Fall in rand hurts SA arm of Peugeot Citroën

23rd May 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Major changes have been announced at PSA Peugeot Citroën as it continues the fight to return to profitability and increase sales.

It is especially the overseas markets that took a pummelling for the French manufacturer at the beginning of 2014, with the exception of China, where sales were up 14.6% in January and February, compared with the same months last year.

Sales in Europe were also healthy, increasing by 14.5% for the same period. However, sales were down 12.5% in Russia, 4.2% in Latin America, and 37.3% in the rest of the world.

The aim for the brand is to sell roughly half of its cars outside Europe by 2015, as it “is too dependent on Europe”, says Peugeot Citroën South Africa (PCSA) MD Francis Harnie.

Nearly all vehicle manufacturers have been struggling to move stock in Europe, where economic growth remains sticky.

Harnie attributes the drop in sales outside Europe and China largely to weak developing market currencies.

The rand’s sharp decline against the dollar and euro has been mirrored in currencies such as the Turkish lira and Russian ruble, he notes.

“We are too dependent on importing vehicles from Europe and selling them in local currencies.”
One answer to stemming the losses is often to simply sell fewer vehicles.

PCSA itself faces significant headwinds in South Africa as sales have almost halved in the first three months of this year.

Sales for the first three months reached 1 553 units in 2013, but are down to 850 units in 2014.

PSA Peugeot Citroën has devised a plan for the French brands to return to profitability, led by new chairperson Carlos Tavares, Renault’s former number two.

Tavares aims for the company to again make money by 2018, following a second year of multibillion-euro losses as announced in February.

The French government and its people also had to look on as the Chinese stepped in through Dongfeng, taking a 14% share of the company in a rescue deal earlier this year.

The Peugeot family, having led the company for more than 200 years, now holds only 14% of the listed PSA Peugeot Citroën entity.

After years of family control, Harnie regards Tavares as the company’s first CEO “with automotive experience”.

Tavares’ ‘Back in the Race’ strategy, announced in April, is built around four operational objectives.

PSA will now consist of three brands, namely the DS, Peugeot and Citroën brands.

The Citroën DS brand will be developed as a fully fledged premium brand, similar to Audi.

Peugeot will be a more premium-quality brand, while Citroën will return to its roots of being a more affordable, creative product.

The second objective is for a focused, targeted global product plan more aligned with market demand.

The group’s line-up will gradually be streamlined to 26 models by 2020.

This should help optimise the use of vehicle platforms and programmes around the world, and to allocate research and development spend and capital expenditure more efficiently.

The third objective is to drive towards more profitable international growth.

Tavares says the group will continue to accelerate its expansion in China, by tripling volumes with Dongfeng in 2020 and completing the development of the DS brand.

At the same time, the group aims to turn around the situation in Russia and transform the business model in Latin America, with the goal of returning to profit in the two regions in the next three years.

PSA Peugeot Citroën will also seek expansion opportunities in new growth countries, for example, in Africa, or the Mediterranean basin.

Assembly in South Africa may be on the cards, says Harnie.

To achieve these goals, a new global organisation structured around six major regions will be put into place.

To address its competitiveness challenges, and as a fourth goal, PSA Peugeot Citroën will step up the modernisation of its plants, bringing them in line with global benchmarks, while continuing to reduce costs and inventory, says Tavares.

“With this plan, I am committed to accelerating the group’s recovery by channelling all of our teams’ creative potential so that we can quickly get back on the road to profit,” he states.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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