French carmakers Renault and PSA/Peugeot-Citroen may be down for now due to the current market situation in Europe, but they are making progress in dealing with their own weaknesses. Renault and PSA are both suffering from stagnant domestic stakes, excessive production capacity, costly payrolls and stiff competition from non-French carmakers like Hyundai and Volkswagen.
Renault and PSA’s plan of action to cope with the situation includes cutting excess capacity, expanding product lineups, signing partnerships with other carmakers and opening out overseas. Of the two French carmakers, Renault seems to be making more progress. It could be because Renault is less reliant on its sales in Europe and is sharing product development cost with its Japanese partner, Nissan.
On the other hand, PSA’s partnership with General Motors is not expected to bring in huge results within five years. PSA is also having a hard time posting growth in new markets like China.
Letting financial figures speak, Renault really outdid PSA. Although Renault suffered a 37-percent drop in net profit to EUR786 million in the first half of 2012, the results show that the carmaker still managed to remain in black.
This is in sharp contrast to PSA’s results in the first six months of 2012. For the period, PSA posted EUR819 million in net loss, compared to EUR806 million in profit a year earlier.
Despite its success in achieving positive results in the first half of 2012, Renault remains on its toes. In an interview with Automotive News Europe, Carlos Tavares, Renault’s Chief Operating Officer warned that Europe's continued economic slide will force the carmaker to remain in turnaround mode for a while.
Tavares remarked that with the current problems in Europe going to last for a few years, Renault’s strategy would be to “to do more with less, or better with less." Tavares wants every Renault employee to think twice before spending, saying that they should act as if they are spending their own money.