Cost Cutting Ahead for European and US Automakers
The big news today was of course DaimlerChrysler has announced massive layoffs – 16% or 13,000 – of their total US workforce at the Chrysler division. One article here. The layoffs come as Chrysler division struggles to bring costs under control and at the same time roll out highly successful products. Of late, Daimler’s US brand has successfully rolled out well-designed products, some of which have certain cachet to American buyers. Still, they have struggled to find mass-market appeal in key vehicles such as the Chrysler Crossfire and the Aspen. Most successful has been the 300C. A large part of this success can attributed to the designers – and the customizers who seem to “pimp” nearly every Black 300C to hit the road. God knows they aren’t buying the car for the amazing handling and braking (perhaps the 300C is meant to be a drag racer).
To return to the main point, European manufacturers are looking to cut costs. Most notably the changes are affecting Peugeot. Both Renault and PSA Peugeot-Citroën have gone from strong product lineups a few years ago to abysmal performance today. Sales are off and both companies are working to improve. Renault with the key ownership of Nissan is in a much different position than Peugeot. 2006 results showed that Peugeot sales slipped .7% to 1,960,000 from 1,995,000 the year prior. In line with these results Peugeot axed the CEO at the beginning of the year and has installed former Airbus and Saint-Gobain executive Christian Streiff.
Unlike Nissan-Renault’s Carlos Ghosn, who seeks to develop broad global alliances, Streiff is seen as a master of cost cutting. It is widely speculated that such cost cutting could come in the form of plant closure in France, Spain, or the UK as noted by the Financial Times earlier this month. Streiff could take two different approaches or a hybrid. One option would be to sell or spin off certain parts of Peugeot’s vertically integrated infrastructure, thus freeing up cash flow and at the same time driving cost competition among suppliers. A second, less likely, approach would be to adopt the aforementioned alliance schematic that Ghosn has adopted at Nissan-Renault.
We will continue to research and write about this topic for future articles, but we would close by noting that the auto industry is nearly cyclical in nature. VW with its governance problems, and Fiat with problems in every area, were considered in recent years to be quite poor off. VW has made a great comeback with 9.3% sales increase and Fiat’s turn around is also worth noting. Bottom-line is that the French automakers may be a bit down, but they are certainly not out.
Sources: Financial Times, January 9, 2007.
Examples of the latest Peugeot