Tavares appointment seen as sweetener for Dongfeng alliance

Article by Anita Panait, on November 27, 2013

When PSA/Peugeot-Citroen renewed the contract of Philippe Varin as chief executive earlier this year for four more years, people thought he would stay at the French carmaker for a longer time. But that is not the case anymore. PSA has named former Renault COO Carlos Tavares to replace Varin later in 2014.

He will join PSA's management board on Jan. 1, 2014 before taking the reins from Varin. The move is seen as part of PSA’s bid to entice Dongfeng Motor Corp. to expand their tie-up. Discussions are ongoing between partners and the French carmaker, with Varin leading them.

It is widely perceived that a deeper connection with Dongfeng – which is one of PSA's joint venture partners in China -- represents an opportunity for the French carmaker to gain a foothold outside Europe. "It does seem as if the Chinese are the only lifeboat left for Peugeot," Garel Rhys, head of the Centre for Automotive Industry Research, told Bloomberg.

He noted that that PSA “is lucky” to have a Chinese company that wants to be involved because of “huge issues." PSA expects to consume around EUR1.5 billion ($2 billion) in cash this year, after its automotive unit posted EUR510 million in operating losses in the first half of 2013. The carmaker has been looking for new partners to end its reliance on mid-market cars in Europe, where demand is still slumping and where PSA is losing market share.

PSA had sought to improve its lots and cut costs by partnering with General Motors, but the alliance failed mainly because they largely compete for the same customers. PSA said in October that it is reviewing a move to pull out partly from the partnership. Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, remarked that going back to GM is not an option for PSA, but partnering with Dongfeng is.

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