So, too, have seemingly simple ones. One of the first jobs of PSA’s new management was to try to rationalise the product offerings. “Insignia buyers had 27 steering wheel options,” said Opel-Vauxhall CEO Michael Lohscheller, “but around 90% were opting for one of two designs. Yet we were buying in, storing, stock managing the others. It was so complex, so inefficient.”
Lohscheller doesn’t tell that story to criticise GM, but rather to highlight why he believes the 2% profit goal by 2020 is achievable. The savings to date are in part why the company was acknowledging, if not celebrating, that it had cut running costs by a remarkable 17% by the end of 2017, five months into the new regime. Even so, the champagne stayed on ice: accounts filed last month revealed that, during that period, Vauxhall and Opel still cost its parent company £160 million in losses.
Hence the need to get on the front foot with new product launches too – because that gives dealers access to the latest, very best products and, as Max Warburton, senior analyst at Bernstein Research, highlighted, because it sets the firm on the path to achieving its stated goal of stripping around £620 of cost from each car it makes. This, for instance, is why the new Corsa was delayed while it is engineered to sit on PSA’s small car platform and why the next Astra will share its underpinnings with the Peugeot 308.
“PSA’s own turnaround has been rather unconventional,” said Warburton, recalling the firm’s own near-bankruptcy in 2012. Years of multi-billion-pound losses had finally reached crisis point, ending with the Peugeot family selling around half of its shareholding in the firm to stay afloat.
“Car industry history is full of comeback stories but they normally involve deep restructuring at a time of economic crisis, a radical improvement in product range and substantial volume growth. PSA under Tavares hasn’t really seen any of these things.
“Instead, it’s been a series of small things that collectively add up to a big improvement in performance: some job cuts and early retirements; a big focus on standardisation and purchasing cost reductions; slashing all non-essential spending; sorting out some chronically loss-making emerging markets. Then an intense focus on pricing – being very calculated on reining in discounts and pushing up prices if feasible. Tavares has shown it’s possible even on weak brands and products.”
PSA may be an anomaly, but its strategy is working. In 2017, the firm made £3.5bn: its most financially successful year to date. As the graph on page 16 shows, Peugeot’s operating profit margin is the envy of most mass-market manufacturers. To paraphrase Warburton, that’s not a bad situation for a firm that arguably makes one market- leading car (the 5008), one good car (the 3008) and a host of decent, if not inspiring, ones.