PSA Figuring Out Branding, Wary of Electrification Regulations

FRANKFURT, Germany – With this summer’s acquisition of Opel and Vauxhall from General Motors, PSA Group now has six brands in its stable, including DS and Los Angeles car-sharing marque Free2Move.

While many industry analysts may consider that three or four too many, PSA CEO Carlos Tavares is confident he can make the six coexist peacefully and, hopefully, profitably.

“So far, my recommendation to the brand CEOs is very simple: You are French, you are German. Now please, work together and find a way to be as complementary as you can,” Tavares tells media here during a wide-ranging roundtable interview.

Tavares sees brand positioning as something that “comes from the heart,” so he is trying to not meddle too much in instructing each brand which way to go, citing Opel and Vauxhall’s longevity and “fantastic” histories.

“Let them express what they feel is the most important in their DNA, and then let’s see in terms of business if there is any kind of overlap or any kinds of problems on the positioning, on the related positioning, but so far I don’t see any,” Tavares says.

Raising the profile of Vauxhall to become more than a subsidiary of Opel is possible, he says, noting there’s “only one rule: make money. Why should I restrain people from expressing their creativity if they make money?”

Figuring out how to make money selling a few hundred thousand vehicles in one particular country is an unanswered question, he admits, noting he tries to avoid being dogmatic about the issues facing Opel and Vauxhall, given any discussion of their futures is an emotional topic.

“(But) if emotions can drive creativity and creativity can drive business, I’m happy,” he says.

As of early September, Tavares had toured two Opel/Vauxhall facilities, the Russelsheim, Germany, headquarters campus, which includes a vehicle-assembly plant, as well as Opel’s Zaragoza, Spain, plant.

He has found the “gaps are big” when it comes to cost and quality, but deems the attitudes of employees regarding fixes for those gaps “extremely healthy.”

In November, Opel will unveil its way forward plan. Tavares says he would like to increase sales volumes for the brand, but in the near term is targeting a lower breakeven point.

“It’s all about efficiency. If we are highly efficient we will be profitable…if we are sustainable nobody will have to worry about his job.”

Another unanswered question is whether Opel and Vauxhall need the manufacturing and R&D footprint they have, given PSA’s plan to unite models on common platforms and use PSA powertrains.

Governments Need to Own Electrification Shift

The future of Opel’s massive, 800-person Russelsheim engine-development center, opened less than a year ago, is in doubt, but Tavares infers its fate is intertwined more with European government directives to ban internal-combustion-engine models and promote electrification then it is the merger.

“The question…is not related to Russelsheim, it is related to the whole European automotive industry,” he says. “If you have ministers in Europe who are saying they are going to stop and forbid the internal-combustion engine…This is not my decision, it’s their decision.”

PSA will comply with any government-directed push toward electrification, Tavares says, but to do so it will need to transform, re-engineer, reorganize and re-train its people to adapt to the new reality.

On this topic, he tempers his disdain, but notes it is unprecedented for governments in Europe to pick technology winners and losers and take the decision of what propulsion system a vehicle should have out of the hands of automakers.

To illustrate this, he infers PSA was fortunate it didn’t pursue hybrid-air technology as a means of propulsion, because that would be facing a death sentence as it doesn’t use electricity.

PSA showcased hybrid-air in a Citroen C3 at the Geneva auto show in 2013. The car had a 3-cyl. gasoline engine with a compressed-air energy-storage unit. The air powered a hydraulic pump/motor unit mated to an automatic transmission with an epicycle gear train, controlled by a dedicated electronic-management system.

“(Hybrid-air) is an excellent example to demonstrate that when you are instructing a technology, in fact you are killing the innovation on all the other aspects,” Tavares says. “(That) means you are preventing the societies from getting the benefit of having the creative power of all the scientific divisions of all the carmakers in the world, which from a citizen perspective is a pity.”

Of the electrification fervor, which may result in ICEs banned in the U.K. and France by 2040 and even earlier in Norway, Tavares says, “Fine. We are great with that. No problem.” Yet, he notes any drawbacks to electrification, including a lack of profitability that could harm automakers as well as possible environmental or health impacts, needs to be owned by the governments mandating the move.

“We have the right dynamics, the right technology, the right engineers (to go electric), but then the scientific responsibility is not ours, it’s the governments, and that’s important for what could happen 20 or 30 years down the road.”

He believes electrified vehicles can be profitable, but says in the near-term automakers are between a rock-and-a-hard place of having to either raise vehicle prices to account for the higher cost of electrified powertrains or go begging from governments for incentives to spur customer interest.

Without government incentives, not as many people will be as able to afford a new vehicle as do today. With them “you smash the margins of the companies, and then you have a problem for the sustainability of the car companies, which very soon becomes a very high-level social problem,” Tavares says.

PSA plans to offer full or partially electrified powertrains in 50% of its models by 2020 and 80% of its lineup by 2023, the CEO says. Multipurpose vehicles off of PSA’s forthcoming electric common modular platform co-developed with China’s Dongfeng are due starting in 2019, with claimed ranges of up to 280 miles (450 km). Battery-electric versions of the Peugeot 208 and DS3 are expected then, while a BEV version of the Peugeot 2008 SUV is due in 2020.

Meanwhile, on the topic of Brexit, Tavares says PSA is working off two strategies, one closed- market and one open-market. It will pick a winner by Christmas. He says he would prefer to have some guidance from the U.K. government given the 3- to 5-year lead times for vehicle development. In the meantime, he says PSA is working on making its U.K. plants among the best-of-the-best for quality and efficiency.

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