Push to Pass is working wonders at the PSA Group, lets see how they cope with vauxhall and Opel !

Successful execution of Push to Pass strategic plan

• Automotive recurring operating income at €1,442 million up by 10.7%, representing a record recurring operating margin of 7.3%[1]
• Group revenue at €29,165 million, up 5% vs 2016 H1
• Record Faurecia recurring operating margin1 at 5.7%
• Record Net income, group share, at €1,256 million
• Growth of net financial position at €7,631 million thanks to a positive €1,116 million Free Cash Flow[2]

"Groupe PSA record performance was achieved thanks to our customers who have made our last commercial launches great successes, and thanks to the continuous commitment of all Group employees in the execution of the Push to Pass plan, combining agility and business sense. The way the teams overcame headwinds brings confidence for the coming challenges." said Carlos Tavares, Chairman of Groupe PSA Managing Board.

Group revenues amounted to €29,165 million in the first half of 2017, up 5.0% compared to €27,779 million in the first half of 2016. The cumulated growth since the beginning of Push to Pass, excluding exchange rates impact, stands at +8.2%[3].

Automotive revenues amounted to €19,887 million, also up 3.6% compared to the first half of 2016, benefiting from the success of the new models and the pricing discipline.

Group recurring operating income amounted to €2,041 million, up 11.5% compared to the first half of 2016. The Automotive recurring operating income grew by 10.7% compared to the first half of 2016 at €1,442 million. This 7.3% record profitability level was reached despite raw material cost increases and exchange rate headwinds, thanks to a positive product mix and further cost reductions.

Group non-recurring operating income and expenses had a negative impact of -€112 million, compared to -€207 million in the first half of 2016.

Group net financial expenses decreased to €121 million, compared to €150 million in the first half of 2016.

Consolidated net income reached €1,474 million, up by €91 million, in spite of the negative impact of operations in China. Net income, Group share, reached €1,256 million, compared to €1,212 million in the first half of 2016.

Banque PSA Finance reported recurring operating income [4] of €312 million, up 5.1% compared to the first half of 2016.

Faurecia recurring operating income amounted to €587 million, an increase of 19.8% compared to the first half of 2016.

The Free Cash Flow of manufacturing and sales companies amounted to €1,116 million, driven by the improved profitability of operations.

Total inventory, including independent dealers, stood at 374,000 vehicles at 30 June 2017, down 25,000 units from end June 2016.

The manufacturing and sales companies' net financial position at 30 June 2017 was a positive €7,631 million, up €818 million compared to 31 December 2016.

Market outlook: for 2017, the Group expects the automotive market to grow by approximatively 3% in Europe, and 5% in China, Latin America and Russia.

Operational targets

The Push to Pass plan sets the following targets:

• Deliver over 4.5% Automotive recurring operating margin[5] on average in 2016-2018, and target over 6% by 2021;
• Deliver 10% Group revenue growth by 2018[6] vs 2015, and target additional 15% by 2021 [6].

Financial Calendar – 25 October 2017: third-quarter 2017 Revenue

Groupe PSA consolidated financial statements at 30 June 2017 were approved by the Managing Board on 20 July 2017 and reviewed by the Supervisory Board on 25 July 2017. The Group's Statutory Auditors have completed their audit and are currently issuing their report on the consolidated financial statements.

The interim results report and interim financial results presentation for 2017 are available at www.groupe-psa.com, in the “Analysts and Investors” section.

The PSA Group 1.2 litre Puretech takes Engine Of The Year for the third year running.

During the 18th International Engine of the Year Awards held in Stuttgart, an international jury of journalists awarded the prize of ‘2017 Engine of the Year’ to the PureTech 1.2L 3-cylinder turbo petrol engine in the 1L to 1.4L category.

An industrial and commercial success

For the third year in the row, the ‘2017 Engine of the Year’ prize confirms the commercial success of this accomplished petrol engine, which is available in 110 and 130hp (PureTech 110 S&S and PureTech 130 S&S). 

The facts:

• With over 850,000 units already produced in the industrial facilities of the Française de Mécanique manufacturing site in Douvrin (France) and in Xiang Yang (China) since its launch in 2014, this engine will also be manufactured at the Trémery plant (France) at the end of 2017 in order to meet the increase of the demand and double the production capacity for this engine in France. Annual production will exceed 1 million units by 2019.
• The PureTech 1.2-litre engine, in 110 and 130hp versions is fully deployed on over 90 vehicles applications in 70 countries. In 2017, it contributed to the commercial success of PSA group’s new products that included the all-new Peugeot 3008 SUV – European Car of the Year 2017 and the new Citroën C3.
• On the European market, the PureTech 1.2L 3-cylinder modular family represents a third of PSA Group’s total petrol and Diesel engines.

A greater performance and environmentally-friendly power unit

Recognised for its all-round driving performance, even at the lowest rpm, the PureTech 1.2L 3-cylinder turbo continues to evolve and will benefit from significant improvements before the end of 2017, with enhancements in efficiency, performance and fuel consumption (up to 4%):

• introduction of a petrol particulate filter to reduce emissions particles by more than 75% in anticipation of future 2020 regulation standards in Europe and China;
• optimisation of efficiency, due to the combustion cycle evolution and a 250bar fuel injection pressure;
• reduction in mechanical friction and introduction of a new turbocharger;
• making the engine more compact to optimise body aerodynamics (SCx gains).

Commenting on the award, Christian Chapelle, Vice-President, Powertrain and Chassis Engineering, PSA Group, said: "Receiving this award confirms the exceptional quality and performance of our petrol engines. We are continuing to optimise our internal combustion engines to make them more efficient and ever more environmentally friendly, thereby better addressing the challenges of energy transition."

Well, we fear for the UK Jobs as it is confirmed that PSA WILL take over Vauxhall/Opel - Sad day, possibly !

• Establishes PSA Group as #2 in Europe. This strong and balanced presence in its home markets will serve as the basis of profitable growth worldwide
• Joint venture in auto financing with BNP Paribas to support development of Opel/Vauxhall brands
• €2.2 Bn transaction advances GM’s transformation and unlocks shareholder value through disciplined capital allocation

General Motors Co. (NYSE:GM) and PSA Group (Paris:UG) today announced an agreement under which GM’s Opel/Vauxhall subsidiary and GM Financial’s European operations will join the PSA Group in a transaction valuing these activities at €1.3 Bn and €0.9 Bn, respectively.

With the addition of Opel/Vauxhall, which generated revenue of €17.7 Bn in 2016¹, PSA will become the second-largest automotive company in Europe, with a 17% market share².

Creates sound European foundation for PSA to support its worldwide profitable growth

“We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround,” said Carlos Tavares, chairman of the Managing Board of PSA. 

“We respect all that Opel/Vauxhall’s talented people have achieved as well as the company’s fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalizing on their respective brand identities. 

Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner. We see this as a natural extension of our relationship and are eager to take it to the next level.”

“We are confident that the Opel/Vauxhall turnaround will significantly accelerate with our support, while respecting the commitments made by GM to the Opel/Vauxhall employees,” continued Mr. Tavares.

Advances GM’s Transformation and Unlocks Value

“We are very pleased that together, GM, our valued colleagues at Opel/Vauxhall and PSA have created a new opportunity to enhance the long-term performance of our respective companies by building on the success of our prior alliance”, said Mary T. Barra, GM chairman and chief executive officer.

“For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum. We are reshaping our company and delivering consistent, record results for our owners through disciplined capital allocation to our higher-return investments in our core automotive business and in new technologies that are enabling us to lead the future of personal mobility.

“We believe this new chapter puts Opel and Vauxhall in an even stronger position for the long term and we look forward to our participation in the future success and strong value-creation potential of PSA through our economic interest and continued collaboration on current and exciting new projects,” Ms. Barra concluded.

Strengthens Each Company for the Long Term

The transaction will allow substantial economies of scale and synergies in purchasing, manufacturing and R&D. Annual synergies of €1.7 Bn are expected by 2026 – of which a significant part is expected to be delivered by 2020, accelerating Opel/Vauxhall’s turnaround. Leveraging the successful partnership with GM, PSA expects Opel/Vauxhall to reach a recurring operating margin³ of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow⁴ by 2020.

PSA, together with BNP Paribas, will also acquire all of GM Financial’s European operations through a newly formed 50%/50% joint venture that will retain GM Financial’s current European platform and team. This joint venture will be fully consolidated by BNP Paribas and accounted under the equity method by PSA.

The transaction is another step in GM’s ongoing work to transform the company, which has delivered three years of record performance and a strong 2017 outlook, and returned significant capital to shareholders. It will strengthen GM’s core business, support its continued deployment of resources to higher-return opportunities including in advanced technologies driving the future, and unlock significant value for shareholders.

By immediately improving EBIT-adjusted, EBIT-adjusted margins and adjusted automotive free cash flow and de-risking the balance sheet, the transaction will enable GM to lower the cash balance requirement under its capital allocation framework by $2 Bn, which it intends to use to accelerate share repurchases, subject to market conditions.

GM will also participate in the future success of the combined entity through its ownership of warrants to purchase shares of PSA. GM and PSA also expect to collaborate in the further deployment of electrification technologies and existing supply agreements for Holden and certain Buick models will continue, and PSA may potentially source long-term supply of fuel cell systems from the GM/Honda joint venture.

Additional Information

Terms of the Agreement

Opel/Vauxhall automotive operations will be acquired by PSA for €1.3 Bn. GM Financial’s European operations will be jointly acquired by PSA and BNP Paribas for 0.8 times their pro forma book value at the closing of the transaction, or approximately €0.9 Bn.

The transaction has a total value of €2.2 Bn, for Opel/Vauxhall automotive operations and 100% of GM Financial’s European operations.

The transaction value for PSA, including Opel/Vauxhall and 50% of GM Financial’s European operations, will be €1.8 Bn.

In connection with this transaction, GM or its affiliates will subscribe warrants for €0.65 Bn. These warrants have a nine-year maturity and are exercisable at any time in whole or in part commencing 5 years after the issue date, with a strike price of €1. Based on a reference price of €17.34 for the PSA share⁵ , the warrants correspond to 39.7 MM shares of PSA, or 4.2% of its fully diluted share capital⁶. GM will not have governance or voting rights with respect to PSA and has agreed to sell the PSA shares received upon exercise of the warrants within 35 days after exercise.

The transaction includes all of Opel/Vauxhall’s automotive operations, comprising Opel and Vauxhall brands, six assembly and five component-manufacturing facilities, one engineering center (Rüsselsheim) and approximately 40,000 employees. GM will retain the engineering center in Torino, Italy.

Opel/Vauxhall will also continue to benefit from intellectual property licenses from GM until its vehicles progressively convert to PSA platforms over the coming years.

In connection with the transaction, GM will take a primarily non-cash special charge of $4.0-4.5 Bn.

Ongoing Pension Fund Commitments

All of Opel/Vauxhall’s European and U.K. pension plans, funded and unfunded, with the exception of the German Actives Plan and selected smaller plans will remain with GM. The obligations with respect to the German Actives Plan and these smaller plans of Opel/Vauxhall will be transferred to PSA. GM will pay PSA €3.0 Bn for full settlement of transferred pension obligations.

Closing Conditions

The transaction is subject to various closing conditions, including regulatory approvals and reorganizations, and is expected to close before the end of 2017.

Warrants

The issuance of the warrants is subject to the vote of shareholders at PSA’s General Meeting of May 10th, 2017. The three main shareholders of PSA (the French State, the Peugeot family and DongFeng) representing in aggregate 36.6% of the share capital and 51.5%⁷ of the voting rights of PSA have undertaken to vote in favor of the resolution related to the issuance of the warrants to GM. In the event the warrant issuance reserved to GM and its affiliates is not approved by PSA’s General Meeting, PSA will settle the €0.65 Bn in cash over five years.

The PSA Group's Push To Pass Plan is really working with improved profits, sales and cash flow.

For the third year in a row, the Group achieved growth on three fronts:

• Growth of the Automotive division operating margin to 6%^[1] versus 5% in 2015
• Growth of sales : 3.15 million vehicles sold^[2], up 5.8%
• Growth of the net financial position thanks to a positive €2.7 billion Free Cash Flow^[3] in 2016

The Group is improving its medium-term operational outlook.

For the first time since 2011^[4], a dividend of €0.48 per share will be submitted for approval at the next Shareholders’ Meeting.

Carlos Tavares, Chairman of PSA Group Managing Board, comments: “These results demonstrate our ability to consistently deliver an excellent performance in an adverse environment. 

They are the outcome of the Group’s operating efficiency improvement and our competitive teams’ focus on the execution of the Push to Pass plan. 

Day after day, the Group is building the conditions for profitable and sustainable growth, reinforced by the success of the first launches in its product offensive.”

In 2016, Group revenues were €54,030 million compared to €54,676 million in 2015 and Automotive revenues were €37,066 million, compared to €37,514 million in 2015 which represent respectively a growth of 2.1% and 2.7%, at constant exchange rates, driven notably by the success of recently launched models and the Group’s pricing power strategy. Net of adverse change in exchange rates, both Group and Automotive revenues were down 1.2%.

The Group recurring operating income was €3,235 million, up 18% compared to 2015. The Automotive recurring operating income was €2,225 million, up 19% compared to 2015. In an environment characterised by adverse exchange rates, this growth was driven by higher volumes, positive price and mix effects, and lower fixed and production costs.

The Group non-recurring operating income and expense was a charge of €624 million, compared to a charge of €757 million in 2015. 

Net financial income and expense was a charge of €268 million versus a charge of €642 million in 2015. 

Net income reached €2,149 million, an increase of €947 million compared to 2015. Net income, Group share, reached €1,730 million compared to €899 million in 2015. 

Banque PSA Finance reported recurring operating income of €571 million^[5], up 11% versus 2015.

Faurecia recurring operating income was €970 million, up 17%.

The free cash flow of manufacturing and sales companies was €2,698 million.

Total inventory, including independent dealers, stood at 406,000 vehicles at 31 December 2016, an increase of 56,000 units year on year.

The net financial position of manufacturing and sales companies was €6,813 million at 31 December 2016, compared to €4,560 million at 31 December 2015.

A dividend of €0.48 per share will be submitted for approval at the next Shareholders’ Meeting with an ex-dividend date considered to be on 15 May 2017, and the payment date on 17 May 2017. 

Market outlook

In 2017, the Group anticipates a stable automotive market in Europe, Latin America and Russia, and growth of 5% in China. 

Operational outlook improved

The new objectives of the Push to Pass plan are to:

-   deliver over 4.5% Automotive recurring operating margin^[6] on average in 2016-2018, and target 6% by 2021;

-   deliver 10% Group revenue growth by 2018^[7] vs 2015, and target additional 15% by 2021⁷.

^[1] Recurring operating income related to revenue

^[2] Of which 233,000 vehicles produced in Iran under Peugeot license in 2016, following the final JV agreement signed with Iran Khodro on 21 June 2016

^[3] Sales and Manufacturing companies

^[4] Dividend in respect of 2010, paid on 7 June 2011.  

^[5] 100% of the result of Banque PSA Finance. In the financial statements of the PSA Group, joint ventures are consolidated using the equity method and other activities covered by the agreement with Santander are reclassified as “Operations held for sale or to be continued in partnership.”

^[6] Recurring operating income as a proportion of revenue

^[7] At constant (2015) exchange rates

The PSA Group invests €200 Million in the "SOCHAUX 2022" Modernisation project.

• An investment calibrated to the right level to modernise this historical site and ensure its sustainability
• The acquisition of a new press line, a first in France for 20 years.
• Improvements to logistic flows with the construction of a new stamping building
• A versatile multi-silhouette line allowing production of up to six different bodies
• Over 60,000 training hours to support this project and significant improvements to work station ergonomics

With "Sochaux 2022", a project that has mobilised a dedicated multi-skilled team on the Sochaux site in Eastern France for the last 36 months, the PSA Group shows its ambition to turn the site into a benchmark plant, at the heart of its historical homeland.

This strategic project aims to simplify flows, inherited from over 100 years of industrial history, that do not currently allow Sochaux to reach its full potential compared to the other PSA Group Industrial sites.

Restoring coherence to building locations will reduce loading and unloading: Sochaux currently is a complex production site, extending over 200 hectares, including 24 kilometres of conveyor belts, and mobilising dozens of trucks to move vehicle sub-assemblies in production.

At the end of this transformation project, Sochaux will be able to meet changing customer expectations thanks to a highly-flexible multi-silhouette line, able to produce six different silhouettes, with a production capacity of 400,000 vehicles per year, exceeding the average of the last 10 years.

This new large transfer press line is the first acquired in France in the last two decades. This new line will be high speed and cutting edge technology, able to build multiple parts and to produce both steel and aluminium parts.

Sochaux's modernisation will also include the setting-up of a versatile, extremely flexible body-assembly workshop, capable of processing the whole diversity of the site's production, and the installation of an assembly workshop, meeting the highest world standards, closer to the other production buildings. This assembly workshop will be built to the highest standards.

Designed according to the principles of the plant of the future, Sochaux will take advantage of the latest developments in terms of digital tools, full kitting logistics, and mobile operator platforms for better ergonomics and optimum levels of quality. The workshops, designed for the 21^st century, will be better organised, to meet the highest standards in ergonomics for the men and women that work there.

The transformations planned as part of the "Sochaux 2022" project will bring the principles of the "excellent plant" programme to the industrial birthplace of the PSA Group and safeguard its future, thanks to a high level of performance.

For Maxime Picat, Executive Vice President, Operational Director Europe: "Today, Sochaux produces emblematic cars for the PSA Group, including the new Peugeot 3008 which has been a huge commercial success, and will begin to manufacture vehicles for the Opel brand. I know that I can count on the professionalism and unwavering commitment of all the employees at our historical site - with whom I have had the chance to work - to continue to meet the current and future expectations of our customers."

For Yann Vincent, Executive Vice President, Director Supply Chain and Manufacturing: "The ‘Sochaux 2022, the car draws itself a future’ project perfectly translates the PSA Group's desire to write its industrial future in France."