PSA Peugeot Citroen announced late yesterday that its next chief executive would be former Renault No.2 Carlos Tavares, in a move that may help to secure new funding from Chinese partner Dongfeng.
Tavares will join Peugeot’s management board on Jan. 1 and will replace CEO Philippe Varin, 61, later in the year, Peugeot said yesterday. Before stepping down, Varin will focus on discussions with partners.
Peugeot shares had closed 5.1 % higher at 10.75 euros following the reports, also lifted by a temporary easing of Iran sanctions that may soon allow car sales to resume there.
While the Paris-based company didn’t mention specific companies, deepening cooperation with Dongfeng – Peugeot’s joint venture partner in China – represents its best opportunity of gaining a foothold outside Europe. With other automotive options scarce, the most likely alternative to Dongfeng is to go it alone and hope the French government steps in if finances get tight.
The CEO switch “signals that PSA and the Peugeot family are willing to make far-reaching changes”, said Erich Hauser, a London-based analyst with International Strategy & Investment. “We consider Tavares to be a strong hire,” he added.
Varin, 61, has led ongoing talks with Dongfeng Motor Group (0489.HK) to deepen an existing joint venture with a multi-billion-euro share issue, in which the Chinese carmaker and the French state would acquire stakes in Peugeot, sources have said.
The surprise succession cuts short the Peugeot CEO’s contract, which was renewed for another four years in May. Sources have said the handover is designed to address Dongfeng concerns about management quality and continuity as it weighs investing in an expanded alliance.
“It does seem as if the Chinese are the only lifeboat left for Peugeot,” said Garel Rhys, head of the Center for Automotive Industry Research in Cardiff, Wales. “In a sense, PSA is lucky to have a Chinese company wanting to get involved because there are huge issues.”
The appointment of Tavares will allow the company to pursue its “strategy of recovery and development”, Chairman Thierry Peugeot said in the statement. Peugeot, one of the carmakers badly hit by the European market slump, is cutting jobs and plant capacity as it struggles to halt losses within two years.
Via Reuters, Bloomberg