31 July, 2018

Valeo latest to cut profit outlook due to WLTP

Vehicle parts supplier Valeo has cut its 2018 profit outlook, blaming vehicle production delays due to WLTP procedures.

The company supplies transmission parts, lighting, sensors, wiper blades and more to a number of carmakers to fit during their production processes. However, some manufacturers have stated that due to the new Worldwide Harmonised Light-Vehicle Test Procedure (WLTP), production will be slowed while existing models are put through the checks.

Valeo has blamed its profit warning on disruptions to production of certain vehicles in Europe resulting from the tests. The supplier has not named the carmakers it is concerned about. However, Volkswagen has said it would need to cut worker time and extend holidays as it slows production of its models in response to WLTP.

In its release over its first-half results, the company says: ‘In view of uncertainties relating to the rise in raw material prices (in particular, steel and resins) and disruptions to the production of certain vehicles in Europe (mainly during the third quarter) due to the new Worldwide Harmonised Light Vehicle Test (WLTP), we expect a 2018 operating margin which might be slightly below that of 2017 (7.8% of sales).’

Order intake came to €14 billion for the first half, down 6% year-on-year. New orders at Valeo's electric vehicle (EV) parts venture with Siemens, however, jumped 57% to €4.7 billion as manufacturers look to outsource much of their requirements for electric projects.

Valeo is not the only company that has warned about the financial impact that WLTP will have for the third quarter of 2018. Daimler has also suggested that its results between July and September will be worse than those achieved in 2017, due to the new test procedure. However, PSA Group has said it will be largely unaffected by the test procedure, with CEO Carlos Tavares making the claim during his company’s earnings release.

Volkswagen’s (VW) management is considering a reduction of holidays at its plants.

‘The changeover to the new WLTP test procedure will mean that Volkswagen Passenger Cars will be able to make adjustments in production in the second half of the year,’ a brand spokesperson told Automobilwoche.

Part of the new procedure means all variations of the vehicle have to be tested, with optional extras also included as they may add or reduce weight – for example, alloy wheels may cause a decrease, while a better audio system may add to a vehicle’s total mass. Options such as cruise control can also affect engine performance either improving or increasing emissions.