fundamentals. We estimate that light vehicle production increased by
approximately 2.3% worldwide in 2017, with all regions of the world showing an increase, except in
North America. Light vehicle production continued to grow in Europe (3.2%) and Asia (2.7%, with
production growth of 2.6% in China) and increased significantly in South America (19.7%). In
contrast, production in North America decreased by 4.0% (source: IHS Automotive, January 2018).
We believe that we will also benefit from favorable macro-economic factors, such as increased gross
domestic product in many of the markets we operate in, that should improve consumers' spending. In
China, having met our target operating margins in 2017, we believe we are adapting well to changes
in the Chinese market (such as the higher presence of domestic automakers) by strengthening our
relationship with major Chinese automakers.
Pioneer in technological innovations
We are a pioneer in technological innovations in the automotive sector, as highlighted by our
consistent track record of award winning innovations. We operate 30 research and development
centers worldwide and employ approximately 6,500 engineers. In 2017, we opened two new R&D
centers, in Seoul and Shanghai, and filed over 570 patents including extensions (representing an
increase of 15% compared to 2016).
We are accelerating our investment in innovation in order to capitalize on the significant global
trends impacting the automotive sector including, in particular, CO2 and emissions regulation and the
increasing
electrification,
connectedness
and
autonomy
of
vehicles.
In
2017,
we
allocated
approximately A1,152 million to gross R&D costs of which management estimates that A160 million
was allocated to research and innovation expenses, an increase of A30 million compared to 2016.
Given the pace of technological change and the need for the efficient development of new products,
we adopt a co-innovation policy involving external research institutes, investment in start-ups and
strategic partnerships.
Since 2011, we have developed numerous partnerships and chairs with research institutions, such as
Massachusetts Institute of Technology (MIT), Stanford University, and the Colle`ge de France, and
technical universities in France and Germany such as E
Ž cole Centrale in Paris and Nantes, Technische
Universitašt Mušnchen and Technische Universitašt Dortmund. In France, we work with the Jules-Verne
and M2P Technological Research Institutes to develop innovative production processes for composite
and metallic materials. We have a five-year agreement in place with the French CEA (Commissariat
for Atomic Energy and Alternative Energy) for the research and development of fuel cell technology,
among other areas. In 2017, we established a new partnership with the Indian Institute of Science in
order to develop innovative HMI systems and sensors.
We are seeking to identify, incubate and invest in start-up companies to develop technological
innovations and generate long-term value. In 2017, we established a ``technology platform'' in Silicon
Valley and intend to establish further platforms in Canada, France, Israel, China and India. Through
our technology platforms, we intend to research and identify new innovations, assess their commercial
value and determine whether to make an investment.
In order to accelerate our investment in key areas, we develop partnerships with other industrial or
technology groups. In particular, ZF for advanced safety, Mahle for thermal comfort, Stelia
Composites for fuel cell tanks and Accenture for data analytics. In 2017, we signed a strategic
partnership with Parrot Automotive, an automotive connectivity and infotainment specialist for the
joint development of integrated smart surfaces manufactured by us, HMI, infotainment and
connectivity solutions. We have also acquired a 50.1% stake in Jiangxi Coagent Electronics Co Ltd
(``Jiangxi Coagent Electronics'') in order to develop HMI and in-vehicle-infotainment such as displays,
voice recognition, radio and navigation and smartphone applications.
We have also established multidisciplinary teams from our Seating and Interiors business groups to
focus on our development of products and technology for the ``cockpit of the future''. We have
established ``Cockpit of the Future Labs'' in Paris, San Francisco, Yokohama and Shanghai. We aim
to develop, for and with manufacturers, applications and solutions that integrate and develop our
products.
10


Document Outline