Poor PSA reported horrid 2010 financial results this week. And the trends are poor. Chairman Philippe Varin had to find something to say that would encourage shareholders… and he did try.
First he reckoned that there were industrial companies within his group that he could sell to support the core automotive business. Secondly, he thought that he could force Peugeot upmarket and achieve the profit margins that currently belong solely to the premium car makers.
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Into the shocked silence comes Yann Delabriere of Faurecia, the big French auto component maker. “It takes a long time before one is recognised as a premium car maker. Things are possible in Germany that are not in France.”
Brave words from a man who makes a living from selling his wares to the French car makers. Doubly brave given that Faurecia is majority owned by PSA. But then Faurecia does make money… an operating margin of 4%. Delabrier expects to see US car production up 6% this year and by around 8% in China. European car production, meanwhile, will be around 5% down, he says. And Europe is where Renault has its problems.
Varin thinks that he can raise EUR1.5bn by selling part of Gefco logistics to outside investors and selling real estate. He has already agreed the sale of Citer car rental.
Like Fiat’s Sergio Marchionne, Varin reckons that the overcapacity in Europe is a massive 3m cars or 20% more than are needed. His options are either to sell more cars at improved margins or sell fewer in the cut-throat markets of France, Italy and Spain and the rest of western Europe. He has business in China and Latin America. When he talks about going upmarket what he really means is that he is overly dependent on low margin (aka no margin) A and B segment cars.
Varin took the opportunity of flashing his charms at collaborators. He already has an engine-sharing deal and a hybrid engine development with BMW/Mini. But he concedes that he needs more.
Worrying news came from GM though. Whereas a while ago it seemed that GM Europe might get canned or massively reduced in size, GM CEO Dan Akerson has just confirmed that he is going to battle it out and keep Opel going. Nick Reilly, who chaired GME for the last few years is to retire in the next couple of weeks and a new man, American Steve Girsky, is to be given a chance of leading a fresh look at the options for a revival. The probability is capacity cuts in the UK at Ellesmere Port or in Germany, or both.
