The Indian market remains strategic for PSA Peugeot Citroën, fitting well into the mid-term international development of the brand.
But that was not to be. Peugeot clarified that its search was still on and, months later, it announced a plan to invest Rs 4,500 crore in a plant at Sanand to build cars and engines.
That was a year or so ago. Fast forward to early 2012 and the European crisis is now the lead headline. The first hint of trouble brewing was the announcement by Peugeot of a delay in its India plans. Then PSA was all over the news. The company, battered by a slowing market in its home turf, announced that the building that houses its Paris HQ was up for sale. Thanks to its costly domestic production and high exposure to southern European markets, the second-largest European carmaker is bearing the brunt of Europe’s unemployment and cuts in consumer spending.
That has spawned a change in the company’s overall strategy. It’s, in a sense, back to Europe for Peugeot, which now has to put its own house in order. In end October, PSA Peugeot unveiled a government-backed refinancing deal for its lending arm, Banque PSA Finance which will necessitate several corporate level changes.
PSA is also reportedly cutting jobs as it attempts to stem losses running into millions of euros a month while developing future vehicles with GM (with which it has reached a tie-up) to deliver more savings in five years’ time through joint programmes.
All this has had its impact on Peugeot’s India plan, which could well mean an extended delay in its India plans. India’s own slowdown will also be very closely watched by Peugeot. All the company has said officially is: 'The Indian market remains strategic for PSA Peugeot Citroën, fitting well into the mid-term international development of the brand. The timing of the introduction of Peugeot is currently being revised in line with the rescheduling of the project.' PSA Peugeot may also consider leveraging its GM tie-up for India even though the alliance is now strictly limited to Europe.
For Varin, 50, a veteran of Europe's steel sector, the challenges are many. From the looks of it, turning around PSA Peugeot will be a very different ballgame. How Varin pulls it off will be closely watched.
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