Coming Back to America? PSA Looks West : 2

Part two: Can PSA really make it in America? Driven to Write continues its investigation.

Image:citroenvie
Image:citroenvie

It is a truth widely acknowledged in crisis management that there are five key steps to corporate recovery. First: change the senior management. Second: rapidly identify and scope the nature of the problem. Third: take action to arrest losses by cutting the cost base. Four: Stabilise the business and five: return to growth. Up to now, PSA’s Carlos Tavares has stuck rigidly to this playbook, ruthlessly extracting cost from the business, yielding financial results that have had the industry’s top analysts patting his head in approval. Not only in regards to profit, but with financial metrics reputedly the envy of its rivals, PSA’s turnaround looks impressive. But stabilising the business is only stage four of the turnaround gameplan, finding growth in a stagnating market is a horse of an entirely different stripe.

PSA faces trouble on several fronts. In Europe, despite PSA posting an overall sales rise of 5.8% last year, the region remains highly sensitive to increasingly chill winds blowing from the East. Latin America is also cause for concern. But given PSA’s dependence on China, finding a sufficiently large and stable market to diversify into makes a lot of sense – on paper at least. But a return to the US won’t be simple. PSA’s lifeboat deal with Dongfeng Motor, followed on from joint production deals which provided a local cost base and distribution network. PSA would ideally require something of a similar nature in the US, and while Tavares could conceivably use his struggling Latin American bases as a manufacturing springboard, a US-wide distribution and dealer network would need to be created from scratch.

Image:paultan
Image:paultan

There also remains the question of which marque to introduce? Peugeot is best known, but even here, we’re looking at a marque with a quarter century absence from the US. Would Citroën’s Haribo Starmix range of cars appeal to US customers? It seems unlikely, especially given the fact that European customers haven’t as yet made up their minds themselves.

Many commentators have suggested Tavares will use the DS brand as PSA’s advance party. This has the advantage of being theoretically the most upmarket of the three PSA marques with the least amount of historical baggage, but comes with the greatest potential cost in terms of creating the sales and aftercare backup an upmarket buyer expects. Regardless of brand and model however, anything in current production would require extensive re-engineering to comply with US regulations.

But having worked out which brand to go with, huge issues remain. The US market has changed massively since the Lion departed with his tail between his legs. At present, it’s difficult to ascertain what would be worth importing. Americans don’t like hatchbacks and saloon car sales continue declining year on year. PSA currently don’t make the SUV/crossover vehicles the market demands and are short of larger-capacity engines. During their 1980’s heyday, the 505 diesel was Peugeot’s big seller, but post-NOx-gate, analysts suggest diesel’s future in the US is doubtful. DS is planning larger saloons and SUVs for the Chinese market. Are these now to be repurposed for the US too?

On the face of things, a return to the US makes a lot of sense. It would cement PSA as a global player and if successful, provide a buffer against volatility elsewhere. Against that are the huge costs in embedding an unknown brand into the American automotive psyche. PSA couldn’t possibly contemplate such a move before the end of the decade at the earliest, and what will have happened the global economy by then is anyone’s guess.

Getting to stage four in corporate recovery 101 is in many ways the easy part. But having starved the business of meaningful investment since PSA’s 2012 bailout, Tavares must now spend vast sums making up lost time. But having stripped PSA bare, where is this funding to come from? Getting ‘back in the race’ with strong, well defined nameplates is formidably difficult. Doing so with three (in)distinct brands is daunting in the extreme. Will it be a case of Dongfeng again to the rescue, or perhaps a cosy civil partnership with Sergio? Interesting times.

Author: Eóin Doyle

Founding Editor. Content Provider.

7 thoughts on “Coming Back to America? PSA Looks West : 2”

  1. “anything in current production would require extensive re-engineering to comply with US regulations”

    Is that so? Is it just about the engines or are there other components that will need re-working for the US?

  2. PSA has stopped selling the Citroen C6, the 607, the RCZ, the CC cabriolets and the Pluriel – the production of great vans has ended one or two years ago.
    They do not longer offer their wonderful 6-cylinder-petrol-engine. The 4-cylnder-BMW-designed-petrol-engines are preparing to say good-bye. Soon PSA is nearly offering only 3-cylinder-petrol engines. And no nice smooth 6-cylinders diesels. And no hybrid-cars.

    Entering the US-market under such circumstances – Monsieur Tavarez must be an ambitious man searching for a really difficult task…

    1. Disregarding prior reputation, it’s interesting to speculate how well the C6 would have done in the US. On paper it could have been an ideal purchase. Both Jalopnik and TTAC were very positive after their drives.

      I could imagine the Cactus getting a niche following, but I don’t know about anything else in the Citroen/DS catalogue. And, although I feel more positive about Peugeots than I did 5 years ago, there is nothing particularly distinctive about any of them that would make them be noticed above the usual suspects currently in the US marketplace.

    2. So Peugeot have stopped producing the RCZ. I missed that. Actually, with 54,029 sold in Europe during its 6 + year life, that’s a respectable figure (maybe 2/3 of equivalent Audi TT sales in the same period). But, to put that into the context of the US market, 33,329 Corvettes were sold there last year.

    3. The production in Graz / Austria ended in September 2015. Between 2010 and 2013, the RCZ did not sell in notable smaller numbers than TT Roadster and Coupe together.(in Europe RCZ 42000 – Audi TT Coupe 38000, TT Roadster 16000)

  3. Does Carlos Tavares really believe that the ghost of love for the PSA brands will see that his firm is one step away from success in the USA? It only takes a minute to realise that it’s a hard market, and we’ve seen Daihatsu, Isuzu, Suzuki, and Scion turn out the nightlight, realising that only bad times awaited.

    If Tavares has got to find his way back to the USA, what can he draw on? The mighty power of love for French automobiles never really crossed the Atlantic. The Linda Jackson-era Citroëns have a quirkiness which might appeal, but it takes more than a woman to re-shape public perception of a brand. Look at Ford, telling us to remember what they told us to forget.
    The more I check it out, I’m certain that PSA cannot expect a free ride in the USA, not even a slow train to paradise.

    Or am I missing an angle?

  4. All these comments plus Eoin’s article point to PSA making a large mistake with anything less than the automotive equivalent of the elixir of eternal youth with a six year warranty and free petrol.

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