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Peugeot Could Still Expand Cooperation Deal with GM

“We strongly believe we have enough arguments to stay number two in Europe, and be a profitable number two”

When General Motors sold its seven per cent stake in financially troubled Peugeot-Citroen of France earlier this year it seemed just a matter of time before their joint projects would bite the dust too.

And following news that the French state and Dongfeng Motor of China agreed to take 14 per cent stakes in Peugeot Citroen, the ending of all cooperation agreements seemed a shoe-in.

Not so, said Peugeot Citroen CEO Carlos Tavares.

In a speech to the annual Automotive News Europe Congress in Brussels, Tavares, who took the reins at Peugeot Citroen in March, reiterated details of his controversial turnaround plan. Asked about the future of the remaining parts of the GM alliance, Tavares said it was working well, and might even be expanded if it was a long-term success.

“The GM partnership is not dead. The most important thing is to make it happen in a pragmatic and a win-win way. Why not do more when they work well,” he said.

Some logistics and engine aspects of the GM/Peugeot-Citroen cooperation were ended, leaving the manufacture of a Peugeot 3008/Opel Zafira using a Peugeot platform to be built by 2016 in Sochaux, France, a C3 Picasso/Opel Meriva built on a GM platform in Zaragoza, Spain, and a small van.

The Peugeot turnaround plan unveiled in April is called “Back in the Race”, and calls for a two per cent operating margin by 2018 rising to five per cent between 2019 and 2023. Tavares targeted €2 billion of operating cash flow in total between 2016 and 2018. Peugeot lost more than €7 billion between 2012 and 2013.

Dump economic models
In April, Tavares said he would dump some uneconomic models, presumably cars like the Peugeot 508 and Citroen C5 which have been huge money losers for years, and replace them with an attempt to move upmarket using the DS brand.

Tavares said it would be arrogant for Peugeot-Citroen to seek to overtake VW as number one manufacturer in Europe, but it would try hard to hang on to second place.

“We want to keep a strong number two position in Europe. It would be arrogant and unrealistic to become number one. But we strongly believe we have enough arguments to stay number two, and be a profitable number two,” Tavares said.

Tavares has been criticised for lacking ambition with his profit target. Citi Research had some faintly positive news for him, revising its forecast for 2014 to an Peugeot-Citroen auto EBIT loss of €540 million from a previous estimate of a €780 million loss, mainly because of higher expectations for restructuring savings.

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