Seat CEO Luca de Meo needed just 18 months to turn the chronic money-losing Spanish brand into a profit maker for parent Volkswagen Group. He wants to make achieving positive financial results a habit at Seat. The Italian executive, who has also held top jobs at Fiat and Audi, discussed Seat's strengths and weaknesses and outlined its future role within the VW Group with Automotive News Europe Associate Publisher and Editor Luca Ciferri.
Is Seat in position to sell 500,000 cars this year?
Last year we sold 408,700 vehicles in what was our fourth consecutive year of growth. My preference is to consistently grow by 8 percent to 9 percent a year because anything above that rate puts enormous pressure on your factories, suppliers and dealers. Therefore, I don't think 500,000 units are achievable this year. To me, it is much more important that we started 2017 with orders covering two months of sales. That allowed us to properly tailor our production. In the past, we operated with orders for just one month, which resulted in an unhealthy channel mix.
What is Seat's operating margin target?
The first goal was to make money, which we finally did last year. Long term, a 1.5 percent to 4.5 percent operating margin range is realistic given the segments and the markets where we operate.
Isn't that a bit low when PSA and Renault had margins of more than 6 percent and your Czech sister brand's margin was nearly 9 percent?
The French automakers had great results, but I think they are at peak cycle. They also disproportionately benefited from strong sales of SUV/crossovers in their home market. And while Seat and Skoda are both part of the VW Group, and there is no denying that Skoda's 2016 performance was remarkable, the brands are very different. Seat is mainly present in the A- and B-segments [minicars and subcompacts], while Skoda's strengths are in the C- and D-segments [compacts and midsize cars]. This has a clear effect on its margins.
Does that mean Seat cannot compete with Skoda?
Skoda began to internationalize when Seat was still struggling to recover financially. In addition, I think -- and the VW Group board agrees -- that it would be wrong for all brands to compete on the same field. Our strengths are that we have the youngest buyers in Europe, a high conquest rate, as well as a longtime presence in both entry segments and southern Europe. We must play to these strengths to better differentiate Seat within the VW Group so we can become a gateway to other brands in the group.