When ex-Renault chief Carlos Tavares arrived at PSA last December, soon to become president, it’s fair to say there was a good deal more apprehension to be felt within the group HQ on Paris’s imposing Avenue de la Grand Armée than Christmas cheer.
Despite the best efforts of a hard-working executive group, the company had just lost an eye-watering £5 billion in trading over the previous two years. Car sales had flagged, and every one of them had been unprofitable.
Tavares’s mild-mannered predecessor, Philippe Varin, had already presided over 9000 redundancies, and, though soft-spoken, the new man was soon noted as the possessor of a steely stare and a race-winner’s determination. No one knew how deep he would cut, but the assumption was that the incisions would be painful.
Ten months later, the mood has changed. Tavares has not lost his reputation for toughness, but neither has he turned into the expected hatchet man.
Instead, he has launched a clear-minded turnaround plan called ‘Back in the Race’ which, for the latest half-year’s trading, has generated a tiny but highly symbolic trading profit of £5.6 million – an achievement he describes as “encouraging, not impressive” when we meet in his comparatively modest office on the ninth and most elevated floor of the building known throughout the company as ‘Grand Armee’.
“We use the word ‘encouraging’ because I wouldn’t want anyone getting the idea that the recovery had been achieved,” Tavares says, speaking fluently in what is the third of his four languages. “We have only just begun the recovery.” Tavares, 56, is Portuguese by birth but went to school and then trained as an engineer in France.
He has since had a series of English-speaking jobs, possibly the biggest of which was running all of Nissan’s operations in the US, including numerous manufacturing plants. Every second weekend during the racing season he found time to return to France to indulge his passion for racing a 600bhp single-seat GP2 car, at which he was remarkably successful.
Tavares once said he’d have preferred a career as a racing driver to his current position as one of France’s most prominent industrialists, but even so, his ambition to reach the top of the car industry tree is firmly on the record.
When he told journalists, in August last year, of his ambition to be the unfettered head of a car company – and subsequently put the idea to his then-boss, Renault–Nissan chief Carlos Ghosn – his 30 years’ service at Renault came to an abrupt halt.
After a couple of months, during which some remarkable rumours flowed, he bobbed up at PSA, first working with Varin, then taking the reins for real in the early months of this year.
Given our genteel surroundings, it hardly seems polite to suggest that this latest tiny profit might be window dressing, a morale boost for employees and PSA’s three major shareholders, Chinese group Dongfeng, the French government and the founding Peugeot family.
I make it anyway, but Tavares is unruffled. “If it had been about window dressing, I would probably have arranged things to go in the opposite direction, because one might think it was too soon to show a profit,” he says. “But the truth is we have good things on the way. We didn’t push any metal; this was a natural achievement. But we have a long way to go.”
There is no rocket science in the remedies, Tavares insists. “The break-even point of the company was too high – above its net sales – so it’s no surprise we were showing red ink. Our job was to start reducing our fixed costs, improving the net pricing of our cars and cutting manufacturing costs – and we also saw some low-hanging fruit that allowed us to begin improving immediately.
“The good news is that when you move those three levers the right way, you see an immediate Improvement. That has done wonders for morale.”
From previous experience, I know Tavares will try to answer any question, so I ask how it feels at last to be the undisputed boss of a very large, if troubled, car company.
The answer is gratifyingly straight: “I feel very free. I have a lot of autonomy. The shareholders know the detail of the plan, and they all ask for the same thing: please fix it. I meet the supervisory board every two months, but beyond that they’re hands-off. It’s a great way to work.”
Encouraged, I ask how hell-bent Tavares is on ‘showing’ Ghosn and his former colleagues at Renault what a recovery looks like. “Not at all,” he insists. “I have hundreds of Renault friends and I’m still in touch with many. It’d be fine with me if Renault were to succeed too; that would be great for the whole country. In any case, at PSA we have only three per cent of the total world market. That leaves 97 per cent to aim for. Why should I concentrate on just one rival?”
Unhappy with this comfortable answer, I press a little further, whereupon Tavares says a telling thing: “The only valid comparison you could make with my former company is to compare PSA’s situation with the recovery of Nissan in 1999.” (We’re talking here of the famous ‘Ghosn miracle’ described in the book Shift.) Do you often make that comparison, I wonder. “No,” Tavares fires back, “though I know we are going faster…”
Surely it helps to be the group’s first leader for many generations who is a genuine ‘car guy’, I suggest. But Tavares is reluctant to make any big claims.
“It certainly helps that I believe I can excite and enthuse our engineers and designers by talking their language,” he says. “But we have to remember we’re producing cars for customers, not for Tavares. Far better to rely on the judgement of clinics, where we test everything thoroughly.
“Mind you, our executive committee drives a lot of cars nowadays. I’ve spent at least a day a month just driving since I’ve been here. Our aim is to engineer cars that can work in all markets, provided we leave room for a layer of adaptation. Markets as disparate as Asia, Russia and Brazil need their own final spec.”
One powerful driver of change – begun already but not due to finish until 2022 – is Tavares’s keenness to rationalise the group model range.
He sells the concept well, pointing out that during the two-year, £5 billion loss period, PSA had 45 different models in its showrooms in a market with around 20 different categories. “Having lots of models doesn’t protect you,” he says. “We proved that. So why do I need so many?”
Tavares is exaggeratedly careful about not letting his own passion for motorsport skew group policy, although he does let slip the killer fact that “none of the really great car brands lacks a motorsport heritage”. When you think about it, he’s right, with the possible exception of Rolls-Royce.
Given that he wants to profile Citroën as comfortable, easy-going and sometimes surprising, it’s pretty clear that the marque’s WTCC and rally programmes may not ultimately fit, but they’re useful for now because Citroën is still building brand recognition in far-flung places.
The newly independent DS will concentrate on being fashionable and artistic, but Peugeot, which Tavares says mixes Latin flair with Germanic detail engineering, looks certain to stay on the track.
Tavares’s own motor racing career also looks set to keep flourishing. This year he has tested Sébastien Loeb’s WTCC car at Spa, driven a Peugeot RCZ R in endurance races and raced a ’70s Porsche in historics and is shaping up to punt a friend’s 550bhp Lola T70 before the season ends.
All this amounts to 18 racing weekends this year, part of a private life in which Saturdays and Sundays are sacrosanct, for spending with his family and on his hobby. Work days are scarcely any less regimented: Tavares leaves home at 7am, sorts his emails for an hour in the car, starts work in the office at 8.30am with the mail done and finishes the day at 6.30pm sharp.
Exactly 30 per cent of the PSA president’s work time is spent out of the office, meeting dealers or walking plants and design studios. The rest of his time is efficiently managed by an unofficial duo consisting of his wife and his Peugeot PA.
“I hate to be pressurised by my agenda,” he says, and history shows that what Carlos Tavares wants, he almost always gets. And what he wants next – very badly indeed – is a full-blown PSA recovery
Carlos Tavares on…
”Look at the VW Group today. Volkswagen earns one to two per cent, Audi earns 10 per cent and Porsche earns 25 per cent. That tells you something about the earning power of premium cars. It’s why we decided to create a premium brand rather than sit idly in the station and watch the train depart. Of course, we recognise it’s a very long-term task. We’re doing this for the next generation, not ours. It’s 30 years from the NSU Ro80 to Audi today. But we’re already making good money with our DS models and we hope to do a lot better.”
Engine co-operation deals
”Looking at how many manufacturers have created small-capacity, three-cylinder turbocharged engines recently, it seems a pity that the industry was not able to co-operate more. It doesn’t make much sense for companies to manufacture such similar products in a low-margin industry like ours. In future, managements may need to be firmer – provided they know that they can buy at a price that won’t hurt their profitability and that they won’t lose a capability they might need for the future.”
Increasing PSA car production
”I’m cautious about saying we need to be bigger to succeed. Honda is about the same size as us; it has a very compact range that’s very competitive, and the company makes big money. This is not necessarily what we would want to do. But I raise it to challenge assumptions that we need to get bigger and must have lots of alliances to succeed. Whatever we do, I know if we don’t fix the fundamentals, we can’t contemplate a bright new future.”
Making big saloons
”Sales of generalist D-segment models are going down. Sales of premium D-segment cars are not. So success is about status and imagery. You need to offer strong brand values. Either that or something that is completely different, surprising or aggressive in terms of design, specifications or features. If you do mainstream you’re going down. Does this mean we’ll launch a big DS model? We’ll see…”
The Dongfeng joint venture
”One reason we’re doing so well in China is because we are under permanent pressure from our partner. Dongfeng has joint ventures with Honda, Kia and Nissan and will soon have one with Renault, as well as us. They put a helluva pressure on us to understand the Chinese buyer, and as a result the cars have powerful customer appeal over these.”
Doing a Dacia
”I don’t think it would help our company to say we want to sell a low-cost car. How many years would we need to get it ready? How much investment would be needed? A low-cost car is not a reward in itself. My feeling is people want a keen deal on a very good product. I would rather put the focus on that by improving the cost-competitiveness of our existing cars.”
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