PSA/Peugeot-Citroen CEO Carlos Tavares is achieving positive results with his Back in the Race turnaround plan at the crisis-hit French automaker.
He says PSA's very solid cash flow numbers are proof of the company’s financial health. "The positive free cash flow that we delivered during the first half of 1.5 billion euros is by pure coincidence the same number as Daimler's and General Motors. That says a lot about the potential of the company," Tavares joked on the sidelines of the Paris auto show.
Max Warburton, a senior analyst for Bernstein Research, says Tavares’ targets of recurring positive operating free cash flow by 2016 and a 2 percent operating margin in the automotive division by 2018 are too conservative.
“The more we look at these targets, the more convinced we become that they are hugely conservative – deliberately so,” Warburton wrote in a research note.
Warburton said PSA can easily meet its goals ahead of time. “To make a 2 percent margin, all PSA needs now is 10 percent higher revenues with an unchanged mix [using a 20 percent operating leverage assumption],” he wrote. “Or with slightly better mix and some actions on cost, it can be achieved with much more modest levels of sales growth.”
It’s easy to forget that only until very recently PSA’s survival as a company was at stake and it was rescued by taking on board China’s Dongfeng Motor and the French government as major shareholders.
PSA lost 2.3 billion euros in 2013, which was an “improvement” compared to its 5 billion euro loss in 2012.
PSA finance chief Jean Baptiste de Chatillon says the automaker will offer a progress report of the turnaround plan in February. “Let’s just say we are in a ‘wait and see’ period,” de Chatillon told me.