Peugeot cuts models to try to restart profits

 
Marion Dakers
PSA PEUGEOT Citroen, the loss-making French car company, is slashing the number of models it makes from 45 to 26 as part of its recovery plan.

The car firm, which signed a €3bn (£2.5bn) rescue deal with Chinese group Dongfeng and the French government in February, said it will “take the example and reference of what we have successfully done in China” as part of its overhaul.

Chief executive Carlos Tavares said all three of the group’s brands – Peugeot, Citroen and DS – will be kept as part of the efforts to streamline, in a plan the company has dubbed “Back in the Race”.

The firm intends to put a stop to its losses by 2016 and reach a two per cent operating margin in 2018.

“While they see themselves as back in the race, they don’t seem to realise that the competition is moving forward just as quickly,” Barclays analyst Kristina Church told Reuters. “They actually need to start spending ahead of the competition.”

Peugeot’s search for better margins will also mean around a fifth of the firm’s research and development will be moved outside of France, a strategy that has already been slammed by one union as “a further step against wages and jobs”.

Capital expenditure, which made up 4.4 per cent of revenue last year, will be limited to between seven and eight per cent in coming years, Tavares said.

Shares in the company fell more than six per cent yesterday as investors fretted over the new direction.