Jabil Circuit Inc., continuing its return to its roots in the automotive market, plans to make body controllers, sensor and switch assemblies, and other products for Valeo, a designer and supplier of components for cars and trucks.
Under a pending three-year outsourcing deal with Paris-based Valeo, Jabil, St. Petersburg, Fla., hopes to acquire Valeo plants in Meung-sur-Loire, France, and Wemding, Germany. The agreement is expected to net Jabil annual revenue of $300 million, according to company executives. Financial terms of the transaction have not been disclosed.
The agreement, which must be approved by the European Works Council, would provide Jabil with 950 new employees and allow the EMS company to set up a regional Center for Automotive Excellence in Meung-sur-Loire.
"We believe this strategic partnership [with Valeo] will set the standard for electronics manufacturing in the global automotive industry," said Brian Althaver, Jabil Automotive Group's vice president, in a statement.
The accord comes as no surprise to industry observers. EMS providers who discovered last year that they were overly dependent on the communications market have turned to less-penetrated areas such as automotive to boost revenue and diversify their customer base. Over the next several years, the automotive sector is expected to present significant opportunities for EMS companies as the amount of electronics in vehicles increases.
Jabil's early history involved the automotive market. The company was established in Detroit in 1966 as a printed-circuit-board assembler for computers. Ten years later, Jabil entered the automotive space, providing parts and engineering services for General Motors Corp.
Seeking to attract automakers by improving its high-tech equipment and expertise, in the past two years Jabil has expanded its Auburn Hills, Mich., plant and established a facility in Chihuahua, Mexico. The plan appears to be working. During the fiscal second quarter, which ended Feb. 28, automotive contributed 7%, or $55 million, to Jabil's revenue.
And the pending deal with Valeo will essentially more than double Jabil's auto business, according to Jerry Labowitz, an analyst at Merrill Lynch & Co. Inc., New York, in a report.
As another part of the agreement, Valeo intends to transfer production from its switches and detection systems operation in Fort Worth, Texas, and its electrical systems division in Juarez, Mexico, to Jabil's Chihuahua plant.