PSA Maps Recovery Plan

PARIS – PSA Peugeot Citroen has invoked strategic changes to its products and brand positioning to rebound from its massive losses in 2012.

The auto maker lost €5 billion ($6.7 billion) last year, burned through €200 million ($269 million) a month in operations.

PSA plans to:

On branding, PSA already sees the Citroen DS line as living almost on its own, referring now to the DS-line and the C-line to distinguish upscale Citroens from their base models.

In China, the Citroen DS3, DS4 and DS5 have their own dealer network, and in the second half the DS will have its own factory, a joint venture with Changan.

The Peugeot brand will be guided more upscale with the 2008, 208 GTI and new 308. Citroen’s C-Line, now positioned just below Peugeot in PSA’s view, will be modernized without moving upmarket.

Citroen will not be low-cost, says CEO Philippe Varin, but it will represent value, again with a modern element.

Both brands are moving away from “valuing tradition” toward “aspiring for modernity,” taking advantage of a market trending in that direction, says Frederick Saint-Geours, executive vice president-brand strategy.

“The DS is already capturing customers coming from the German luxury brands,” he says.

The Citroen C-Line will give up some horsepower and top speed – “traditional values” – for new technology features that owners will find more useful, Saint-Geours says, without being specific.

“We are not aiming at any existing brand,” he says, “because no one is playing in that space now.”

The auto maker earlier announced development of the two new platforms. PSA already has designed the EMP2, which initially will be used for C-segment minivans and cross/utility vehicles shared with Opel. PSA and Opel together are designing the EMP1 platform for B-segment vehicles.

Varin says PSA will launch nine vehicles in Europe this year, including three C-Line Citroens, the Citroen DS3 cabriolet and five Peugeots, including the 2008 small minivan, 208 GTi hot hatch and upscale, urban 208 XY.

All told, PSA says 18% of its sales this year will be premium-priced models, up from 9% in 2009.

With cost-cutting, including the costly shutdown of a factory and other financial measures already under way, PSA Chief Financial Officer Jean-Baptiste de Chatillon says 2013 will burn cash at half the rate of last year. Varin expects the company to be at breakeven by the end of 2014.

In terms of unit sales, PSA had a bad 2012, as its main markets of France, Spain and Italy all declined by double-digit rates. PSA vehicle sales were down 14.8% in a Europe off 9% overall and 13.2% in a growing Latin America market, as a plant was closed for rework.

Deliveries were up 4.9% in Russia, although the market grew 11%, but PSA’s 9.2% increase in China did outstrip the 7% market growth.

This year, Varin expects the European market to be down 3%-5%, the sixth straight decline, while China will grow 8%, Latin America 2% and Russia 2%.