Commercial fortune is smiling at PSA’s Carlos Tavares. After treating lesser bigwigs to a memorable autoindustry masterclass in both 2015 and 2016, likelihood now is that his conviction – ‘there is no point to profitless growth’ - will be the one mantra he will best be remembered for. This belief, probably still seen sceptically by some other carmakers just a few years ago, is one, if not the only root cause of PSA’s remarkable financial turnaround.
For a company that does not split annual profits between its passenger car and light commercial vehicle division, we’ve got nothing better than the official numbers.
Impressive stuff, last year’s operating margin climbed for a third successive year to 6 per cent.
This compares with -2.8 per cent as recently as 2013. PSA’s remarkably quick turnaround already sparked widespread applause, particularly from an otherwise hardnosed analyst community.
Their only real criticism, his future goals are considered too conservative.
There is little doubt that Tavares, overshadowed for long by Renault’s Carlos Ghosn - widely seen as a true
autoindustry Messiah - has learnt a great deal from his mentor.
Ghosn’s legendary cost-cutting skills and his masterstroke: bringing Japan’s previously deeply troubled Nissan back from the dead.
Combine this pedigree Renault training with first class entrepreneurial skill and enthusiasm, and it comes as no surprise that Tavares steered PSA’s previously rock-damaged ship back into calmer waters.
To his credit, that was a lot of treacherous, stormy seas to navigate.
But apart from being smart, Mr Tavares’ successful tenure at the helm show that luck also played a large part in lifting PSA in Phoenix like manner from the ashes.
Thanks to the wisdom of PSA’s earlier helmsmen, in the unglamorous field of light-commercials (LCVs) PSA for decades has had a tightly knit co-operation agreement with Fiat.
Unlike the passenger car market, Europe’s LCV market is more akin to an oligopoly, which in turn suggests satisfactory profits for all those who take part in it.
PSA, by its own admission, says it was leading last year’s European LCV market with an 18.9 per cent market share.
Unlike last year’s West Europe’s car market, which rose 5.8 per cent, the region’s LCV market grew at twice that pace.
That’s an 11.3 per cent surge to 1.83 million light and medium vans.
Providing some useful guidance on the issue of LCV profitability, Mercedes Vans, partly thanks to its mutually fruitful earlier product co-operation with Volkswagen, last year posted an operating margin of 10.1 per cent.
That equals last year’s Mercedes prestige sector passenger car margin.
PSA’s successful participation in the mundane, but seemingly highly profitable world of light commercials - thanks in no small part to Europe’s continuing internet shopping spree - has ostensibly helped PSA a great deal.
Same goes for its Renault compatriot, and no less so Fiat and Ford.
To keep this cash-cow in good health calls for more product effort – hence PSA’s decision to invest more in future LCVs for growth.
Smart and talented Mr Tavares knows full well that he is not in the glamour business.
Instead, his goal is profitable growth, whatever its source; cars, automotive parts, banking or light commercials.
For sustainable ultimate profitability, regardless of the particular business field, Tavares will put up a decent fight, and PSA’s shareholders should be deeply thankful for