Group PSA

History and the Development of Group PSA:

The foundation of PSA was built on its emblematic Peugeot and Citroën car brands.
● Peugeot was founded in France by the Peugeot family in 1810 and launched its first petrol car in
1890. Citroën was founded in 1919, also in France. Citroën South Africa established its reputation
in 1934 with avant-garde technology, which led to the world’s first mass-produced
front-wheel-drive car.
● In 1976, Peugeot S.A. and Citroën S.A. merged to become PSA Peugeot Citroën. In 1978, PSA
Peugeot Citroën took over Chrysler Europe, becoming the largest automotive company in Europe
at the time and the fourth largest in the world. In 2016, PSA Peugeot Citroën became Groupe
PSA.
● Over the years, PSA expanded its portfolio to include other brands such as Opel/Vauxhall, DS
Automobiles, and Free2Move. In recent years, PSA has focused on implementing its "Push to
Pass" plan, which aims to achieve sustainable and profitable growth through various strategies
such as expanding into new markets and investing in electric vehicles.

How did PSA survive the Global Financial Crisis?

● PSA struggled after the global financial crisis of 2007-08 due to shrinking market share and
financial issues.
● The company was facing bankruptcy in 2012 due to high reliance on the declining European
market. Its share price collapsed to around €5, with a net loss of €2.3 billion in 2013 after a loss of
€5 billion in 2012.
● In February 2014, PSA secured a rescue deal that diluted the Peugeot family’s stake from 25.4
per cent to 13.7 per cent, resulting in the family ceding company control. The French government
and Dongfeng each invested about €800 million in return for a 13.7 per cent stake each in PSA,
matching the resulting stake held by the Peugeot family.
● In March 2014, Carlos Tavares was appointed as CEO and chairman of PSA, and he began the
"Back in the Race" recovery plan announced at the Geneva auto show in April 2014. The plan
included improving operating profits, reducing working capital, managing cash, creating a luxury
brand, focusing on China, and repositioning in emerging markets. Through these efforts, PSA
was able to turn around its financial situation and achieve profitable growth.

Recovery plan
● "Back in the Race" recovery plan was launched in 2014 by Carlos Tavares, who was appointed
as CEO and chairman of PSA. The plan aimed to achieve a 2% operating margin by 2018 and a
5% operating margin by 2023. To achieve these goals, the plan included several specific actions
such as reducing costs by €1 billion per year, reducing the number of platforms from 14 to 2,
reducing the number of powertrains from 23 to 4, and reducing the number of models from 45 to
26.
● The plan also included a focus on China, where PSA aimed to achieve a 5% market share by
2020, and the creation of a luxury brand called DS. Additionally, the plan aimed to reposition PSA
in emerging markets such as Latin America, Russia, and the Middle East.

Company's Global Presence in Europe:

● Strong presence in Europe, where it sold over 2 million vehicles in 2016. The company's two
main brands in Europe were Peugeot and Citroën, which together accounted for over 1.8 million
of the vehicles sold.
 ● In 2016, Peugeot's sales in Europe increased by 4.4% to over 1.1 million vehicles, while Citroën's
sales increased by 4.3% to over 760,000 vehicles. Groupe PSA also had a smaller presence in
Europe through its DS brand, which sold over 20,000 vehicles in the region in 2016.
● Significant manufacturing presence in the region. The company had 17 production sites in
Europe, including 10 in France, 2 in Spain, and 1 each in the UK, Germany, Poland, Slovakia,
and Portugal. These sites produced a range of vehicles, including passenger cars, light
commercial vehicles, and electric vehicles.

Company's Global Presence in China and Southeast Asia:

● Groupe PSA had a presence in China and Southeast Asia, but faced challenges in the region due
to fierce competition and declining sales.
● In 2017, PSA's market share in China was 1.4%, down from 2.5% in 2016 and 4.4% in 2015.
● Despite these challenges, PSA aimed to capitalize on the potential of the Chinese market and
had a partnership with Dongfeng to expand its presence in the region.

Company's Global Presence in Middle East and Africa:

● Groupe PSA had a growing presence in the Middle East and Africa, with sales doubling from
2015 to 2016. The company had formed partnerships in Iran, Algeria, and Morocco to reinforce its
presence in the region and aimed to achieve 23 product launches and annual sales of 700,000
vehicles across the region by 2021, with 70% of cars manufactured locally.
● PSA also aimed to sell 1 million vehicles in the region by 2025.
Company's Global Presence in Latin America:
● Groupe PSA had a growing presence in Latin America, with sales increasing by 17.1% from 2015
to 2016.
● The company had three production sites in the region, including one in Brazil and two in
Argentina, and aimed to double sales and triple profit between 2015 and 2021
● PSA had renewed car models and built eight new models locally, and aimed to launch 16 models
by 2021 to achieve profitable growth while maintaining strong competitive positions.

Company's Global Presence in Eurasia:

● Groupe PSA had a presence in Eurasia, including Russia, Ukraine, and some post-Soviet states.
● Groupe PSA had a presence in Eurasia, including Russia, Ukraine, and some post-Soviet states.
● Despite a decline in the market, PSA had great potential in the region and had joint-venture
production plants with Mitsubishi in Russia and an assembly plant with a partner in Kazakhstan.

Company's Global Presence in India-Pacific:

● This region was one of the most dynamic and important for PSA, led by Japan and South Korea.
● The company aimed to launch 17 models and achieve sales growth of 50% by 2021, based on a
growing market trend, upmarket product launches, and excellent cooperation with local importer
partners.
● PSA had sales growth of 20.6% in Japan in 2016, selling 19,890 vehicles, and aimed to capitalize
on this momentum to achieve profitable growth in the region.

Plummet of Vehicle sales in Chinese Market:

● PSA faced unprecedented issues in China despite being one of the first European carmakers to
enter the market in the 1980s.
● Due to fierce competition, PSA's sales in China and Southeast Asia decreased by 16% from
736,000 vehicles in 2015 to 618,000 in 2016. Chinese car ownership was far below that of the
 United States, with only 170 cars per 1,000 capita compared to 465 cars per 1,000 capita in the
US.
● PSA aimed to capitalize on this potential through its partnership with Dongfeng, which had six
plants with a total production capacity of 1.2 million vehicles and a dealership network.

GM struggle to make profits in Europe:

● Despite investing in model designs, cleaner engines, and making factories more efficient, GM had
not generated any profits in its European subsidiaries. Instead, it had incurred over $19 billion in
total losses between 1999 and 2016, plus obligations for wages for 38,000 employees.
● The changing geopolitical and regulatory climate in Europe demanded more investment at a time
when GM saw a greater need to focus on North America, China, and emerging technologies.
● The Brexit vote, the subsequent devalued British pound, and lower sales in the United Kingdom
were also responsible for the losses.
● In 2009, GM filed for bankruptcy after facing liquidity problems, and it almost sold its Opel
operations. However, due to improving business conditions, GM later canceled the deal, believing
it could turn around this strategically important unit. The turnaround plan included a significant 30
per cent reduction of fixed costs through job cuts and a plant closure.
● In 2012, Opel presented a 10-year turnaround plan, which included the launch of new vehicles
and engines by 2016. At the time, GM decided to close a factory in Bochum, Germany, incurring
closure costs of over $866 million.

Talk about PSA's acquisition of Opel:

● In March 2017, PSA confirmed the acquisition of GM’s Opel and Vauxhall units for $1.3 billion,
and the acquisition of related financial operations in Europe for $1 billion, for a deal that totalled
$2.3 billion. PSA's stock price increased 5.2 per cent after the announcement.
● The deal was officially completed with the approval of the EU’s antitrust authority in October
2017, making PSA the second largest automaker in Europe with the combined unit occupying a
market share of 17 per cent, just behind Volkswagen.

Impact of Brexit on Opel/Vauxhall?

● Opel estimated that Brexit cost the brand around $660 million, leading to an operating loss at
Opel of $240 million in 2016.
● The reliance on access to the European market was critical for Vauxhall’s factory in Ellesmere
Port, which exported around 80 per cent of its vehicles to the mainland and imported from Europe
three-quarters of all the components the factory used. GM's CEO, Mary Barra, maintained that
Opel/Vauxhall would have hit the target to break even in 2016 had it not been for Brexit.

● Despite these challenges, it is worth noting that the impact of Brexit on Opel/Vauxhall was not
solely negative. it is mentioned that if a hard Brexit were to occur, PSA's Ellesmere Port factory
might remain to produce Peugeot, Citroën, and Vauxhall vehicles for the British market, thus
avoiding potential tariffs and exchange rate risks. This suggests that there could be opportunities
for certain manufacturers to continue production in the United Kingdom even in a post-Brexit
scenario.

Strategies PSA implemented while entering the US market again;

● PSA engaged some Opel engineers, who had worked for GM over the years, to make PSA’s
latest products compliant with US regulations. The plan was to sell vehicles in the United States
by 2026.
 ● PSA was researching the US market to decide which brand should lead the company’s return
and, as in Russia and Latin America, the French automaker would begin with low-volume sales to
ensure short-term profitability.
● Additionally, PSA was preparing a platform that allowed customers to use multiple mobility
services, including car sharing and rentals, using a smartphone application.

PSA plan to go ahead with new challenges:

● PSA had set ambitious goals under its six-year Push to Pass plan, which aimed to "meet
customers' mobility needs by anticipating changes in car usage patterns." To achieve these goals,
PSA planned to expand globally, increase profit margins and overall revenues, become involved
in mobility provisions, and expand into more connected services.
● The company aimed to achieve profit margins of 4 percent in 2018 and 6 percent in 2021, and
yearly average revenue growth of 3.2 percent between 2016 and 2018 and 4.4 percent between
2019 and 2021.
● To achieve these targets, PSA's CEO, Carlos Tavares, wanted to apply the European
benchmarking system across PSA's factories, in which all workers could evaluate their own
efficiency.