Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • VW teases electric flagship showing a sleek four-door fastback
      Bentley appoints Skoda exec as sales chief
      Alfa Romeo names global leadership team to revive brand
      Honda unveils its new Level 3 tech, but how does it work?
    • Bentley appoints Skoda exec as sales chief
      Alfa Romeo names global leadership team to revive brand
      VW brand will accelerate electric vehicle shift
      Spain will use EU funds for EV battery plant with VW's Seat, Iberdrola
    • Opel Mokka 2020
      Stellantis battery JV seeks contracts with other automakers
      Sogefi appoints new CEO, virus weighs on 2020 results
      3BIDEN-MAIN_i.jpg
      Biden to press for $37 billion to boost chip output amid shortage
      Continental grille web.jpg
      Continental invests in object recognition startup
    • 6DEFENDER-MAIN_i.jpg
      Bigger Land Rover Defender confirmed by JLR
      Porsche adds Taycan electric wagon, stepping up Tesla challenge
      Toyota will stay in Europe's minicar segment while others electrify or leave
      Mercedes preps debut of EQE EV, a Tesla Model S rival
    • Valeo joins Bosch, GM, others in pledge for carbon neutrality
      GMEVBarra-MAIN_i.jpg
      GM aims to stop selling gasoline vehicles by 2035 in carbon neutrality pledge
      VW will appeal $20M Spanish diesel compensation ruling
      Death of diesel looms as automakers accelerate to electric future
    • UK sales plunge 36% in worst February since 1959
      Spain's February sales fell 38% in 'perfect storm'
      German sales plunge 19% in worst February since 2007
      Italy sales dropped 12% in February but incentives boosted demand from private buyers
    • Bentley appoints Skoda exec as sales chief
      Alfa Romeo names global leadership team to revive brand
      Toyota names new CEO for Europe
      Audi appoints former Porsche exec as finance chief
    • Geneva Auto Show
    • Frankfurt Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Mobility
    • Segment Analysis
    • Latest Launches
    • Supplier Spotlight
    • Europe By The Numbers
    • Apple, Nio, other auto newcomers get creative to avoid Tesla's 'production hell'
      How Amazon, Google are transforming the auto industry
      EV-only future looks closer than ever in Europe
      European car retailing poised for shake-up as 'agency' model gains support
    • Renault CEO bets on 'winning horses' for turnaround
      Nvidia CEO says software will soon define the car, drive profit
      Tavares: Keeping PSA, FCA merger on track an 'incredible' achievement
      Renault CEO outlines ambitious revival plan
    • VW teases electric flagship showing a sleek four-door fastback
      VW brand will accelerate electric vehicle shift
      Spain will use EU funds for EV battery plant with VW's Seat, Iberdrola
      Stellantis will increase pace of EV launches in Europe, U.S.
    • Honda unveils its new Level 3 tech, but how does it work?
      Honda to sell limited batch of Level 3 self-driving cars
      VW tests self-driving taxis in Germany ahead of 2025 launch
      A 'genius idea' gets a second chance in Renault's mobility strategy
    • EVs make huge gains helped by incentives, tougher CO2 rules
      EVs, surging SUVs to hit Europe's biggest segment
      Wagons hold market share, but costly EV shift looms
      Electrification gains speed in Europe's key compact segment
    • Porsche adds Taycan electric wagon, stepping up Tesla challenge
      Hyundai counts on Bayon's 'distinctive' design to make small SUV stand out
      Mercedes positions C-Class as sportier S-Class
      Nissan Qashqai gets better handling thanks to new platform
    • How GKN is transforming to gain from e-powertrain shift
      Marelli CEO expects e-powertrains to provide long-term boost
      Veoneer boss expects to reach key milestone this quarter
      How Faurecia aims to become a hydrogen leader
    • Europe sales by model, January: Porsche, Lamborghini, Volvo defy down market; Toyota Yaris No. 1-seller for the month, VW Golf finishes 4th
      Top 10 sellers by market, January: Skoda Octavia finishes No. 1 or No. 2 in eight markets
      Russia sales fall 4% in January as rebound stalls
      CORRECTED: Turkey sales, January: Ford, Kia, Opel, BMW rise
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
    • geely.jpg
      Why Geely wants to be a contract manufacturer
      Jaguar Land Rover Gerry McGovern
      Gerry McGovern is right man to steer Jaguar reinvention
      A 'genius idea' gets a second chance in Renault's mobility strategy
      Skoda connectivity features need to offer more 'must-have' allure
    • Understanding the impact of design on marketing, brand and user experience
      Ex-Aston Martin CEO Palmer calls on UK to intensify battery commitment
      Why Apple must target the $230B luxury car market
      Apple car: Who will build it? Magna Steyr possible candidate
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
    • taycan_cross_1.jpg
      view gallery
      7 photos
      Porsche Taycan Cross Turismo
      view gallery
      11 photos
      Volvo C40 Recharge
      view gallery
      11 photos
      Hyundai Bayon
      view gallery
      9 photos
      Honda HR-V Hybrid
    • koenigsegg-gemera-front-quarter-passenger-01.jpg
      view gallery
      14 photos
      Koenigsegg Gemera
      view gallery
      21 photos
      Fiat New 500
      view gallery
      11 photos
      Aston Martin V12 Speedster
      view gallery
      13 photos
      Audi A3 Sportback 2020
    • At the Beijing show, sales rebound and EV boom mix with murky outlook
      3BEIJING-MAIN_i.jpg
      Beijing show to highlight competition for local EV makers
      Beijing auto show delayed due to coronavirus
      Maserati will unveil Ghibli hybrid at Beijing show
    • view gallery
      11 photos
      Mercedes-Benz Vision EQS
      view gallery
      11 photos
      Renault Captur
      view gallery
      5 photos
      Mercedes-Benz AMG GLB 53
      view gallery
      10 photos
      Mercedes-AMG GLE 53 Coupe
    • view gallery
      8 photos
      VinFast Lux SA2.0 SUV
      view gallery
      8 photos
      VinFast Lux A2.0 sedan
      view gallery
      9 photos
      Seat Tarraco
      view gallery
      7 photos
      Toyota Corolla station wagon
    • view gallery
      4 photos
      Nio ET Preview
      view gallery
      7 photos
      Infiniti Qs Inspiration concept
      view gallery
      5 photos
      BMW 3-series LWB
      view gallery
      9 photos
      Mini Clubman
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress Conversations
    • ANE Shift
    • ANE Rising Stars
    • ANE Eurostars
    • ANE Leading Women
    • Watch Again
      • July 9: EU green deal in the COVID-19 new normal
      • July 16: Assisted or Autonomous Driving
      • July 23: Challenges in Electrification
      • July 30: The Road Ahead for Europe
    • Meet the 2020 winners
    • Watch the 2020 Rising Stars awards again
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Automotive News Europe
April 07, 2014 01:00 AM

How high-revving PSA CEO Carlos Tavares plans to turn around Europe's second-largest automaker

Luca Ciferri
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Racing-loving Carlos Tavares takes on the biggest challenge of his career.

    New PSA/Peugeot-Citroen CEO Carlos Tavares takes over an automaker that has lost more than 7 billion euros in the last five years because he says, "making money was not the core value here." That is one of the first things the 55-year-old former No. 2 at Renault plans to change. Other challenges include reducing PSA's bloated car lineups, strengthening the automaker's presence in China, adjusting the company's European production footprint and navigating the potential minefields that come with having to please powerful new shareholders.

    Tavares welcomes the long list of tough tasks. "When you have the opportunity to contribute to a turnaround, I think that's exciting," he told Automotive News Europe.

    On April 14, Tavares, PSA’s third CEO in five years, will unveil his Back in the Race recovery plan for Europe’s second-largest automaker after Volkswagen Group. The straight-talking Portuguese national shared his views on the problems PSA faces at the Geneva auto show last month. Based on his comments, as well as feedback from industry watchers, the automaker has a number of challenges ahead to end its massive cash burn and position itself for long-term success. Tavares’s key tasks include:

    • Increasing operating profit: Tavares says to do this PSA will need to sell its cars “at the right price.” It also must reduce production costs and work efficiently with suppliers.
    • Reduce working capital: Tavares says a key here is to streamline PSA’s inventory of unsold vehicles, which he finds much too high.
    • Manage cash better: Tavares wants all investments to provide an adequate return. He believes PSA should abandon car segments where its models are unprofitable and that it needs to avoid oversaturating segments.
    • Invest in DS: Tavares wants to transform the Citroen upscale subbrand into an internationally recognized stand-alone luxury marque that can compete with Germany’s premium brands.
    • Focus on China: PSA needs to build even stronger ties with partner and part owner Dongfeng Motor.
    • Reposition in emerging markets: PSA must reduce its product lineups in money-losing countries such as Russia and Brazil.

    PSA CEO Carlos Tavares says the C4 Cactus highlights what he wants from future Citroens: comfortable design, ease of use and intelligent innovations.

    Sharper focus

    Tavares says PSA will stop making unprofitable models and focus on vehicles that generate high volumes and strong margins, something he did successfully while he was chief operating officer at Renault from 2011 until last summer. “His accomplishments at Renault are remarkable and show what is possible,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank, told Automotive News Europe.

    One segment where PSA has potential to streamline is compact cars. With the recent addition of the Citroen C4 Cactus, PSA offers five compact hatchbacks for two brands (the others are the Citroen C4 and DS4 and Peugeot 308 and 3008). Only Volkswagen Group offers the same number of compact hatchbacks, but it spreads them over three brands (Audi A3, VW Golf, Golf Plus and Beetle and Seat Leon). There was a huge difference in demand as VW Group’s compact hatchbacks had combined sales of 816,000 in Europe last year compared with PSA’s 287,000, according to data from JATO Dynamics. Analysts say one reason for the big difference is that PSA models lack key features offered by VW Group models.

    “The Peugeot 308 competes against the Golf, but it does not have four-wheel drive or an automatic transmission. Tavares clearly needs to change PSA’s product portfolio,” said Florent Couvreur, a Paris-based analyst at CM-CIC Securities.

    Not so French

    Couvreur sees two other problems that Tavares needs to address: PSA’s lack of scale and its excessive French-ness. “If it can’t share development costs with other partners, then PSA will continue to lose money,” she said. “For example, PSA’s agreement with Ford for diesel engines works well, now Tavares needs to seal other agreements like this.”

    Couvreur also believes that PSA needs to focus more on making cars that appeal to customers outside its home market. “Today PSA makes cars for French people, with a focus on diesel engines, manual transmissions and hatchback bodies. Tavares must make sure that PSA puts cars in the pipeline that people will want to buy outside of France and around the world,” she said. That means more gasoline engines, more automatics and fewer hatchbacks.

    PSA is set to announce that it will spend more on r&d and that it will develop technologies for a smaller range of cars that will appeal to a wider base of customers worldwide, with less emphasis on France. The money for future investments will come in part from a 3 billion euro capital increase, in which China’s Dongfeng and the French state will initially contribute about half the money in exchange for stakes of 14 percent apiece. Banco Santander also will contribute funds through a partnership with PSA’s lending arm.

    NEW E-MAGAZINE

    This story is from the current issue of the Automotive News Europe monthly e-magazine, which is also available to read on our iPhone and iPad apps.You can download the new issue as well as past issues by clicking here.

    The Peugeot 308, the reigning European Car of the Year, has helped to boost PSA sales.

    In terms of brand positioning, Tavares says the 308 compact, the 2014 European Car of the Year, epitomizes what he sees as Peugeot’s strengths: a convergence of the rigor, seriousness and robustness typical of a German car with the emotion of a Latin brand. He also considers the C4 Cactus a benchmark for future Citroens because of its comfortable design, ease of use and intelligent innovations.

    Better pricing in Europe

    Analysts say that to get PSA to break even by 2016 or sooner Tavares must reduce PSA’s cash burn by increasing the efficiency of its European production network and closing the pricing gap with competitors. “If Tavares can close the price gap with Volkswagen by 10 percent … that alone could fix the bottom line,” said Paris-based Deutsche Bank analyst Gaetan Toulemonde.

    Commerzbank’s Gommel said Tavares proved at Renault that he knows how to turn around a brand’s pricing. “He can improve pricing more easily than when he was at Renault because PSA has a stronger brand reputation than Renault has.”

    PSA shut its plant in Aulnay, France, last year and is looking at ways to lower production costs further in its home region. One way is to add models to the underutilized plants, but Tavares also wants to maximize the efficiency of PSA’s European factories, French newspaper Le Figaro reported. Tavares said in February that margins for the Citroen C-Elysee and the Peugeot 301, which are made in Vigo, Spain, are marginal and did not reflect an efficient use of capacity. “Tavares must improve PSA’s European footprint. Capacity is clearly an issue and existing capacity needs to be better utilized,” Gommel said.

    Streamline Russia, Brazil

    Tavares is expected to announce that PSA will streamline its offerings in South America and Russia. It is losing money in both regions, analysts say. PSA has a production capacity of 100,000 units in Kaluga, Russia, but the plant only produced 20,000 vehicles in 2013, French newspaper Le Monde reported. The automaker also offers more than 25 different vehicles in Russia, which Deutsche Bank’s Toulemonde says is too many, especially in a market that has been in decline since last year. “Tavares needs to sell fewer than 10 models there,” he said.

    Added Commerzbank’s Gommel: “In South America and in other emerging markets where it already has local production, PSA must do better. It needs to improve its localization at its plants in emerging markets, where it continues to import too many parts.” Doing this would better protect PSA from exchange rate fluctuations, the analysts said.

    Meanwhile, CM-CIC’s Couvreur pointed out that Tavares was instrumental in making Renault successful in eastern Europe and South America by offering limited ranges that sold in high volumes. “I think that PSA can be profitable in Brazil and in Russia in two to three years by adopting a more localized strategy. These two countries currently are Tavares’ problem markets,” she said.

    Tavares enters PSA as the automaker is starting to gain traction in China. His job will be to strengthen the automaker’s ties with Dongfeng while avoiding potential conflicts over technology sharing. “Tavares must clearly make the boundary between PSA’s and Dongfeng’s technologies,” CM-CIC’s Couvreur said. She thinks that PSA needs to protect its expertise but fears that this will be difficult. “Dongfeng’s two representatives on PSA’s supervisory board will try to accelerate this technology transfer,” she said. Couvreur also fears that one day Dongfeng will leave the alliance with enough knowledge and technology to compete against its former partner. She says this has happened in China to companies such as Alstom and Airbus. “This is going to be a very touchy subject for Tavares,” she said.

    More to do in China

    Commerzbank’s Gommel said PSA’s challenge today, however, is expanding its presence in China and to do that it is relying heavily on Dongfeng. “PSA has fixed a lot of its problems in China, but it has more do. Clearly, the partnership with Dongfeng will help, but China still needs to become a more important part of its business,” he said.

    Established in 1969 and based in the central Chinese city of Wuhan, Dongfeng already operates three factories with PSA in the world’s largest auto market. The partners plan to raise joint production to 750,000 vehicles by the end of 2015 from a record 550,000 units sold last year. Dongfeng wants to sell a combined 1.5 million Dongfeng and PSA vehicles a year in China by 2020.

    Despite the big challenges that Tavares faces, the consensus is that he has the right experience, the right tenacity and the right amount of supervisory board support to fix PSA. “The Peugeot family has blocked certain decisions in the past that would have been good for the company,” Commerzbank’s Gommel said. “Tavares has a more independent board now that will not put the family’s interests first.”

    Toulemonde also is optimistic about the new CEO’s chances. “Tavares’ track record speaks for itself,” he said. “You just have to look at what he has done at Renault, what he has done at Nissan and the perception the market has of him.”

    RECOMMENDED FOR YOU
    2020 Eurostar winner Frank Bekemeier
    Recommended for You
    2020 Eurostar winner Frank Bekemeier
    2020 Eurostar winner Frank Bekemeier
    2020 Eurostar winner Jürgen Weissinger
    2020 Eurostar winner Jürgen Weissinger
    2020 Eurostar winner Nicolas Racquet
    2020 Eurostar winner Nicolas Racquet
    Succeeding with the automated driving journey through AI
    Sponsored Content: Succeeding with the automated driving journey through AI
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • 2020 Media Kit
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Geneva Auto Show
        • Frankfurt Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Mobility
      • Segment Analysis
      • Latest Launches
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress Conversations
        • Watch Again
          • July 9: EU green deal in the COVID-19 new normal
          • July 16: Assisted or Autonomous Driving
          • July 23: Challenges in Electrification
          • July 30: The Road Ahead for Europe
      • ANE Shift
      • ANE Rising Stars
        • Meet the 2020 winners
        • Watch the 2020 Rising Stars awards again
      • ANE Eurostars
      • ANE Leading Women
    • More
      • Publishing Partners
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us