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Tavares Hustles to Make Humbled Peugeot an Auto Champion

March 06, 2014

PSA Peugeot Citroen Incoming CEO Carlos Tavares

PSA Peugeot Citroen incoming Chief Executive Officer Carlos Tavares walks through a display hall at the 84th Geneva International Motor Show in Geneva. Photographer: Chris Ratcliffe/Bloomberg

PSA Peugeot Citroen (UG)’s incoming Chief Executive Officer Carlos Tavares hustled around the Geneva International Motor Show this week in a way that didn’t suggest he was taking one of the toughest jobs in the auto industry.

Attending his first car show since joining the French carmaker “is very pleasant,” Tavares said while rushing to Peugeot’s display area, where electronic music throbbed and the 308 hatchback -- the 2014 European Car of the Year -- was prominently displayed. “I’m a lucky guy.”

He might be the only one that thinks that. The 55-year-old is charged with turning around Europe’s second-largest carmaker, which racked up more than 6 billion euros ($8.2 billion) in losses over the past two years. Wiry and with close-cropped hair, the former chief operating officer at French competitor Renault SA (RNO) will succeed Philippe Varin as CEO on March 31.

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Tavares will take the reins at a critical juncture in the 118-year-old company’s history. With its market share in western Europe slumping to its lowest level in more than two decades, the heirs of founder Armand Peugeot relinquished control, agreeing to let the French government and China-backed Dongfeng Motor Corp. (489) buy 14 percent stakes. In the process, the family’s stake will be watered down to that level as well.

The deal could be both a blessing and a curse for Tavares. The transaction will add 3 billion euros to Peugeot’s coffers and give it breathing room to pursue expansion plans in China, Russia and Brazil.

Earth, Fire

At the same time, the three-headed ownership structure, including sensitive political interests, could become an obstacle for an executive known to be blunt and occasionally brutal in his assessments, according to Bruno Mathiez, the head of Renault’s works council.

“It will be a tough challenge,” said Yves Dubreil, a retired Renault engineer who worked with Tavares in the late 1990s. “The Peugeot-Dongfeng-French state troika is like having water, fire and earth together -- three elements that are hard to unite.”

Even with his positive energy, Tavares is keenly aware of the challenges he faces. At his first meeting with analysts last month, he discussed the Paris-based company’s overlapping lineup that pits Peugeot and Citroen models against one another. He talked about streamlining costs and becoming more focused in emerging markets. The self-described “petrol head,” who joined Peugeot on Jan. 1, also wasn’t afraid to ruffle feathers, complaining that Varin’s development spending trailed competitors.

Unorthodox Path

“There was a kind of blindness that Tavares now seems to be questioning,” said Bernard Jullien, director of French automotive think tank Gerpisa. “It took him less than three months to realize that. I find this very comforting.”

Tavares took an unorthodox path to get the top job at Peugeot. After working for Renault and its Japanese affiliate Nissan Motor Co. (7201) for more than three decades, he told Bloomberg News in August that he wanted to become CEO of a big car company. Since his boss, Carlos Ghosn, wasn’t going anywhere, he said he may need to move to another manufacturer, naming Ford Motor Co. (F:US) and General Motors Co. (GM:US) as potential destinations.

That ended up becoming a self-fulfilling prophecy. The public statement about his personal ambitions created a stir, triggering his departure as Renault’s second in command two weeks later and freeing him to take over at Peugeot.

“If someone stands in his way, he either wants that position or he leaves,” said Bruno Cebile, a long-time friend and former Renault colleague who served as a navigator with Tavares in rally races. “This is his Champions League. He will give everything he has.”

Award Winner

His competitiveness was evident in the name he gave for the business plan that he will present next month: “Back in the Race.” When speaking to analysts in February after being officially designated CEO, he said Peugeot has humility and that’s “a big characteristic of champions.”

While he can’t take credit for it, Peugeot started the Geneva motor show on a positive note, with the 308 compact winning Europe’s biggest annual car award. The hatchback beat out Bayerische Motoren Werke AG’s i3 electric car, Tesla Motors Inc.’s Model S and the S-Class luxury sedan from Daimler AG’s Mercedes-Benz to win the honor for the first time in 12 years.

While the jury praised the car as “stylish and with new ambitions in quality and elegance,” Tavares will need to turn those laurels into sales and profit. He has the credentials.

The founder of Clementeam Racing -- which competes in auto races in Europe and is named after the oldest of his three daughters -- the executive is the first real “car guy” to lead the company after a string of outside managers. Current CEO Varin came from the metals industry, while his predecessor was former Airbus executive Christian Streiff.

Megane Developer

Tavares, born in Lisbon, joined Renault in 1981 as a test driver after graduating from Ecole Centrale de Paris, a top French engineering school. He rose through the ranks, including leading development of the Renault Megane compact. As COO, the French company reported unexpected growth in profit in the first half of 2013 as labor-cost reductions and higher vehicle prices offset an industrywide slump in European deliveries.

When Tavares oversaw North America for Nissan, he helped the company earn 209 billion yen ($2.03 billion) in the region in the year ended March 2010, versus a 46.7 billion-yen loss the previous year. After being appointed Peugeot CEO, he posted on his Facebook page: “The challenge of my life!”

In Geneva, Tavares was very much the man in charge at his new employer. He and his entourage, including development chief Gilles Le Borgne, toured the show floor to review rival offerings such as compact sport-utility vehicles like the Kia Soul, Mercedes GLA and Jeep Renegade, as well as checking out upstart Chinese brand Qoros. Tavares’s hard-driving style may be just what the doctor ordered for the French carmaker.

“The competitor’s image will do us good,” said Christian Lafaye, the FO union leader at Peugeot. “There will certainly be some side effects, like when one takes a drug. But I dare to believe that these side effects will be less important than what he’ll bring. We need a warrior.”

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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