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article imagePeugeot Citroen reveals recovery strategy, shares slump

By Laure Fillon (AFP)     Apr 14, 2014 in Business

French auto group Peugeot Citroen, fighting to recover from crisis with a new Chinese shareholder, presented a recovery strategy on Monday, but its shares slumped.

The group would focus overall on a culture of performance and global branding, it said in a statement.

PSA Peugeot Citroen, which has made net losses of 7.2 billion euros ($10.0 billion) in the last two years, titled its programme "Back in the Race", and emphasised ambitions to grow in China and South-East Asia.

But its ambitions were received with a cold shoulder on the Paris stock exchange where its shares fell by 4.46 percent to 13.08 euros. The overall French market was down 0.26 percent.

The new chief executive Carlos Tavares said in a statement that the objective was to concentrate every resource to raise profitability.

The group said it aimed to generate operating cash flow, a measure of the speed with which money is earned before it is allocated, of 2.0 billion euros from 2016 to 2018.

Employees work on the production line of the Peugeot Metropolis motorcycle on November 28  2013 at t...
Employees work on the production line of the Peugeot Metropolis motorcycle on November 28, 2013 at the factory in Mandeure, eastern France
Sebastien Bozon, AFP

It was aiming for the car division to generate an operating margin of 2.0 percent by 2018 and then 5.0 percent under the next medium-term plan for the years 2019 to 2023.

To achieve this the group would focus on boosting its Peugeot and Citroen brands, and develop the upmarket Citroen DS brand cars so that they no longer competed with other models by the group, and to obtain higher prices for its vehicles.

To do this the group would concentrate on 26 models by 2020 to offer a broader range, higher profitability and target profitable market segments.

PSA is in the process of acquiring two new shareholders, the Chinese state-controlled Dongfeng auto group which already works with Peugeot Citroen as well as with the other French auto maker Renault, and the French state.

The group halved its net loss last year from 5.0 billion euros in 2012 to 2.3 billion euros, has been in dire financial straits for some time, and desperately needed new capital as well as a way of accelerating its penetration of the Chinese market.

An employee works on the production line of the Peugeot 2008 on May 7  2013 at the factory in Mulhou...
An employee works on the production line of the Peugeot 2008 on May 7, 2013 at the factory in Mulhouse, France
Sebastien Bozon, AFP/File

A government-commissioned report found that the group had made a key strategic mistake for many years in not making the most of opportunities offered by globalised markets.

The strategic plan said the group would also aim to turn around its situation in Latin America and in Russia, two regions where it is losing money, to achieve profitability in these areas within three years.

This meant the group would reorganise itself on the basis of six big regions.

Another priority was to modernise its factories while reducing costs and its inventories.

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