PARIS – The French automotive industry enters 2014 walking on eggshells following a tumultuous 2013
- Renault in the spring fired its No.2 chief operating officer, Carlos Tavares, and late in the year PSA Peugeot Citroen hired him to replace CEO Philip Varin in 2014.
- Dongfeng, the No.2 Chinese automaker, developed intimate production relationships with both Renault and PSA.
- The French government, which owns 15% of Renault, was in discussions to purchase 15% of PSA, with Dongfeng negotiating for another 15%.
- All of the above occurred in a desultory home market.
Renault and PSA rely on Europe for the majority of their sales, although both are trying hard to build new markets.
Early in December, Renault inked a deal with Dongfeng to build a factory in China in 2016, initially limited to SUV production. CEO Carlos Ghosn is promoting Nissan’s presence in China, and Renault is the only global automaker without a factory there today.
The economic crisis that erupted in 2008 has hurt Southern Europe – France, Spain and Italy – harder than Northern Europe, and those markets were the best for Renault, PSA and Fiat. After five years of decline, analysts believe the low point has been reached.
Sales in France this year will be down about 6% from 2012 to about 1.8 million units, according to the CCFA industry association. Car sales through November totaled 1,614,606, down 7.1%.
“The market is certainly morose,” CCFA President Patrick Blaine says, “but we touched the bottom of the swimming pool in June.”
In Europe, 10,945,360 new cars were registered through November, down 2.7% compared with year-ago. PSA was the second-largest group in Europe with an 11% market share, but Volkswagen was twice as big at 25%.
According to data provider Jato, PSA had only one vehicle among the 10 best-selling models after 11 months: the Peugeot 208, ranked No.5 with 223,762 deliveries, while VW’s No.1 Golf and No.4 Polo had 679,162 sales combined.
Globally, PSA ranked No.11 in production in 2012 with 2.1 million units, according to WardsAuto data, and after 2013 it is likely to fall another notch or two, as Daimler and Renault are growing. PSA stands alone, independent, while other small global players are joining in groups that help spread engineering and production costs over higher volumes.
Since 2007, European new-car sales are down 23%, but the French statistical agency BIPE expects them to begin improving next year, 1.6% in 17 European countries and 2% in France.
“However, 2% is marginal,” says Flavien Neuvy, director of market-research service L’Observatoire Cetelem, which worked with BIPE. “It is only 35,000 more cars.”
Neuvy cites a Cetelem study, “The Car: Public Transport of the Future,” based on surveys of more than 4,000 Europeans, and he argues several factors are likely to keep the recovery modest.
“The financial effort that the purchase of a new car represents effectively excludes part of the population that lacks the necessary means, younger people in particular,” according to the study.
Neuvy notes young people are leading rapid growth in car-sharing and car-pooling systems in Europe, which suggests fewer cars will handle the personal transportation needs of more people in the future.
This forecast is a bleak one for PSA. The projected economic recovery in Europe and France is not big enough to stop the automaker’s losses, starting with €1.2 billion ($1.6 billion) in 2009.
PSA is controlled by the Peugeot family, which has about 38% of the votes and 25% of the shares. It has been a family firm since the 18th century, and Peugeot pepper mills still are sold as a vestige of its early industrial activity.
For years, PSA’s strategy was to remain independent. The automaker formed industrial partnerships sharing engines with Ford and BMW, vehicles with Mitsubishi and Fiat and transmissions with Renault. Other large European volume automakers have had other ideas that created more permanent volume-sharing, as Renault took control of Nissan and Fiat took over Chrysler.
Desperate for capital in 2012, PSA invited General Motors to take a 7% interest in the French automaker, but GM had no interest in taking on more. When the potential of a Dongfeng investment arrived, GM bailed out in December, taking a small loss on its shares, although remaining in several industrial partnerships.
GM has a poor record of doing business in Europe in the past 30 years, with botched investments in Fiat, PSA and Saab, and bringing in Chevrolet to compete with its weak Opel subsidiary.
A French commentator, Bernard Julien, says GM may have changed for the better by naming Mary Barra as CEO.
“Messages are clear,” he writes. “The business badly treated by an indigent, masculine and aging management before the crisis was capable of better performance, in the United States and elsewhere. (Barra) is showing the difference already, making decisions that are required when they are required and not letting situations rot.”)
Some 15 members of the Peugeot family – seven to nine generations from the founder – work at the company, either on the non-executive administrative board or with operational jobs. The best known are administrators Thierry, Jean-Philippe and Robert Peugeot, and public-affairs chief Christian Peugeot. According to a profile published in Le Monde, disagreements have been common among branches of the family since the 2002 death of Pierre Peugeot, the uncontested family leader who was father of Thierry and Christian and uncle of Robert and Jean-Pierre.
Thierry’s family branch has the most shares, and he is the non-executive chairman of the board. But the rest of the family has argued over his choice for a successor to CEO Jean-Martin Folz, disagreed about firing CEO Christian Streiff and squabbled over when to dump CEO Philip Varin because of the poor results of the group.
The family is fighting tooth and nail to keep as much power as possible when Dongfeng and France enter as shareholders, but the infusions of capital will dilute the family’s power.
Emerging against this background is the possibility of a merger of PSA into Renault, even though industrial justification for the idea is negligible.
Renault and PSA are fierce competitors, with ranges and markets that overlap. But never before has one of the OEMs hired a top executive such as incoming CEO Tavares who had worked at the other one. Seldom has the Peugeot family turned to the state for aid. And the presence of Dongfeng, China’s No.2 automaker, brings new potency to the table, with the French government a second player.
Peugeot “will remain French,” assures Arnaud Montebourg, the minister of industrial renewal, in December, and the prime minister’s office says the government will be following the talks with Dongfeng closely.