Analysis: how PSA boss Tavares transformed the car group

Tavares immediately put in place a strategy called ‘Back in the Race’, which set targets for what was needed to make PSA competitive again. These goals included a streamlined product line-up, expansion in global markets and a wide range of cost and efficiency savings across the group’s brands. 

At the time, Tavares said he would measure success against the firm’s cash flow and operating margins. He smashed those targets in 2015, with PSA posting an operating margin of 5% (against a 2% goal) and profits of £950 million, the firm’s first year in the black since 2010. 

Increasing productivity in PSA’s factories from 65% in 2012 to 90% in 2016 and dramatically lowering the firm’s break-even point were two further achievements, helped by better than expected market growth globally. It meant all objectives in the Back in the Race plan had been achieved a full two years ahead of schedule. 

The next phase of Tavares’ turnaround was dubbed ‘Push to Pass’. The first aim was an increased focus in profitability – with PSA’s 5% margins already the envy of many mainstream manufacturers – and further cost reductions. A continued revitalisation of Citroën, massive investment in DS as a separate premium brand and plans to give Peugeot a more defined character were outlined. A new focus on building SUVs, the key growth sector, was paramount to all of this. Electrification also became a priority, with PSA behind the curve on that front. 

In 2017, several key models were launched, in particular the hugely popular Peugeot 3008 and Peugeot 5008 SUVs. A new Citroën C3 supermini gave the brand a huge sales boost and DS launched its first bespoke (ie non-Citroën-based) model, the 7 Crossback. At the end of the year, PSA posted record sales volume, operating margin and revenue. 

“PSA is clearly focusing on high-end, higher prices and more profitable segments, and this is having a positive impact on growth and margins,” said Felipe Munoz, automotive analyst at data firm JATO. 

Then came PSA’s shock acquisition of Vauxhall-Opel from GM, which highlighted the dramatic turnaround from the time when GM had been lined up to save PSA. GM’s European arm hadn’t turned a profit for almost two decades, but Tavares boldly claimed the brands would shake off their loss-making history and become “a true European champion”. 

Many were sceptical but again Tavares performed the unthinkable. An ambitious cost-saving plan helped Vauxhall-Opel make a €502m (£438m) profit in the first half of 2018, while the deal boosted PSA’s revenue by 40% and turned it into the biggest-selling car group in Europe after VW.