PSA's new CEO seen as key to Dongfeng investment deal
PSA Peugeot-Citroen's move to name former Renault chief operating officer Carlos Tavares as its future CEO could help secure an alliance with Dongfeng Motor Corp.
Tavares will join PSA's management board on Jan. 1 and will replace CEO Philippe Varin, 61, later in the year, the automaker said Monday.
Before stepping down, Varin will focus on discussions with partners, the company added.
While the Paris-based automaker didn't mention specific companies, deepening cooperation with Dongfeng -- one of PSA's joint venture partners in China -- represents its best opportunity to gain a foothold outside Europe.
If Dongfeng decides not to take a stake in PSA, the French automaker may have to go it alone and hope the French government steps in if finances get tight.
"It does seem as if the Chinese are the only lifeboat left for Peugeot," said Garel Rhys, head of the Centre for Automotive Industry Research in Cardiff, Wales. "In a sense, PSA is lucky to have a Chinese company
wanting to get involved because there are huge issues."
PSA says it expects to burn through 1.5 billion euros (12.4 billion yuan) in cash this year and reported a first-half operating loss of 510 million euros in its automotive unit.
The company has been searching for new partners to end its dependence on mid-market cars in Europe, where auto demand is at a two-decade low and PSA is losing market share.
Dongfeng offers Europe's second-largest carmaker a stronger footing in China, the world's biggest auto market, and above all a life line of fresh cash, while the Chinese manufacturer could gain access to modern technology.
PSA has proposed a capital increase of at least 3 billion euros, with Dongfeng and the French state taking equal holdings of about 20 percent, people familiar said last month.
Dongfeng snag
That plan has hit a snag as Dongfeng seeks a smaller stake than first discussed, people familiar with the matter said last week. Dongfeng is weighing buying about 10 percent, half the size of the original proposal, said the people, who asked not to be identified discussing private talks. It's not necessarily an all-or-nothing proposition.
"Why do they need a rights issue if cash generation is going to turn around next year," said Jose Asumendi, an analyst with JPMorgan in London. "The refinancing needs are pretty much under control" and the French state could step in if needed.
Talks with Dongfeng will focus on industrial projects before the companies address financial matters, Varin said Nov. 23 at a conference in Berlin. In the future, "there will be more and more cross links" between carmakers, he said.
Tavares, who previously worked at Renault's Nissan affiliate and races cars in his spare time, may also be part of winning over Dongfeng. The 55-year-old executive has experience with European-Asian auto alliances and that could give Dongfeng reassurance that a cooperation will survive after Varin steps down as planned next year.
"He knows the sector well, and he's fast-moving," said Gaetan Toulemonde, a Paris-based analyst at Deutsche Bank AG. "He's a car guy. He has the knowledge, the discipline."
Before stepping down, Varin will focus on discussions with partners, the company added.
While the Paris-based automaker didn't mention specific companies, deepening cooperation with Dongfeng -- one of PSA's joint venture partners in China -- represents its best opportunity to gain a foothold outside Europe.
If Dongfeng decides not to take a stake in PSA, the French automaker may have to go it alone and hope the French government steps in if finances get tight.
"It does seem as if the Chinese are the only lifeboat left for Peugeot," said Garel Rhys, head of the Centre for Automotive Industry Research in Cardiff, Wales. "In a sense, PSA is lucky to have a Chinese company
wanting to get involved because there are huge issues."
PSA says it expects to burn through 1.5 billion euros (12.4 billion yuan) in cash this year and reported a first-half operating loss of 510 million euros in its automotive unit.
The company has been searching for new partners to end its dependence on mid-market cars in Europe, where auto demand is at a two-decade low and PSA is losing market share.
Dongfeng offers Europe's second-largest carmaker a stronger footing in China, the world's biggest auto market, and above all a life line of fresh cash, while the Chinese manufacturer could gain access to modern technology.
PSA has proposed a capital increase of at least 3 billion euros, with Dongfeng and the French state taking equal holdings of about 20 percent, people familiar said last month.
Dongfeng snag
That plan has hit a snag as Dongfeng seeks a smaller stake than first discussed, people familiar with the matter said last week. Dongfeng is weighing buying about 10 percent, half the size of the original proposal, said the people, who asked not to be identified discussing private talks. It's not necessarily an all-or-nothing proposition.
"Why do they need a rights issue if cash generation is going to turn around next year," said Jose Asumendi, an analyst with JPMorgan in London. "The refinancing needs are pretty much under control" and the French state could step in if needed.
Talks with Dongfeng will focus on industrial projects before the companies address financial matters, Varin said Nov. 23 at a conference in Berlin. In the future, "there will be more and more cross links" between carmakers, he said.
Tavares, who previously worked at Renault's Nissan affiliate and races cars in his spare time, may also be part of winning over Dongfeng. The 55-year-old executive has experience with European-Asian auto alliances and that could give Dongfeng reassurance that a cooperation will survive after Varin steps down as planned next year.
"He knows the sector well, and he's fast-moving," said Gaetan Toulemonde, a Paris-based analyst at Deutsche Bank AG. "He's a car guy. He has the knowledge, the discipline."
