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Last updated: November 25, 2013 6:27 pm
PSA Peugeot Citroën has hired former senior Renault executive Carlos Tavares to take over as chief executive next year with the task of restoring the shaky finances and expanding the international footprint of Europe’s second-largest carmaker.
The move comes as 61-year-old Philippe Varin, chief executive of Peugeot since 2009, has his hands full negotiating a deal for Chinese carmaker Dongfeng to take a stake via a potential capital increase.
Peugeot is attempting to lower its reliance on the moribund European markets, where it sells more than half of its vehicles, as well as cut costs in its French factories. European deliveries fell 10 per cent this year.
“By choosing Carlos Tavares . . . the supervisory board ensures that the strategy of recovery and development to overcome the current crisis . . . will continue to be executed over the long term,” said Thierry Peugeot, president of the board.
Mr Tavares, who studied in Paris and speaks French fluently, is a former protégé of Renault-Nissan head Carlos Ghosn and has previously worked with Dongfeng, brokering a joint venture between Renault and the Chinese carmaker that is expected to be signed soon.
He joined Renault as a test driver straight from university, spent 32 years working his way up the company, and his decades of experience at the highly successful global alliance are regarded by Dongfeng as key to his possible appointment.
Mr Tavares suffered a stunning fall from grace at Renault over the summer, however, after a frank media interview in which he said he did not want to wait for Mr Ghosn to retire, but was looking to run General Motors or Ford Motor instead.
When Mr Ghosn returned from the summer break an emergency board meeting was called and it was announced that Mr Tavares was stepping down immediately “in order to pursue other personal projects”.
Mr Tavares may be a veteran of managing by alliance, but any potential successor to Mr Varin next year could find themselves running a company controlled by four different large investors.
The Peugeot family, which controls the carmaker with a 25 per cent stake, has been broadly supportive of Mr Varin despite the carmaker’s falling sales in Europe and stuttering progress on a deeper tie-up with GM. But any investment by the French state or Dongfeng could mean that the family loses control of Peugeot, and leaves Mr Varin with less support from the board, said two people with knowledge of the situation.
Any stake taken by the Chinese would be politically sensitive, and so the government is weighing up taking a stake itself, which would help to inject more money and also maintain French control.
The most likely investment by Dongfeng and the French state would give the Chinese carmaker and Paris a 17.6 per cent stake each, according to research by Macquarie, with the Peugeot family holding 16.5 per cent and GM 4.5 per cent.
Under Mr Varin’s tenure, Peugeot has announced a plan to eliminate 11,200 jobs and close a factory on the outskirts of Paris to stem losses and cut industrial overcapacity.
Peugeot is attempting to cut its cash burn of €3bn last year by half in 2013. Last year the carmaker announced 6,000 job cuts and the closure of its Aulnay factory, the first large French car plant to shut for 30 years.
Even if Peugeot is able to reduce its cash burn and stabilise sales, many analysts argue the company is still not large or globalised enough to compete with larger groups such as Toyota, Volkswagen, Renault-Nissan or Hyundai-Kia.
Shares in Peugeot were up 5 per cent at €10.75 in Paris. Renault was also higher, up 1.4 per cent at €65.3.
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