PSA Peugeot Citroen CEO Carlos Tavares has restated his recovery plan for the company based on a rationalisation of product and a more globally based organisation.
Speaking at Automotive News Europe‘s Congress, he said he has a high level of confidence in the recovery plan for PSA because of the ability of people in the company. “When you make EUR6bn of losses in two years, something must be wrong in the way we operate,” he said. “People realise they have worked so hard and got those results, which – of course – don’t meet expectations. People realise that things need to change in the business. That creates a fantastic opportunity and environment to turn the company around. I am very confident that will happen.”
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Tavares said that there are three things for PSA to focus on: fixed costs are too high, net prices are too low and variable cost is too high. “As soon as these three things are fixed, then the company will be in better shape.” He said that the plan is to get the company to positive free cash flow, operating profit margin of 2% for the automotive business alone (no later than 2018, with the company as a whole at 4-5%) and wipe out the company’s debt.
On improving net pricing he said the business plan is to differentiate the company’s brands and stop the risk of cannibalisation. DS will become a premium line and is being set up within PSA as a brand in its own right. “We already have three very attractive products for the DS brand and three or four more are in the pipeline. DS will express sophistication and French glamour, French modernity, French style and way of life. Outside of France, people consider France a luxurious place where quality of life if very high, modernity is very high and culture is very deep and we have a unique opportunity with a fresh brand to express these things. There are not so many car companies that can do this.” Peugeot, Tavares said, is a tech-driven brand with strong engineering and design values while Citroen’s appeal centres on ‘comfort’. Tavares also sees Citroen as a brand that is suited to new concepts, such as SUVs and crossovers, for flexibility and a value proposition to the customer.
He also said that PSA needs more ‘global thinking’ in the way it develops its products in order to improve efficiency. Tavares has already outlined a plan to reduce the number of models produced by the group from 45 to 26 by 2022. “You are fragmenting resources by having too many cars,” he said. “You have to have a more global range that addresses markets and segments and our company needs to have a mindset of a global carmaker rather than a regional carmaker, so that products meet all global needs and are designed and engineered for that from the beginning. We are creating a roadmap to do this, brand by brand.”
On internationalisation, Tavares noted that the company is currently making money in China, but losing money in Russia and Latin America. “That is not acceptable,” he said. “We must make money everywhere and in all regions.”
He also told delegates that PSA must improve its competitive position in Europe and in France. “It’s a big challenge, but also an enormous opportunity,” he said. “Our French and Spanish plants have to be as good and competitive as other plants around the world. The unions are aligned with the idea that we can do better in Europe.”
