From “Back in the Race” to “Push to Pass”: PSA Peugeot-Citroën profit strategies

Abstract:

The auto industry permanent transformation comes, in the past decades, reconfiguring the sector in a way that goes beyond the incorporation of new technologies and organization of work conceptions. At least, since the 1990s, there is a strong tendency to the financialization of the automakers (Froud et al., 2002; Carmo et al., 2016), besides investing in after-sales and in more efficient logistic processes. Regarding the technological development, recent transactions point the consolidation of the tendency for autonomous and electric cars, which generally aim to reduce the environmental impacts caused by the CO2 emission and decrease the dependence of oil derivatives, which price is very susceptible to speculation. Thus, it is an extremely dynamic sector, which has been searching for alternate maintenance sources and extension of its economical return rates.
On what regards the vehicles’ manufacturing (cars, trucks, buses, motorcycles and utility cars), geography has also significantly changed in the last years, with the growing importance of the Chinese, Mexican and eastern Europe production, showing that at the same time that an accelerated fragmentation and integration process of this industry among countless countries, regions, companies and employees. The combination of these three variables is fundamental to understand the new map of the sector, which tendency in the last twenty years show its migration to emerging countries, especially China and Mexico, besides Brazil, Russia and smaller countries of eastern Europe, like Poland (Pavlínek, 2015). The numbers presented by employers’ entities such as European Automobile Manufacturers Association (ACEA) indicate that the movement has been for the concentration of vehicles’ assembly in numerous countries, as previously mentioned, besides the ones with tradition on it (United States, Japan, and Germany are stand out). However, there is a slow spreading of brands, breaking with the supremacy of the big American, German and Japanese corporations, and observing the market growth of Korean and Chinese companies too.
The proposal to be developed here aims to contribute to the studies of automotive groups from the perspective of the regulation theory (Boyer, 2009), suggesting a theoretical frame capable of interpreting the profit strategies of such organizations, according to their acting territories. In order to keep the truth, it is needed to observe the companies’ actions in countries according to the type of assignment which these play in the global auto industry map, ones being just markets (luxury or popular), others already configured as geographic spots designated for the assembly of vehicles, buses, trucks and other utility cars. Others, in their turn, are responsible for producing auto components, etc. Countries such as Brazil come, by hypothesis, leaving the condition of production locus (attending the domestic market and Latin-American) and converting into importer, mainly of luxury vehicles coming from Asian countries. This is a hypothesis that still needs better explanation, but numbers referring to 2016 demonstrate retraction in the national market as well as in the production.
The sector, therefore, is very representative for the comprehension of how changes, mainly on transportation’s technology, have been contributing for new countries to industrialize, thus undoing the classical separation between industrialized and non-industrialized countries, central and peripherals, from the north and from the south (Gereffi, 1994). Thus, a sector originally strong in the United States, Germany, Japan, France and Italy has spreaded, starting to incorporate in a larger scale, emerging countries from Asia, Latin America and Central Europe (e.g. Poland) and Eastern Europe.
The focus of the analysis, however, primarily falls over the power relations among organizations in disputed markets, which reveals essential for investigations regarding innovation, market achievement strategies, geographic expansion, vertical integration, among other processes associated to the firm (Fligstein, 2012). The main argument is the same used by discussions of Economical Sociology over the transformations of corporations. By this argument, in which the actors dominating the market develop social structures in order to mediate issues they face in the exchange, competition and production (Fligstein, 2012), meaning, they make up stable social structures (markets) (Swedberg, 2004) that ensure or conduct to monopoly or, in last case, to reproduce their hegemony inside a certain organizational field (Fligstein, 2007).
It has been a while since the auto industry is pioneer in the conception of new technologies and new patterns of work relations. Not by chance, the kind of relation instated in factories installed in various geographic contexts has been constant target for researches that include, for example, the dimension of the work organization on the factory floor (Pialoux & Beuad, 2009). Thus, the studies about the sector have been speaking more about the workers’ path than the firms’ path, highlighting the reflections regarding workers and syndicates acting locally and globally, featuring recent studies, that emphasize the interlocution increasingly global between workers and union leaders (Rombaldi, 2017).
However, it is fit to question about how are oriented the profit strategies of these firms, which governance structures (Gereffi, 1994; Pegler, 2015) are revealed to be extremely complex, either because of its stock split, or because of how they have been undertaking a new international division of labor through improvement of their production chains. The understanding of market strategies that guide such groups needs to consider initiatives in terms of new and diversified products, financial innovations, geographic expansion, vertical integration and stock control.
The case presented is of the PSA Peugeot-Citroën group. Second largest European (only behind Volkswagen), this group is a very representative case of changes ongoing the sector and the expansion plans drawn in the last 15 years help illustrate this statement. The methodology is based on the analysis of the company's annual reports published between 2005 and 2016 and the description of two strategic plans of the company: the Push to Pass and the Back in the Race. The paper concludes that PSA Peugeot-Citroën's profit strategies have long been diversified, projecting itself at least in four directions: product market, financialization, service provision (car sharing and connectivity) and after-sales (maintenance, recycling of parts and accessories, insurance, etc.).