Under the leadership of Carlos Tavares, the PSA Group has gone from near oblivion to success
10 December 2018

PSA chairman Carlos Tavares recently confirmed a 40% year-on-year revenue growth and record profitability for the group, which passed Volkswagen Group in September to become Europe’s biggest car maker. 

Tavares has transformed PSA’s Peugeot, Citroën and DS brands (plus newly acquired Vauxhall-Opel) from a dire financial situation into what is now one of the most profitable car-making groups in the world. 

Back in 2012, PSA was close to bankruptcy after years of mounting losses, with the group reporting a €5 billion loss (£4.36bn at today’s exchange rate) that year. Part of this was due to the group’s Eurocentric focus: the European new car market was still suffering from the 2008 financial crash. With high wage costs and far slimmer profit margins in Europe than elsewhere in the world, PSA’s cash flow went from bad to worse. 

Drastic changes were already being made before Tavares’ appointment in early 2014. Peugeot announced sweeping cost-cutting plans, slashing 8000 jobs and closing its factory in Aulnay, Paris, after more than 40 years of building cars there. The firm looked to the French government and China’s Dongfeng Motor for a multibillion-euro rescue deal. 

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Dongfeng and the French government bought 14% of PSA each, with the Peugeot family giving up control of the company it had been running for eight generations. There was even talk of General Motors taking overall control of the ailing business. 

The Dongfeng rescue deal was the first step in the right direction. It gave PSA the foothold in the Asian market it so desperately needed, as well as providing a vital cash injection. Then came Tavares, who joined as CEO and board chairman after leaving his job as COO of Renault

Tavares immediately put in place a strategy called ‘Back in the Race’, which set targets for what was needed to make PSA competitive again. These goals included a streamlined product line-up, expansion in global markets and a wide range of cost and efficiency savings across the group’s brands. 

At the time, Tavares said he would measure success against the firm’s cash flow and operating margins. He smashed those targets in 2015, with PSA posting an operating margin of 5% (against a 2% goal) and profits of £950 million, the firm’s first year in the black since 2010. 

Increasing productivity in PSA’s factories from 65% in 2012 to 90% in 2016 and dramatically lowering the firm’s break-even point were two further achievements, helped by better than expected market growth globally. It meant all objectives in the Back in the Race plan had been achieved a full two years ahead of schedule. 

The next phase of Tavares’ turnaround was dubbed ‘Push to Pass’. The first aim was an increased focus in profitability – with PSA’s 5% margins already the envy of many mainstream manufacturers – and further cost reductions. A continued revitalisation of Citroën, massive investment in DS as a separate premium brand and plans to give Peugeot a more defined character were outlined. A new focus on building SUVs, the key growth sector, was paramount to all of this. Electrification also became a priority, with PSA behind the curve on that front. 

In 2017, several key models were launched, in particular the hugely popular Peugeot 3008 and 5008 SUVs. A new Citroën C3 supermini gave the brand a huge sales boost and DS launched its first bespoke (ie non-Citroën-based) model, the 7 Crossback. At the end of the year, PSA posted record sales volume, operating margin and revenue. 

“PSA is clearly focusing on high-end, higher prices and more profitable segments, and this is having a positive impact on growth and margins,” said Felipe Munoz, automotive analyst at data firm JATO. 

Then came PSA’s shock acquisition of Vauxhall-Opel from GM, which highlighted the dramatic turnaround from the time when GM had been lined up to save PSA. GM’s European arm hadn’t turned a profit for almost two decades, but Tavares boldly claimed the brands would shake off their loss-making history and become “a true European champion”. 

Many were sceptical but again Tavares performed the unthinkable. An ambitious cost-saving plan helped Vauxhall-Opel make a €502m (£438m) profit in the first half of 2018, while the deal boosted PSA’s revenue by 40% and turned it into the biggest-selling car group in Europe after VW. 

“It is making use of more efficiencies thanks to the acquisition of Opel-Vauxhall, which is having a positive effect on costs,” Munoz said. 

Big challenges lie ahead – Munoz points out that PSA is “losing ground” in the volatile Chinese market – but given what Tavares has overcome so far, there’s little doubt that, with margins and revenue at a very positive level, it’s another storm that Tavares can weather.

Read more

PSA may still close a UK Vauxhall factory post-Brexit​

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Comments
7

10 December 2018
Is it due to his stewardship or bale-out by French Government and the Chinese?
Don't applaud to loud as Vauxhall face a very uncertain future. Remember Coventry!!!!

10 December 2018

Buying share is not a "bale out" (or even a "bail out" which is the correct spelling), the French government and Dongfeng bought shares, they didnt lend or give money.

XXXX just went POP.

FMS

10 December 2018
EdBalls wrote:

Is it due to his stewardship or bale-out by French Government and the Chinese? Don't applaud to loud as Vauxhall face a very uncertain future. Remember Coventry!!!!

 

Explain in detail, exactly what you mean by "Coventry" and then explain further exactly what you mean by "Remember Coventry". If you can't, then these are just random words posted by a random fool. Go!.

10 December 2018

I'm not convinced that DS is anything other than a flop.

Vauxhall / Opel is probably going to disappear or just become a badge brand.

On the positive side Peugeot is a least making nice looking cars again.

I'm not convinced by any current Citroen models - overpriced and, well, weird.

 

 

 

Steam cars are due a revival.

10 December 2018

Left Renault as soon as het found out Ghosn wasn't going to retire any time soon. Turned an ailing carmanufacturer into a cash generating outfit within 1 year. Currently 8,5% margin =  equal to Audi. C3 vs Audi A8, surreal. Opel / VHX turned around in 9 months - incroyable. 

Wheelman

10 December 2018

in a nutshell; peugoet had the prehistoric rootes group factory there after they took over chrysler uk (talbot), made a few cars there and then closed it

10 December 2018

it's on wikipedia as "Ryton Plant". people think that because of this, psa are going to close everything vauxhall have in the uk and a whole bunch of other pessimism

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