Philippe Varin faces tougher 2nd term as PSA chief executive

Article by Anita Panait, on June 3, 2013

Philippe Varin has started this week his second four-year term as chief executive of troubled French carmaker PSA/Peugeot-Citroen. Just like his first term, he will have to balance and counterbalance the interests of the carmaker’s major stakeholders – two which are the Peugeot family and the French government – to ensure PSA’s continued survival.

But that might be hard to accomplish, considering that each stakeholder has their own plans for PSA. For instance, the Peugeot family does not agree to all of Varin’s decision, including the formation of an alliance with US carmaker General Motors. Co. On the other hand, the French government is not entirely agreeable to Varin’s cost cutting plans, which in part entails letting go some of its workforce.

France wants jobs at PSA to remain and has taken a board seat in exchange for financial support. Bernard Jullien, an economist at French think tank Gerpisa, noted to Bloomberg that Varin has not been able to impose his choices at the carmaker.

PSA is considerably suffering worse than its European rivals, no thanks to the continuing economic slump in the region. This could be attributed to the fact that it builds most of its vehicle in high-cost France. It could also be attributed to the fact that unlike those of its German counterparts, PSA’s vehicles lack the status to fetch higher prices and entice buyers abroad.

According to an estimate of the Center for Automotive Research at the University of Duisburg-Essen, PSA around EUR510 ($658) on each car it sold in 2012. On the other hand, fellow French carmaker Renault lost about EUR241 while German company Volkswagen Group earned EUR751, the center says. PSA is considering a capital increase to continue financing its operations, this after it consumed around EUR3 billion in 2012, three people privy with the matter told Bloomberg. [source: automotive news - sub. required]

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