Faiveley S.A.

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Faiveley S.A.

143 Boulevard Anatole France
Carrefour Pleyel
F-93285 Saint-Denis Cedex
France
Telephone: ( + 33) 1 48-13-65-00
Fax: ( + 33) 1-48-13-66-47
Web site: http://www.faiveley.com

Public Company
Incorporated: 1916 as Etablissements Louis Faiveley
Employees: 1,837
Sales: EUR 226.56 million ($203.85 million)(2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: FAI Sicovam: 5314
NAIC: 336510 Railroad Rolling Stock Manufacturing

Faiveley S.A. is one of the world’s top four suppliers of equipment to the railroad industry. The company is worldwide leader in three core markets, those of automatic door systems, passenger train air conditioning systems, and pantographs—the devices used to convert power from third rails for use by trains. Grouped under the company’s Faiveley Transport subsidiary, this division represents 80 percent of the company’s annual sales of more than EUR 226 million. Based in France, Faiveley has been one of the first of the world’s railroad equipment makers to go global, with well-established operations in Spain, Portugal, Brazil, and Italy, joined by the company’s more recently formed Japanese, American, United Kingdom, and Chinese operations. In all, exports account for more than 60 percent of the company’s sales. If Faiveley continues to be known and highly regarded for its cutting-edge technology—which also includes specially designed “black boxes” for trains and ecologically friendly air conditioning systems—the company is hoping to become equally known for its plastics divisions. Launched in 1992, Faiveley had expanded its plastics operations to account for some 19 percent of its sales, helping to balance out the company’s more cyclical railroad business. Faiveley’s plastics division, operating through subsidiaries Grand-Perret, VPI-Verchère, Sepal, and Rhône Moulage Industrie, produces primarily small plastic parts for the cosmetics, textile, automotive, and other industries. Traded on the Euronext Paris stock exchange, Faiveley continues to be majority controlled by the founding Faiveley family. François Faiveley, holding 62 percent of the company’s voting rights, and better known for being the guiding force behind the family’s famed Burgundy wine production, is also company chairman. CEO Robert Joyeux, named to his post in 1999, is helping to lead a reorganization of the company as it struggles to confront a shrinking and more competitive railroad market.

Pantograph Specialist in the 1920s

Faiveley began as a small electro-mechanical workshop opened by Louis Faiveley in 1919, in Saint Ouen, in France’s Indre-et-Loire region. Etablissements Louis Faiveley, as the company was then called, quickly became a railroad equipment specialist producing new generation, electro-mechanic parts for France’s changing railroad system. In 1923, Faiveley debuted its first pantograph—the device that connects electric-driven trains to the third rail, converting the electric power for use by the locomotive. The pantograph played a crucial role in the ability of a train to develop speed, and Faiveley’s early commitment to research and development helped the company spur France’s railroad to greater speed achievements.

The availability of electric power to trains, and especially passenger trains, introduced a wide range of possibilities to constructors, enabling trains to become not only quicker, but also more comfortable. Faiveley branched out into designing and producing door systems in 1930. By 1935, Faiveley already counted among France’s leading railroad equipment and systems producers. The company reincorporated, becoming a joint stock company, while remaining wholly controlled by the Faiveley family.

The destruction of much of France’s rolling stock during World War II was to provide new opportunities for the company. In the immediate postwar years, as the country began to rebuild its train system, Faiveley expanded its production range to include another important part of the new era passenger train, that of electric heating systems. Faiveley began production of this line of products in 1946.

Meanwhile, the company continued to enhance its pantograph system. In 1955, the company helped to establish a new train speed record, as a Faiveley-equipped train topped 331 kilometers per hour. In that year, also, Faiveley introduced the world’s first single-arm pantograph. This innovation helped the company build its position as world leader in railroad system pantographs.

Internationalization in the 1970s

Faiveley continued to build on its reputation as a technological leader in its sector. In 1961, the company turned toward the burgeoning electronics industry, creating its own research and development team for adapting electronics applications to the railroad industry. The result was a new line of electronic switching devices. At the same time, Faiveley had branched out from its core railroad equipment market to begin equipping the new generation of rubber-wheeled Paris Metro cars.

In the mid-1960s, Faiveley sought to apply its automatic door mechanisms to other markets, particularly the building market. The company’s first building doors were produced by 1965. In 1968, the company launched a new subsidiary specifically for its building door systems production, Faiveley Automatismes. By then, Faiveley had made its first move into the international market, launching a subsidiary in Madrid, Spain in 1966.

The 1970s were to prove an era of increasing international presence for the company. In 1976, the company opened a Brazilian subsidiary, Equipfer, quickly becoming a leader of that large and growing market. Two years later Faiveley launched a subsidiary in Italy as well. France remained Faiveley’s most important market, however. After taking part in the French railroad system SNCF’s launch of a new series of Corail railroad coaches in 1970, the company also was chosen to supply equipment for a new generation of Métro trains, the MF77. Faiveley’s commitment to cutting-edge technology once again showed when it introduced its very-high-speed pantograph in 1972. The company also was preparing to debut its first electric automated door systems, a market segment that was to become one of its most successful.

Faiveley also attempted to enter the North American market, launching subsidiary operations in the United States and Canada. Its railroad activities in the U.S. market remained limited, however, until the late 1990s. The company’s fortunes were stronger in its European base, particularly as the company continued to increase its scope of operations. In 1984 the company bought up Saint Gobain subsidiary Air-Industrie’s transport division, giving it operations in passenger train air conditioning systems. In that same year, Faiveley acquired the tachometry activities of Matra subsidiary Interelec. Together with the company’s other transportation-related activities, these subsidiary operations were brought under a newly created umbrella subsidiary Faiveley Transport.

Faiveley Transport was in at the ground floor of a new revolution in railroading. The company helped equip the new line of TGV trains (“trains à grande vitesse” or high-speed trains) commissioned by the SNCF. Faiveley’s pantograph designs were to play a significant role in the achievement of a new train speed record—515.3 kilometers per hour set by the TGV Atlantique line in 1990. By then, the company was seeking to enter new markets, with mixed results. An attempt to enter the Japanese market was thwarted in 1987, when Faiveley saw the production of its equipment designs for the Shinkansen 300 line taken over by a Japanese constructor. Faiveley instead began to develop a new strategy based on diversification. As a company representative told La Tribune, “Not being cautious enough, we let the production run get away from us.”

Diversified Manufacturing for the 21st Century

The company moved its headquarters to Saint-Pierre-des-Corps in 1991. In that year, it invested in expanding its electronics production facilities, building a new plant in La Ville-aux-Dames. The following year, Faiveley determined to gain a measure of protection against the cyclical nature of its core industry and especially the growing awareness that the railroad market was soon to tighten, with the privatization of most of Europe’s formerly government-run railroad systems and the introduction of more severe pricing restrictions and heightened competition among equipment suppliers. At the same time, the SNCF’s heavy investments in launching the TGV trains were coming to an end, and spending was expected to diminish through the middle of the decade.

In 1992, the company took its first step toward building a new pole of operations, when it acquired plastics product maker Grand-Perret. Founded in 1875, Grand-Perret had first entered the plastics industry with the purchase of an injection press in 1948. The Grand-Perret acquisition was to be the first of several companies that added some FFr 200 million to the company’s sales, which by then neared FFr 800 million.

Key Dates:

1916:: Etablissements Louis Faiveley is founded.
1923:: Company introduces first pantographs.
1935:: Company starts production of door systems.
1946:: Faiveley launches electric heating systems.
1955:: First single-arm pantograph is introduced.
1965:: Company begins building automatic door systems.
1972:: Faiveley introduces very-high-speed pantograph.
1982:: Company opens Canadian subsidiary.
1988:: Transport operations are grouped under Faiveley Transport subsidiary.
1990:: Faiveley helps establish new train speed record at 515.3 kilometers per hour.
1992:: Company acquires Grand-Perret.
1994:: Company is publicly listed on Paris stock exchange.
1999:: Company introduces black boxes for trains; a restructuring plan begins.

In 1993, Faiveley moved to concentrate its activities around its historic core of railroad and transportation equipment and its brand new plastics division, selling off its Faiveley Automatismes subsidiary. At the same time, the company made a new, more successful attempt to move into the Japanese market, which had become one of the world’s strongest markets for the new generation high-speed trains. This time Faiveley went in with a partnership with one of Japan’s largest railroad equipment makers, forming the Nabco-Faiveley Ltd. joint venture and winning a contract to supply some 3,000 electronically controlled automated door systems—a first for Japan, which until then had seen only hydraulic systems—for the country’s train system. That year, Faiveley launched its U.K. subsidiary, placing itself in a position to capture a share of that market as the British Rail system was being privatized.

Faiveley began to prepare for a more ambitious expansion in the late 1990s. In 1994, the company went public, selling some 30 percent of its shares on the Paris stock exchange. The Faiveley family, now led by François Faiveley, nonetheless retained solid control of their company’s stock. The listing enabled the company to pay down debt and to go on a bit of a spending spree, especially to boost its plastics division.

In 1995, the company acquired VPI-Verchère Plastiques Industriels, founded in the 1930s and originally focused on products using bakélite, before turning to thermo-injected plastics. The following year, Faiveley added the operations of Rhône Moulage and Sepal, Ltd. Both Lyon-area companies had been led by Horst Bilger, who remained CEO of these operations after their acquisition by Faiveley. These two companies added another FFr 100 million to Faiveley’s annual sales, which by then had topped FFr 1.3 billion. By the end of the decade, plastics had risen to nearly 20 percent of Faiveley’s total sales.

Although the company continued to book steady gains in annual turnover, its acquisition binge gave it a nasty case of indigestion in the late 1990s. Chiefly responsible for the company’s profits drop was its 1995 acquisition of German railroad air conditioning specialist Hagenuk Fahrzeugklima, from parent company Siemens, for FFr 120 million. The purchase gave Faiveley an important foothold into the German railroad equipment market, Europe’s largest, as well as the leading position worldwide in the air conditioning segment. Yet Hagenuk and its subsidiary operations were in dire need of restructuring. By 1997, the acquisition had begun to drain Faiveley’s profits, and the company was forced to post a net loss for 1998.

The result was a restructuring of Faiveley’s management as well, as François Faiveley stepped in to take the chairman’s seat, dismissing Alain Bodel, who had been the architect of the group’s expansion since the 1980s, and appointing Robert Joyeux as CEO in his stead. The company embarked on a restructuring of its operations on a wider scale, including cutting out some 40 percent of its German workforce and a number of jobs from its French manufacturing facilities as well. Faced with a shrinking market, especially shrinking margins in its traditional European base, Faiveley stepped up its international expansion abroad. In 1997, the company launched a new subsidiary in the United States, Faiveley Rail Inc., based in Pennsylvania. The company also boosted its activities in the Asian markets. The Hagenuk acquisition, while proving a temporary burden, also had given it a subsidiary in China, Shanghai Hagenuk Refrigerating Machine Co. Ltd., which held some 50 percent of that potentially vast market. The company also opened a subsidiary in Hong Kong.

Faiveley’s continued investments in research and development kept the company at the leading edge of its industry. The company debuted its innovative “black box” systems, similar to those used in airplanes, adapted to the needs of railroads. This product received a warm welcome, particularly from Italy’s rail system, which put in an order for nearly 2,500 boxes, worth more than FFr 240 million. Faiveley’s German arm, meanwhile, completed a new generation air conditioning system commissioned by the German rail system, based on cycled air, eliminating the highly polluting systems typically found in trains. Still held at more than 62 percent by the Faiveley family, the company looked forward to equipping the world’s trains in the 21st century.

Principal Subsidiaries

Faiveley Transport; Sofaport; Faiveley Española S.A. & Transequipos; Faiveley Italia Spa; Faiveley UK Limited; HFG-Hagenuk Faiveley Gmbh (Germany); HFG-Shanghai Hagenuk Refrigerating Machine Co. Ltd (China); Faiveley Far East Ltd. (Hong Kong); NFL-Nabco Faiveley Ltd. (Japan); Equipfer Faiveley Ltda (Brazil); Faiveley Rail Inc. (U.S.).