Toyota in Europe turned itself back into profit despite adverse market conditions over the 2010-2013 period

Toyota in Europe turned itself back into profit despite adverse market conditions over the 2010-2013 period

I was in Brussels last week for the Automotive News Europe Congress. One strong theme that emerged was corporate turnaround and the kinds of things that company leaders need to do in an industry as highly competitive as automotive.

There is always a starting point for the new CEO; it presents opportunities and challenges. You inherit a situation, lots of positives and negatives. The external environment may be constantly changing and not under your control - things like overall market demand, exchange rates - but your organisation is something that you can change. Indeed, you have to be able to make changes that are beneficial, lead from the front and also by example, inspire others, have a credible plan.

So, when Didier Leroy took the job as head of Toyota Europe's operations in 2010, he took a look at the forecasts for five more years of loss in Europe and realised that major changes were needed. It was a moment when he could drive organisational and cultural change inside Toyota because the company as a whole was in crisis (recall meltdown, if you remember, at the time).

Everything had to be looked at through the prism of what needed to happen to make the European unit profitable again. Shutting a plant in Western Europe and moving capacity to lower cost Eastern Europe was tempting, he admitted. But there was also an opportunity for the existing Western European plants to be looked at to become more competitive, to give the plants a chance to change, to re-examine plant-product mix across the region; and that's what eventually happened. The strategy was to look at all aspects of Toyota's European operations and empower people to take action, to be accountable, and it has worked. The European unit clawed its way back to profitability. Unlike before, everything could now be challenged, Toyota Europe acting as a business centre with a high degree of autonomy within Toyota Group (and trend setting for other regions within the group). It is, he said, a mindset change and it's something that is ongoing.

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Didier Leroy's description of the commitment the company demonstrated, the faith in the people already working at Toyota, also chimed with what we heard from Carlos Tavares, PSA Peugeot Citroen's recently appointed CEO. He is also facing a pretty big turnaround challenge and also knows that structural reorganisation is absolutely necessary. Again, there is a starting point. The key thing is, as with Toyota, to bring the people already in the company with you on the journey, get them to buy in to the strategy, to believe in it, make it credible. Build on the positives, but reshape the vision so that everyone is now working for a turnaround to a success that is attainable, the various steps in the overall plan fitting together.

In PSA's case, the strategy announced thus far includes a rationalisation of the product offering and differentiating the three brands better to raise net pricing. The two brands, surely? No, three: DS is becoming a brand in its own right. And in terms of manufacturing footprint, DS makes sense for relatively high-cost French plants. There is already a commitment not to shutter any more plants in France after Aulnay. No such commitment is in place for the company's Spanish plants, but much depends on how the PSA brands and models perform in the future. Mr Tavares is talking about having a better global strategy for the group, from a product engineering, design, manufacturing and sales perspective. It all makes sense. Yes, there is rationalisation, but not in a crude 'get the cost-cutting axe' way. Fewer models (and there are too many) means a better focus of resources. PSA ultimately gets leaner and more global to have a better chance of long-term survival and success.

The starting point for Mr Tavares, as was the case with Mr Leroy in 2010, is to have a plan that the people who will deliver it - his colleagues and the workers at all levels within PSA - can believe in. Like Mr Leroy, he's a capable and plausible guy with the right background and experience. He talks a good game. He has got to first base with a plan that people can believe in. Some of the latest Peugeot models point in the right direction and have been well received. Citroen is a brand that could well have more scope. DS could turn out to be an audacious reinterpretation of 'French premium'. Low-hanging-fruit cost savings are on the way as models are culled. The talk, so far, has been good. Now comes the hard part: execution of the plan.

BELGIUM: PSA CEO Tavares eyes recovery to a more global and leaner PSA