PSA/Peugeot-Citroen laid out plans to move its namesake Peugeot brand upscale to help the automaker return to profit after the company posted a record 5 billion euro ($6.73 billion) net loss for 2012.
Peugeot cars will be upgraded to differentiate them more from Citroen models and average volume will double through the automaker's alliance with General Motors Co., CEO Philippe Varin said today at a Paris press conference.
"The Peugeot brand will move toward a more modern image," led by the 208 subcompact's high-performance GTI version and the new 2008 SUV-styled crossover, Varin said. "In 2013, the positioning of our brands will be supported by a very rich range of products and 17 vehicle launches," he said. At the same time, Citroen will not become a low-cost brand, the CEO said.
PSA wants to raise the number of premium-marketed vehicles from the 18 percent of total deliveries last year, Varin said.
Chief Financial Officer Jean-Baptiste de Chatillon said Peugeot has been charging more for its vehicles this year, and pricing in Europe will probably be stable throughout 2013.
Philippe Houchois, an analyst at UBS, said giving the Peugeot brand a more upmarket image will be difficult. "It is easy to add content in cars to make it more attractive, but the time for the customer to respond to that can take years." he told Bloomberg Television.
PSA's 2012 net loss reflected 4.74 billion euros in write-downs and mounting industrial losses as the company's European car sales plummet. Losses at the struggling auto division increased to 1.5 billion euros from a 92 million loss a year earlier and group revenue fell 5.2 percent to 58.4 billion, PSA said.
Varin said PSA's recovery plan is on track after the automaker achieved savings of 1.18 billion euros, ahead of its 1 billion goal. "The results of the cost reduction and asset disposal plans have exceeded our targets," he said. "The foundations for our rebound have been laid. We are going to focus our investments, actively restore our profitability in Europe and reap the benefits from our investments in growing markets."
The carmaker is targeting 50 percent of its deliveries outside Europe by 2015, Varin said. He reiterated the company's aim this year to halve negative operating cash flow, which amounted to 3 billion euros in 2012 including 2.5 billion euros at the auto division.
More cuts in 2013
PSA said 900 million in new cuts are targeted for 2013 and the company plans to raise 300 million from property sales this year. Pooled vehicle development with GM will generate a further 600 million euros in savings for 2013, de Chatillon said. He also said that the carmaker's Faurecia parts division is not for sale.
Earlier this month, PSA's write-down prompted French Budget Minister Jerome Cahuzac to say that the state may consider buying a stake in the carmaker.
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PSA's 2012 operating loss was 576 million euros compared with operating profit of 1.09 billion euros a year earlier. The company's net debt at the end of 2012 decreased 211 million euros from a year earlier to 3.15 billion euros.
Last year, PSA sold assets including a stake in the Gefco trucking unit worth 2 billion euros. It also reached deals on 11.5 billion euros in refinancing and received a French government guarantee to sell 7 billion euros in bonds.
PSA's plan to eliminate 11,200 jobs and close a factory in the outskirts of Paris are on hold after a French court said last month that the automaker can't cut the positions until Faurecia, 57 percent-owned by PSA, fully informs workers about the effects of the carmaker's restructuring.
PSA, which ranks second to Volkswagen Group in car sales in Europe, employs more than 100,000 workers in France. Christian Lafaye, leader of the FO labor union at PSA, said on Jan. 31 that the company is losing 7 million euros a day.
Europe to remain 'depressed'
The automaker is the worst casualty of a European auto sales collapse that has been especially brutal in the company's core southern Europe markets. PSA's passenger car sales fell 13 percent to 1.47 million last year in the EU and EFTA countries in a total market down nearly 8 percent to 13.6 million, according to industry association ACEA. The company's market share dropped to 11.4 percent from 12.4 percent in 2011.
European auto demand is likely to fall a further 3 percent to 5 percent this year and remain depressed "for the foreseeable future," PSA said.
The automaker aims to reach the break-even level by 2014 and profitability in 2015.
Analysts said the 2012 loss was not as bad as expected. PSA shares jumped as much as 5.6 percent to 6.30 euros, the biggest intraday gain since Jan. 14. Stock was trading up 3.1 percent at 9:55 a.m. local time in Paris. The stock has gained 12 percent this year, valuing the carmaker at 2.18 billion euros.
Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt, said the results were not quite as catastrophic as the market in general expected because cost reductions and sales fell less than estimated. "The outlook is certainly not great, but it seems that maybe the most negative points have been passed," he said.
However, analysts are skeptical about PSA's recovery plan. "Rebound 2015 is built around a stable market at the 2012 level and a 13 percent market share for PSA," Credit Suisse analyst David Arnold said in a note. "Both look unlikely now."
CEO Varin's contract will be extended
CEO Varin's contract will be extended "without a doubt" when the board takes up his reappointment in May, PSA Co-Vice Chairman Jean-Philippe Peugeot said today. The Peugeot family, which controls the manufacturer, backs the recovery plan and understands that it may take some time to complete, he said.
Some reports had said the French government wanted Varin replaced with Louis Gallois, the former head of planemaker Airbus. Gallois will take a seat on PSA's supervisory board as the government's representative on April 24. Gallois, 68, did not want the CEO post, the reports said.
"It's not a negative to have Varin staying as CEO," said Sascha Gommel, a Frankfurt-based analyst at Commerzbank. "He's not responsible for the problems PSA is in and he's trying to turn it around."
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