Many in the automotive industry are talking about the need to consolidate to overcome the challenges of emissions regulations and autonomous cars, but Carlos Tavares is doing something about it. In 2017, PSA acquired Opel/Vauxhall from General Motors and within 18 months the money-losing German/British brands were recording 5 percent operating margins. This year, Tavares is dreaming bigger, hoping to engineer a merger with Fiat Chrysler Automobiles that would create the world's fourth-largest car company. He spoke with Automotive News Europe Associate Publisher and Editor Luca Ciferri and Correspondent Peter Sigal about the road ahead.
What is the rationale for a potential PSA-FCA merger?
The two companies are very complementary on technology and very complementary on geography. They have the confidence that comes from the fact that they have turned themselves around, and the maturity to understand that it's better to face the challenges ahead together rather than alone. All this is the foundation for synergies that could generate value for shareholders and stakeholders.
In the proposed merger, you would be CEO for five years and the 11th board member, with five each from PSA and FCA. How would you use that power?
The CEO is just a tool to make things happen, and the toolbox is very, very big. I want to be very humble. I'm privileged to have the opportunity to bring this deal to a conclusion with all the teams involved. I want to underline that Mike [Manley, FCA CEO] and I have a longtime relationship and mutual respect and trust for what we hope to build together. The [overall] CEO would be there to make sure the new company is moving forward in terms of technology investment, profitability, work-life balance and everything. Success for all of us would be that in a few years nobody remembers who appointed the board members.
The chairman of the new company would come from FCA, and the vice chairman would come from PSA. Is the arrangement as fair as it could be?
The top executives at each company should be at ease. These are two great companies based on the public numbers published by both. Neither is currently in crisis. So, full respect to the current top executives of the two companies -- chapeau bas (hats off), as we say in French. [PSA-FCA would be] such a big entity, with such a high level of things to be achieved, that we would need all of them. The second thing is that the only rule would be meritocracy: In the interests of everybody in the company, in each key position you should pick the best possible executive to deliver results for everybody to enjoy.
Do you want to become a bigger automaker or become a mobility provider?
A bigger carmaker would be very helpful, because if you don't become larger to dilute your r&d costs and have a volume scale effect on the purchasing of components such as batteries you could be in trouble. It's especially helpful with electrification, because you will have leverage to buy kilowatt hours at the most competitive price. Those two factors are real. That is where it helps. And specifically, for people working in regions where there are going to be significant breakthroughs on CO2 objectives, scale would be a real benefit.
PSA does not have a designated chief operating officer. How do you manage decision-making?
I am a strong believer in a matrix organization. At PSA we operate within three axes: the regions, the brands and the functions. Even within this three-dimensional operation, we have business units that go through and try to boost the system. For example, we could have the CEO of Peugeot reporting on volumes and profit, then the European head report on total profits, volumes, market share, quality and customer satisfaction for all brands in the region. On the functional side, we would look at whether we are ready to launch a new car, are manufacturing costs being reduced? So we are constantly reviewing the business in three dimensions.
How is this beneficial?
It's very important to let the matrix breathe. People are human. They have different characters, and they express them in a personal way. If you "lock" the matrix, it will break because you can't force people to all act in the same way. In the end, I don't care about the win for the brand, for the region or for the function. I want PSA to win as a whole.
You are a big believer in agility. When your company grows, how do you maintain its maneuverability?
Adding Opel/Vauxhall to Peugeot, Citroen and DS was a good learning experience. What I'm trying to do is find the spirit in what we want to achieve as an efficient team. People come to me with a paper with, say, 10 bullet points. I will listen to what they are, then say, "OK, what is the spirit of what we want to do?" If people understand that then they won't ask you every day what they should or should not do. They don't have to ask me for validation. Therefore, you will have more time because people will have more autonomy. It is rewarding and they can unleash their potential in a way that is much more fulfilling for them, and it gives me much more time.