On March 31, Carlos Tavares, Renault’s former chief operating officer, became the CEO of France’s largest automaker, PSA Peugeot Citroen. His mission won’t be easy, on the contrary, as the carmaker lost more than €7 billion in the last five years because and in Tavares’ own words, “making money was not the core value here.”
That has to change, however, with Tavares making it his number one priority. But he has many challenges ahead, the most important of which are reducing PSA’s redundant car lineups, reinforcing the company’s presence in China and adjusting its European production footprint.
“When you have the opportunity to contribute to a turnaround, I think that’s exciting,” Tavares told Autonews Europe. On April 14 the new CEO will unveil the “Back in the Race” recovery plan for PSA Peugeot Citroen, which includes a series of key tasks.
First of all, Tavares wants to increase operating profit, which can be done if PSA sells its cars “at the right price”. This also involves a reduction in production costs and a more efficient collaboration with suppliers. Another challenge is to reduce working capital, with Tavares saying it is important to streamline PSA’s inventory of unsold vehicles, which he says it’s too high.
The new CEO also wants the company to manage cash better, meaning that all investments should provide an adequate return. In his view, PSA should exit car segments where its models are unprofitable and should avoid segments that are overpopulated.
Another pillar of his strategy is to develop the Citroen’s DS upscale sub-brand into a stand-alone luxury marque that can compete with Germany’s premium brands. However, this is a long-term strategy, with analysts estimating it could take 15 to 20 years for DS to become a profitable brand.
Besides a stronger focus on China, where PSA needs to profit more from its ties with partner and part owner Dongfeng Motor, the company needs to reposition in emerging markets where it loses money (such as Russia and Brazil) by reducing its product lineups.
By Dan Mihalascu
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