It has been an eventful year for PSA CEO Carlos Tavares. After guiding the French automaker to an industry-leading automotive profit margin in 2016, Tavares agreed to buy Opel and Vauxhall, General Motors' money-losing European brands. The 2.2 billion euro deal vaulted PSA into second place by volume among European automakers, behind Volkswagen Group.
With a goal for Opel of reaching a 2 percent operating profit and positive free cash flow by 2020, Tavares plans to move quickly to cut costs, improve pricing and transition Opel models onto PSA platforms to save money and meet emissions standards. He said he will do this without closing plants or imposing forced layoffs.
Tavares is eager to get started. “This situation is quite dramatic. We need to move,” he said in November, as PSA presented a new strategic plan for Opel at the company’s headquarters in Germany.
Tavares discussed the situation at Opel and other automotive trends with Automotive News Europe and other journalists at events and round tables in Paris; Frankfurt; Dijon, France; and at Opel’s headquarters in Ruesselsheim, near Frankfurt.
One of your justifications for acquiring Opel is that there are many people who don’t want to buy a French car, and so you wanted to have a German car company within PSA. How will you make sure your customers know they are buying a German car?
When we tell our designers that they can unleash their power as a German team, I know they will express the German dimensions of Opel cars because they understand the culture. They understand the country. They understand the value of technology and the value of a well done car. One thing I have learned is to appreciate human beings and how passionate and competent they can be. We tell our German teams, “Go ahead. Do your best. Express your potential.” As a natural consequence, we’ll have more German-ness in our Opel products.
You have said that you are looking for agility in PSA, because agility, not size, will protect your company. Given that you’ve just finished the acquisition of Opel, aren’t you really looking for size?
Even with Opel we are still very small, with 4 million vehicles, compared with the worldwide leaders at 10 million. The acquisition of Opel/Vauxhall will give us the opportunity to become very profitable and a market leader in Europe. It’s a way to reinforce our economics in a highly competitive market we understand well, and from there to be able to leverage these strengths overseas. It’s a good thing, not only because Europe has been a leader in terms of emissions, which has been excellent in terms of developing our engineering capabilities, but Europe also is very demanding in terms of mobility services and mobility devices. That means that we can develop our skills in those areas and deploy them overseas.
There have been several efforts in the past to have Peugeot and Opel work together on projects such as the new Opel Corsa. Some were not successful. What has changed since the first attempt at this marriage?
If you look at what has happened over the past four years, if you look at the Crossland X and at the Grandland X [SUVs], if you look at the coming small LCV [light commercial vehicle] and what will happen with the future Corsa, what I see is that the teams have been working together in a very productive, collaborative way. When these four products, which have been developed collaboratively over the last four years, go into production they will make up nearly 50 percent of Opel volume, which is significant.
The PSA portfolio includes the Peugeot, Citroen, Opel, Vauxhall and DS brands. What will be done to differentiate them?
What is important is not to instruct the brands to go this way or that way. My recommendation to our brands is very simple: You are French, you are German, now please work together to find a way to be as complementary as you can to cover the marketplace in an efficient manner. Brand positioning is something that comes from the heart, so people need to breathe the brand. Opel is a German brand with a long history, Vauxhall is a British brand with a long history. Let them breathe. Let them express what they feel is most important in their DNA. Then, when it comes to business, let’s see if there is any overlap or problems in the positioning.
How does Opel fit into PSA’s plans for the U.S. market?
What we have done so far is that we are already operating as a mobility service provider with our partners. We have created a small team to manage the business in North America, based in Atlanta. We are engineering the next generation of our cars to be U.S. compliant with the support of Ruesselsheim r&d center, which means that from three or four years down the road we’ll be able to push the button if we decide to do so. Therefore, we are on our way. But as you know, in this chaotic world we are not in a hurry. We’ll take our time.
How long does Opel have to achieve a lower breakeven point and reach profitability?
I worked for five years in Japan, where I learned what it means to be resilient and what it means to be persistent. We are very patient, but status quo is not an option due to Opel’s current situation. The most important thing is that we trust people, and that we believe people are the solution and not the problem. We think it will take a few years, but it’s absolutely doable with the quality of the people I have seen so far.
Some people with knowledge of Opel’s engineering and manufacturing have said that the turnaround plan for the company could be perceived as arrogant. What is your response?
It doesn’t matter. What matters is what kind of solution we need to bring to the Opel employees. This perception -- which is not my intention -- might come from the fact that we are passionate about fixing this significant problem. If bringing a solution in a highly passionate way with a lot of determination is perceived that way, if this is the price to pay to protect the Opel employees, so be it.
With the purchase of Opel, you are stronger in Europe but also more dependent on it as it accounts for about 70 percent of sales. What steps are you taking to become more international?
I don’t think there is anything wrong with being a strong European player. But, it is true that we are highly dependent on Europe in terms of profitability. All global automakers have to have a strong national/regional footprint to expand worldwide. Currently, we are moving very quickly in Africa and the Middle East. In Iran, we have very strong growth and very strong manufacturing plans, both for Peugeot and Citroen. We are starting a new venture in India, where we have two plants, one is a car plant and one is a powertrain plant now under construction. We are growing in Eurasia and we are growing in Latin America. We are facing serious operational issues in China. This is one of our headaches. We are preparing for the future in North America with the mobility services, and preparing the compliance of our products for that market in a few years.
What does making Ruesselsheim a center of global competence mean for all engineering in PSA Group?
We are very lucky. We have very strong engineering in Germany on one side, and very strong engineering in France on the other side, at the precise moment when we are faced with a very difficult challenge, which is to put Opel/Vauxhall back on the road map in terms of CO2 compliance. The teams from PSA and Opel completely rebuilt the product planning and technology strategy to put Opel on track to meet the European regulations by 2020. This is an outstanding achievement and demonstrates the collaboration between the French and German engineering teams.
The trend toward autonomy is taking control away from the driver, for better or worse. How do you keep the passion in the automotive business if you cannot drive the car yourself?
We are going to adapt the way you can use the car to enhance the experience. For example, when you are on the highway with a lot of traffic density, you are not enjoying the drive. Even if you are a racecar driver, you would prefer to be in autonomous mode so you could talk with your wife and children or look at your emails or read a magazine. The car will give you back quality time. Conversely, when you are on a small road on the countryside, you can drive the car yourself, and you will enjoy the experience and feel the rigor and the precision of your chassis, for example.
Consumer behavior with regards to automobile ownership and use is changing very fast, but at different rates in rural villages and big cities, and among continents and countries. How is PSA preparing for this?
The world is not moving in a homogeneous way. We will have to have different mobility devices for urban areas, the countryside and for long-distance travel. I believe that the market is going to continue to fragment, which also means that it makes sense for the PSA Group to have two legs: A cutting-edge, efficient carmaker from one side, a preferred mobility supplier from the other. The synergies are in the fact that we need to imagine the mobility devices that are going to meet expectations from different kinds of customers.
Do you think being a racecar driver gives you an edge in business?
It gives me the ability to have a good dialogue with many, many people in the company. When we test a car, for example, we can have a dialogue, saying this oversteers here, this understeers here, the steering is not linear enough, I would like less friction on the gearshift, or I would like the brakes to be a little more biting at the beginning of the stroke. If employees think that the top management level understands what they are doing, they will be even more motivated to unleash their own power and their own skills.
You have a background as an engineer. As a racer you’ve driven many different cars, in many different conditions and at many different tracks. How does that influence the development of your models?
To your big surprise, in a limited way. My job as a CEO is not to give engineers direction in the way they should tune the car, in the way they should do this or that. My job is to ensure that inside the company each person can unleash his full potential, and make sure that his creative power is full throttle. I try — and this is not always possible because I am so passionate about it — not to be directive because we are not making cars for me, we are making cars for consumers. Therefore, it would be counterproductive to think that I have the vision of what the car should be.