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Presenting at FCA’s new partner, and their record profits

by David Zatz on

PSA’s 2019 revenue rose by 1%, to €75 billion; their margin (loosely, how much profit was made from the revenue) rose to 8.5%. These were quite good numbers, since PSA absorbed the formerly money-losing Opel/Vauxhall not long ago; now, Opel had a 6.5% adjusted operating margin.

peugeot

This bodes well for Fiat Chrysler—PSA’s last corporate integration went relatively smoothly and turned losses to profits quickly. PSA also gained €3.3 billion in free cash flow in their automotive division, providing more money for new models or to weather a recession.

One item that may be of interest to FCA followers: “Quality First” is the first pillar in five of PSA’s plans. Quality is not quite so emphasized by FCA in their plans. (The other pillars are core model and technology strategy, brand power, core efficiency, and new frontiers, in their translated words.)

peugeot emp2 hyrid

Also of interest to FCA followers: the company took sales customer satisfaction from 7 points below average to 3 points below average last year. After-sales customer satisfaction improved from 10 points below average to 4 points below average. FCA brands in the United States score far below average in both sales and after-sales customer satisfaction, though customers tend to be satisfied with the vehicles themselves. Unlike ratings of FCA cars, ratings of FCA dealers have continued to be poor. While the franchise structure in the United States is different from that in Europe, it’s possible that Peugeot might bring some of its magic here. (General Motors has improved dealership satisfaction, despite the same franchise laws.)

Carlos Tavares attributed the gains to “skilled and committed teams,” and an “agile, customer focused and socially responsible approach.” He added that they were “eater to enter a new era with the projected merger with FCA.” Stockholders will get a dividend of €1.23 per share.

While FCA owned a parts division (since sold), Magneti Marelli, PSA owns parts maker Faurecia, a major supplier to Ford and others. Faurecia’s income fell by 3%. PSA also owns a credit arm, like nearly every other automaker except FCA: Banque PSA Finance. (FCA had a close relationship with a different bank.)

The company has shown increasing profits at Peugeot/Citroën/DS since their last loss, in 2013, as well as increasing margins. These profits come largely from price increases and a stronger product mix—just like the increasing profits at FCA.

The vast majority of PSA’s sales are in Europe, with 3 million sales there in 2019 (3.1 million in 2018); the next strongest market is the Middle East and Africa, with just 164,000 sales, down from 292,000. Like FCA, the company is weak in China and Southeast Asia, and fell from 263,000 to 117,000 sales last year. Latin American sales are not as good as at FCA, falling from 175,000 to 136,000. PSA is almost absent from India and the Asia-Pacific region, but is starting Indian production soon and increasing the use of local suppliers. Likewise, the company returned to profitability in Russia in 2019, and is expecting higher growth there and in Ukraine.

Inventories were controlled, falling to the company’s target, from 164,000 cars held by the group at the end of 2018 to 112,000 at the end fo 2019; dealers cut their stock from 516,000 to 494,000.

Peugeot PSA technologies

PSA strategies for the future include e-motors, e-transmissions, reduction gears, battery packs, and battery cells; motors, transmissions, and battery cells are all being advanced through joint ventures. The company is also bringing out a line of fuel-cell vans in 2021.


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