French car makers warn Lucas

RUSSELL HOTTEN

Lucas Industries, tipped to take a stake in the French car components maker Valeo, could face opposition from France's two motor manufacturers, PSA Peugeot-Citroen and Renault.

The car makers have warned they might stop doing business with Valeo if it fell into foreign hands. Lucas is one of several companies rumoured to want to buy Carlo De Benedetti's controlling stake in Valeo, thought to be worth about pounds 500m.

Jacques Calvet, chairman of PSA, yesterday told reporters at the Geneva Motor Show that if he did not like the takeover he would progressively halt purchases from Valeo. "And that is final," he said.

Mr De Beneditti owns 28 per cent of Valeo but controls 42 per cent of the voting rights. Lucas's chief executive, George Simpson, recently forecast a wave of mergers in the car components sector, but the company yesterday declined to comment on the Valeo speculation.

Mr Calvet said he wanted to see French ownership of Valeo, the country's largest parts supplier and Europe's second largest. "I want Valeo to remain French. I will do everything to ensure that," he told Reuters news agency.

The chairman of state-controlled Renault, Louis Schweitzer, said he would be alarmed if a change of Valeo's ownership affected its relationship with his company.

The Peugeot group and Renault are Valeo's two biggest clients, accounting for around 35 per cent of its sales last year, worth more than Fr25bn (pounds 3.3bn).

Lucas would need a huge rights issue to fund a Valeo purchase, and the company may also attempt to raise money by selling its aerospace division.

Meanwhile, in Geneva yesterday, the president of General Motors Europe forecast that unemployment and the poor economic outlook would depress car sales across the continent this year.

But GM's European operations would command the largest tranche of the group's capital expenditure over the next five years, with Opel receiving about $6.3bn pounds 4.2bn) and Vauxhall, the UK division, about $1bn.

GM is also believed to have reached an agreement with Sweden's Investor to refinance their jointly-owned car maker Saab.