Automotive News Europe - August 2019 - 8

AUTOMOTIVE NEWS EUROPE

COVER STORY

pacity utilization, "even if he has had
to do some trimming" at some plants,
including reducing the number of production lines and shifts, he said.
Among the plants that have shown
sharp utilization rate increases under
Tavares are Rennes, France, which went
to 45 percent in 2018 from 25 percent
in 2016; Zaragoza, Spain, to 98 percent
from 79 percent; and Sochaux, France,
to 118 percent from 83 percent. In fact,
four of 14 PSA factories in Europe are
operating at 100 percent capacity or
higher, including lower-wage sites in
Trnava, Slovakia, and Mangualde, Portugal. PSA will start production of the
Peugeot 208 at a new factory in Kenitra,
Morocco, this year.
Volumes have fallen, however, at former GM plants -- Luton and Ellesmere
Port in the UK; Opel's German plants
at Ruesselsheim and Eisenach; and at
Gliwice. "Tavares is quite happy to let
sales and production fall so that they
don't have these huge inventories that
they have to discount or sell at a loss or
very low margins," Cox said.
Tavares has said GM plants were much
less efficient than PSA's, which have
been sharpened by internal competition
for products. "Most automakers do it,
but PSA takes the internal competition
between plants to another level," said
Philippe Houchois of Jefferies. "I'm sure
it's a bit tense - you are only as safe as
the life cycle of the product."
--Peter Sigal

Peugeot 3008 production in
Sochaux, France, where capacity
use was boosted to 118%.

www.autonewseurope.com

Demand for the Peugeot 3008 has helped boost PSA.
of nonaggression between Peugeot and
Renault are gone," Houchois said.

Next Marchionne?
In style and substance, Tavares bears
some resemblance to the late Sergio Marchionne, the hard-driving CEO who managed to wring profits out of Fiat Chrysler
Automobiles, analysts said. "One of his key
strengths has been humility, a realization of
what kind of company he has, which Marchionne similarly had in Europe. By having
a clear understanding of its strengths and
challenges, it's been easier to cut models
and not to fight for the incremental sales,
and therefore to hugely improve the overall
mix," Hendrikse said.
Said Houchois: "Tavares today is probably the closest we have to Sergio Marchionne in the industry, in the ability to
drive people to do more." Houchois, however, added a note of caution. "Keeping
people on their toes as a management
style has a lot of benefits, but it also
wears people out," Houchois said. "You
have to be careful."
Tavares has turned PSA's relatively
small size into an advantage, analysts
said. "People have been suspecting PSA
of underinvesting, but what we have
seen coming out of r&d and the design
studio is quite impressive," Houchois
said. "There has been a continued focus
on capital allocation and savings that is
Tavares' imprint on the business."

Tavares has often cited pricing relative
to benchmarks as an important metric of
success. "His other obsession [outside of
efficiency] is to sell well," Houchois said.
"When Tavares was COO of Renault, it was
about the only period when Renault was
particularly good in pricing."
Hendrikse said PSA did not take much
market share in Europe from 2014 to 2016
when the market was seeing its biggest
gains. Instead the company used the organic market growth to hugely improve the
mix on the sales they were making. "They
reduced exposure to rental cars and dealer
self-registrations," he said. "The overall
sales discipline that Tavares has had has
been incredibly important," Hendrikse added. "He has not had an outright unit sales
strategy, but one based on profitability."
To command higher prices a company has
to offer a product that buyers want, which
PSA has done as Peugeot and Citroen have
emerged as distinct brands with recognizable styling and a tighter lineup, analysts
said. "Tavares highlighted the fact that PSA
had too many models in too many different
regions," Hendrikse said. Many were not
profitable, and low sales meant high inventory and capital expenditure needs. "By allocating models more intelligently around
the world and cutting less profitable models he has turned PSA into a much more
efficient company," he said.
Three models cited by analysts as having
boosted PSA's fortunes are the new-generation 3008 compact SUV -- "you have

AUGUST 2019

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Automotive News Europe - August 2019

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