Financial News

  • 15 April 2014, 10:35

Peugeot Citroen Overhauls Models And Culture

Loss-making carmaker Peugeot Citroen plans to cut its models, slash staff costs, and make its DS into a stand-alone premium brand.

The news comes after the Chinese and French-backed firm released a presentation of how it aims to return to profitability by 2018.

New CEO Carlos Tavares, who took over the Peugeot Citroen last month after the company's second consecutive year of multi-billion losses, said the company was not profit-focused enough.

"We are going to focus the creative power of our teams on a more limited number of products that people want to buy," Mr Tavares said.

"If you have less cars you will do a better job, and the cars will be more competitive. By doing this, you will have more attractive products."

Although it was restructuring its European processes, the company said it still needed to address modernisation to meet an operating margin of 2% in 2018.

It then hopes to increase profitability to 5% until 2023.

The company will make the DS - currently sold under the Citroen name - into a premium brand for urban dwellers in the "200 wealthiest cities worldwide".

Peugeot will become a "high-end generalist brand targeting the best competition" while Citroen a cost-effective value brand.

The redesign plan would mean cars would be "as new after three years" and retain the "best residual value in top markets".

As part of the model cuts, Peugeot will reduce its line-up from 25 to 13 models by 2022 and Citroen models would be cut from 15 to seven.

The DS, which takes its name from one of the most innovative cars of the 20th century, will see the product range increase.

Cost-cutting will include an 18% reduction in overheads by 2016, increased Chinese development and sharing of intellectual property.

Peugeot Citroen has struggled to adapt to the shrinking European car market, with vehicle sales falling 5.4% last year in a global market that grew 4.2%.

In February, the parent PSA group received a ?3bn (2.5bn) bailout from China's Dongfeng and the French state.

It said it planned to cut total group wage costs, related to revenues, by about a fifth before the end of 2016.

There is a potential for strike action from workers, following on from last year's labour disputes, over increased productivity or benefit changes.

The company said it would promote a company-wide "back in the race culture" to become a truly global carmaker, with an emphasis on accountability and profit.

It would, however, double the use of "low-cost parts sourcing" to 40%.

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