Dongfeng and PSA seek to further strategic cooperation

Gasgoo.com (Shanghai June 26) - Earlier this year in March, Dongfeng Group acquired a 14 percent share in French automobile manufacturer PSA for the price of 800 million euros ($1.089b). Not long after, both parties signed an agreement establishing a global strategic alliance which aims to foster comprehensive cooperation in the fields including production, R&D and sales. In a report appearing in the China Youth Daily today, CEO of PSA Asian Operations Grégoire Olivier was quoted as expressing that cooperation between Dongfeng and PSA is progressing smoothly.

According to Mr. Olivier, Dongfeng CEO Xu Ping has taken the post of deputy chairman of the two company's supervisory board, while Liu Weidong has been appointed as chairman of the supervisory board's subsidiary Asia affairs committee. Mr. Olivier also revealed that PSA and Dongfeng will establish an office in charge of coordination affairs in Paris, which will overlook communication between the two companies regarding their operations and allow them to help each other to overcome challenges. Both PSA and Dongfeng will appoint their managers as representatives to the office; according to Mr. Olivier, the latter will appoint Wei Wenqing.

In order to prepare for this board cooperation, both Dongfeng, PSA and the Dongfeng Peugeot Citroën joint venture have begun undertaking a series of internal reorganization. Mr. Wei's original post of business vice president for Dongfeng Peugeot Citroën was transferred to Dongfeng Peugeot President Lyu Haitao. Last week a key conference was held regarding the establishment of a new unified R&D center, which will be built on the foundation of PSA's current R&D center and will be equally owned by PSA and Dongfeng. At the conference, the two companies discussed product strategies of Peugeot and Citroën products, as well as the future development of Dongfeng Fengshen products. Future conferences will further elaborate on Dongfeng's plans to export Dongfeng Peugeot Citroën products to Southeast Asia.

Mr. Olivier further discusses the DS brand, which he comments is now independent. He adds that the Peugeot and Citroën brands are aimed at different audiences, with Peugeot's core message that of seriousness, elegance and excitement and espousing the joy of driving, while Citroën's is aimed at comfort, fashion and cutting-edge technology, thereby aimed at families and those seeking personal comfort. Due to the differences between the two brands, their product designs will also be different. As one example, Mr. Olivier points out that the Peugeot's dashboard is located far ahead of the driver's wheel, while the Citroën's is located closer to the center. The Peugeot also sports a harder chassis that allows vibrations to be more easily felt, while the Citroën has a lighter chassis to maximize comfort. Another example that Mr. Olivier mentioned is the more rigid Peugeot seat designs compared to more adjustable seats in Citroëns.

Mr. Olivier also mentioned that when Dongfeng purchased its stake in PSA, the price it paid was 7.5 euros ($10.21) per share; that price has now skyrocketed to 11 euros ($14.98) per share. According to Mr. Olivier, the stock increase was triggered both by the growth of the Chinese market as well as increasing sales in PSA's home market of Europe. In the agreement the two companies signed, PSA voiced its commitment to helping Dongfeng Peugeot Citroën to fulfill its target of 1.5 million automobile sales in 2020, 500,000 of which are own brand sales.

Dongfeng Peugeot Citroën has sold a total of 286,000 vehicles from January to May, achieving year-on-year growth of 25 percent. The JV is planning the release of a new Peugeot 408 and new Citroën-branded compact SUV in the latter half of the year.