Denso sees Europe driving more business growth

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FRANKFURT, Sept 12 (Reuters) The head of top Japanese car parts maker Denso Corp said on Wednesday he expected Europe to be one of the main drivers of its overall growth, eventually making up more than one-fifth of its total sales.

''We used to be seen merely as a Japanese parts maker that provided products that weren't the European suppliers' forte,'' Chief Executive Koichi Fukaya told Reuters in an interview at the Frankfurt International Motor Show.

''Now we're competing head-on with local suppliers, getting business from more and more European carmakers,'' he added.

Denso, the world's biggest traded auto parts supplier with revenues of 3.61 trillion yen (.62 billion), is well-placed to benefit from the growing importance of electronic controls systems -- its mainstay business -- in the development of new vehicles with enhanced safety and environmental technologies.

Europe accounted for just 14 percent of its revenue in the year ended March 31, but Fukaya said he expected that to rise to 20 percent and possibly more, with several new businesses in the pipeline.

''We're now entering the next stage of growth in Europe.'' Denso has a joint venture to produce diesel particulate filters with part-owner Bosch starting in 2009, ahead of proposed European regulations that would require all diesel vehicles to be equipped with the tailpipe-cleaning component.

Through the business, Denso aims to expand its sales of the after-treatment component beyond those to top shareholder Toyota Motor Corp, Fukaya said, adding he expected the market for diesel-fuelled cars to grow in Japan and the United States.

POWERTRAINS AND MARGINS Denso's main edge, however, lies in its ability to invest in the development of powertrains across the spectrum -- from more efficient gasoline engines to clean diesel to biofuels and plug-in hybrids -- Fukaya said.

''It'll soon start to become clear what powertrains will join the mainstream, and that will likely differ from region to region,'' he said.

''But whatever powertrain gains, we'll be ready and reap the fruits of our initial R&D spending.'' Despite the high level of such outlays and what Fukaya characterised as ferocious and persistent pressure to cut costs from carmakers, Fukaya said Denso remained committed to its operating margin target of 10 percent in the 2010/11 business year.

Last year, the margin was 8.4 percent -- short of Toyota's but above that of both Honda Motor Co and Nissan Motor Co, two of the most profitable carmakers in the industry.

''We need that kind of profitability to ensure we have the means to keep developing new technology and stay ahead of the competition,'' he said.

Fukaya said he saw no impact on Denso from Continental's 11.4 billion euro (.8 billion) deal to buy rival German car parts maker VDO, since there was little overlap in their businesses.

REUTERS DKS SSC1515

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