Carlos vs. Carlos: PSA move turns double-act to rivalry
Relations between Tavares, right, and Ghosn, left, suffered after Tavares said his CEO ambitions could not be satisfied at Renault.
PARIS (Reuters) -- Whatever the secret of French carmaker Renault's crisis-defying performance, Carlos Tavares has taken it with him to domestic competitor PSA/Peugeot-Citroen.
An appearance at the Geneva auto show on Tuesday marks Tavares's graduation from former Renault second-in-command and Carlos Ghosn protege to PSA CEO and Ghosn rival. Under Brazilian-born Ghosn, who heads the Renault-Nissan alliance, Tavares helped to steer the French side of the partnership unscathed through a deep European slump that almost sank PSA. While Renault was sheltered by its 43.4 percent Nissan stake and buoyant low-cost car sales, analysts also credit price increases and cost savings that Tavares pushed through and now wants to repeat at PSA.
"The fact that I see a certain number of contrasts with my previous experience gives us the ability to [identify] room for improvement," the new PSA CEO said on Monday during a panel interview organized by French trade publication 7pm Auto.
PSA last month unveiled another multibillion-euro loss for 2013, along with a 3 billion euro ($4.1 billion) rescue deal that will see Chinese partner Dongfeng and the French government take significant stakes in the carmaker.
Tavares, 55, rose rapidly through the Renault-Nissan ranks as Ghosn handed him three promotions in four years, culminating in his 2011 appointment as Renault chief operating officer. "They're both excellent individuals," said Andy Palmer, Nissan executive vice president and chief planning officer. "One of the advantages Carlos Tavares does have is that he's been brought up through the Nissan system."
The Carlos-Carlos working relationship was strained when Tavares, a Portuguese national, said in an August interview he was looking to move to Ford or General Motors because his CEO ambitions could not be satisfied at Renault. Tavares will not comment on the discussions that led to his exit two weeks later. "Every story needs a mystery, and you'll need to learn to live with that one," he said on Monday. But former colleagues say he was forced out after refusing Ghosn's suggestion that he apologize to staff for the gaffe.
"Ghosn gave him an out and an opportunity to stay, but he didn't take it," according to a company insider, who said PSA representatives contacted Tavares soon after that. As a result, both French carmakers are now run by CEOs called Carlos who were raised in Portuguese-speaking environments. Both went on to graduate from French Grandes Ecoles and - perhaps less surprisingly - both like fast cars. Ghosn, who turns 60 this month, drives a Nissan GTR, while Tavares races competitively.
Few doubt that Carlos the younger would beat Ghosn around the Nuerburgring, and probably has. "Lap times weren't recorded," the same insider said of the two executives' past sorties on the legendary German track. Ghosn recently laughed off suggestions that he had been wounded by the departure of Tavares and that his former lieutenant's inside knowledge might now pose a threat. "If you're easily bruised then you shouldn't be a car boss," Ghosn said on LCI television. "Knowledge is important in the industry but it's only 5 percent of the battle. It's knowing what to do with it that really counts."
In his first interview since taking operational command at PSA last month, Tavares set out his priorities: improved pricing power, a simplified model lineup, Nissan-style "Kaizen" production savings and a Renault-inspired push to increase the use of local suppliers in emerging markets.
Following in Ghosn's footsteps
By parachuting in to save a distressed company, Tavares is following in the footsteps of Ghosn, sent to Japan by then Renault CEO Louis Schweitzer to rescue Nissan in 1999. Whereas the Japanese carmaker had been bled dry by investment overstretch, former alliance executive Alain Dassas said, PSA's predicament resulted from issues such as a prolonged failure to find the right international partners. "The cash problems are similar, but the reasons behind them are not the same," said Dassas, who served as chief financial officer for Renault and Nissan. "Hiring Carlos Tavares is one of the best things PSA could have done to turn itself around."
PSA lost 1.35 billion euros at the operating level in 2013, while Renault's profit rose 58 percent to 1.24 billion, helped by price increases and cost cuts. New model launches at higher sticker prices were followed by panic among sales directors when the initial orders surge waned during the tail-end of the European slump, according to a source close to Renault. "They said we must discount or sink," the source said. "But Tavares said no, we've raised prices and we're sticking to it. Sure enough, sales stabilized and he'd beaten the rebellion."
Another thing Tavares and Ghosn now have in common is the close supervision of the French government as a large and boisterous stakeholder in both manufacturers. Already Renault's biggest shareholder with a 15 percent holding, France is buying 14 percent of Peugeot, matching the stakes to be held by its founding family and Dongfeng. Politicians like Industry Minister Arnaud Montebourg may expect the two national champions to pool more resources, after investing 800 million euros of taxpayers' funds in PSA. "It's interesting to observe the national mobilization around PSA," Montebourg replied indirectly last week to a question about potential cooperation between the carmakers. "The French people have effectively become co-owners of PSA and are bound to consider that it belongs partly to them."
Some Renault managers are wary that the company could be pressured to share more with its struggling French peer than it would like. An early test may be self-driving vehicles, where Ghosn is already leading a government-backed research push. "The natural play would be to have both your French car companies involved," said a serving Renault-Nissan executive who knows both CEOs. "So let's see where that goes."
Renault and PSA already cooperate fruitfully on early-stage engineering projects through France's government-assisted PFA industry body, Tavares said. "If, to accelerate the PSA turnaround, there are opportunities to collaborate then of course we should address them," the new CEO added. "Carlos Ghosn and myself are professional people - it's in the interest of both our companies that we get along properly."Contact Automotive News