PSA Peugeot Citroen Might Reduce Model Range to Return to Profitability image

PSA Peugeot Citroen might see its model range reduce, part of the restructuring strategy aimed at returning the company to profit.

The new chief executive officer of PSA Peugeot Citroen, Carlos Tavares, spoke for the first time since it took the new job last year. He said that although the automaker will continue efforts in keeping its position as a general market manufacturer, it will need to reduce its current model range. Tavares did not rule out the possibility of cutting capacity in France beginning with 2016.

PSA Peugeot Citroen will manage to save 3 billion euro in an agreement with the French government and Chinese company Dongfeng, if it promises not to shut down any plants in France for a period of two year once the agreement is signed.

“We are going to respect very rigorously the agreement we have with our unions, which means no factory will be closed until 2016 at least. That’s the deal,” Tavares said.

The French automaker, which has been struggling with the European crisis for more than six years, will sell 14% stakes to Chinese partner Dongfeng and the French government in a  capital increase.

“We must stop the cash burn, hopefully by 2016. To fix things, we must take three steps: increase operating profit by making sure our pricing is good, accelerate progress in reducing costs — one important way is to reduce stocks, which are higher than other companies — and establish better rapport with suppliers to control component prices,” added Tavares.