PSA plans to half model offerings to achieve 2% margin by 2018

Article by Christian A., on April 15, 2014

PSA/Peugeot-Citroen has detailed plans to trim its model lineup by nearly half and to transform Citroen's DS unit into a separate brand. Chief executive Carlos Tavares said in his strategic review of PSA that the French carmaker will see its operating margin rise to 2 percent of sales in 2018, and to 5 percent in the 2019-2023 period.

PSA has said that its new strategy relies on cutting the number of models from 45 to 26 vehicles, as well as on its penetration into markets outside Europe. PSA’s strategy will be funded partly by the fresh capital to be brought in by Chinese carmaker Dongfeng Motor Corp. and the French state. PSA said in a statement that they will continue to reposition the three brands – Peugeot, Citroen and DS -- while clarifying their lineups.

Reducing the number of models will permit PSA improve market coverage and margins by aiming at the most profitable segments. The DS brand will have its own separate management team amid an "aggressive" push into China. DS will have a lineup of six vehicles by 2022. "It’s not going to be a big-bang story,” Tavares said of plans for the DS line.

He said that the plan for DS is to do the right cars. He said that once the right cars are highly appealing, they will show them to appropriate investors. He noted premium brand is a matter of decades, not a matter of years. PSA will also reorganize its sales operations, reiterating a goal to triple deliveries in China via partnership with Dongfeng by 2020.

The carmaker also reiterated a goal to return to profit in Russia and in Latin America. Tavares said the PSA’s problem lies with fact that while the carmaker is making good money in China, it needs a turnaround everywhere else. He said that there is no reason for PSA to lose money in Russia or Latin America when its rivals are earning profits in those markets. [source: Bloomberg]

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