PSA makes a profit: Success for cost killer Tavares

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Paris Carlos Tavares is known as a manager who drives costs down even when the market is booming. The results of. Show that he is right with this strategy Peugeot Citroën Opel (PSA) for the first half of 2020. Although the car sales slumped by almost half due to the corona crisis, the French company still generated a positive operating margin and a profit of almost 600 million euros. Sales of the French group, which also runs the Peugeot, Citroën and DS brands, fell by 34.5 percent from January to the end of June compared to the same period in the previous year to EUR 25.1 billion.

“We are an all-weather company,” concluded the Portuguese with a French passport. The German subsidiary Opel also has a positive operating margin of two percent and contributes around 111 million euros to the operating result. However, Tavares admitted “that we are in a difficult situation with regard to Opel and Opel Vauxhall concerns. “That had decreased by 1.3 percentage points. The PSA boss is not at all satisfied with it and for the first time he broke with his rhetoric when presenting the half-year results that market shares were not so important to him.

“We want to increase market share as much as profit,” he said at a conference call with analysts and journalists. At Opel, he expects them to increase again from the first quarter of 2021 because then the new Opel Mokka will be offered. The decline led Tavares back to the “brutal transition from a model range based on GM technology to the new one based on PSA” – with the result that many cars were withdrawn from the market.

From 2021 there will be an important presentation of a new model for the brand with the flash every year, that will help. “The Opel team is fighting very hard, also to withdraw production volumes from other PSA plants,” said Tavares appreciatively.

Opel boss Michael Lohscheller does not yet see the corona crisis for the automotive industry and his company overcome. A sustained recovery of the markets that had slumped in the meantime was uncertain, the manager said on Tuesday when the parent company presented its half-year figures. A second possible lockdown could lead to the next sharp drop in demand and lead to supply chain disruptions.

Stellantis is scheduled to start in the first quarter of 2020

As for the merger with Fiat Chrysler As for (FCA), Tavares remains expecting the merger to be completed in the first quarter of 2021. “I do not know whether this will be before or after the annual results are announced, but it will certainly be the case in the first quarter.” There are currently intensive discussions with EU merger control, which are mainly concerned with the market for would turn light delivery vans on which PSA and FCA would be joint market leaders.

The new group, which will operate under the name Stellantis, comes third in terms of sales worldwide. It will have 14 car brands, all of which will keep their identity. Without being asked, Tavares pointed out that it was crucial for him to have as strong a cash position as possible from day one after the merger. “We do everything we can to make the best possible contribution with PSA.” One can understand that as a hint with the fence post to the address of FCA.

Tavares did not want to comment on how FCA would adapt to PSA’s emissions strategy, referring to the consideration of legal provisions prior to the merger. Fiat Chrysler depends very much on the sales of large SUVs and pickups that have very high emissions. In order to avoid fines, the group is therefore an expensive partnership with the electrical pioneer Tesla received.

In contrast, PPE sees itself as the world market leader in emissions reduction. Today’s fleet consumption corresponds to CO2 emissions of less than 80 grams, which means that the company is within the stricter EU standards for pollutant emissions right from the start.

Battery production in France and Germany

The demand for electric cars is increasing, with the new Peugeot 208 already 17 percent of the orders are for the E-variant. From 2025 onwards, PSA’s current focus on two platforms that are suitable for both internal combustion engines and e-drives will be replaced by two pure e-platforms. A lot will happen between 2025 and 2030, Tavares expects, because then all automakers would have to increase their share of electric vehicles from 25 to 60 percent in order to meet the new fleet goals of the European Union.

PSA prepares for this by developing and manufacturing both motors and gearboxes and batteries itself. “This creates a competitive advantage for us, because the demand for batteries will skyrocket after 2025. The battery cell factories in northern France and Germany would start up between 2023 and 2025. Tavares announced that PSA has just signed the relevant contracts with its Total and Saft partners. Now you just wait for the green light from the French and German governments.

Tavares left it open whether PSA would also manufacture the software for electric cars in addition to the platform and the drive train. It depends on whether this is decisive for customer satisfaction and competitiveness, depending on whether it is bought in or developed in-house.

Tavares also sees scope for hydrogen technology, but especially for business customers whose cars return to a fixed location every day because the supply of hydrogen is a problem.

The corona crisis did not discourage the cost killer, it rather seems to inspire him. “We have discovered thousands of things that we can make more efficient,” the manager rejoiced. “The journey to cut costs continues.”

An example: PSA has made teleworking the rule for office employees. 79 percent are satisfied with it. Tavares recognized the opportunity immediately and saved almost a million square meters of office space within a few months, that’s almost seven percent. For competitors who, unlike PPE, rely on aid from their government, the Portuguese has a warning up his sleeve: “When the subsidy comes out, the real gap to the competition becomes clear.”

More: EU review deadline for merger of PSA and Fiat Chrysler suspended

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