Changan Automobile or a joint venture with PSA subsidiary Foglia

Due to the continued heavy losses of the French PSA Peugeot Citroën Group (hereinafter referred to as PSA), President Philip Valan was badly beaten. In order to honour the promise to the Board of Directors of “recovering the balance of cash flow in 2014”, it is necessary to further “slimming down”. On February 16, according to informed sources of Changan Automobile Group, the joint venture plan of Changan Automobile Group and PSA's component subsidiary Faurecia in 2013 is expected to land. “Last year, the successful transformation of Changan’s own-brand car business put forward new requirements for the adjustment of its parts and components system.” According to informed sources, Changan is currently eager to establish a joint venture with a powerful international component giant to improve product quality and reduce procurement costs.

On February 13, the financial report released by PSA showed that the group had a net loss of 5.01 billion euros in 2012, the amount of losses reached a record high, and assets have shrunk. Among them, the automotive sector had a loss of 1.504 billion euros, and the loss was much higher than the 92 million euros in 2011. PSA's debt dilemma provided an opportunity for Changan to quickly realize a joint venture with Faurecia.

In the absence of measures to lay off employees or shut down factories, PSA President VP Vallan said that the company has no choice but to hope to accelerate the group restructuring through new measures and strive to restore cash flow balance in operations in 2014. In early January of this year, there was news from the French side that PSA might sell 57.4% of Faurecia.

Although the news was later denied by the PSA, speeding up the transition of its business to emerging markets has become the only self-help measure that PSA is currently seeing. Covering the transfer of quality assets. Famager, the world’s sixth-largest auto parts supplier, has been one of the profitable business segments of the PSA Group. According to statistics from Credit Suisse, Faurecia contributed a total of 1.8 billion euros of profits to PSA from 2006 to 2012, while the latter’s core auto business lost 1.2 billion euros in the same period. However, the shrinking European car market has also mercilessly dragged this auto parts supplier into debt. Erich Hauser, an analyst at Credit Suisse, said that the current total PSA debt is 2.5 billion euros, of which Faurecia holds 1.6 billion euros.

Excessive reliance on the company’s business in the European market is the main reason for Fagor’s rapid decline in operating profit. The supplier of components for car seats, emissions control technology systems, automotive interiors and exteriors, is still the main market for sales in Europe. Data shows that in 2011, the sales revenue of Faurecia Europe, North America, and China accounted for 63%, 21%, and 9%, respectively. Even in 2012, the company’s European business accounted for more than half of the total, and the European auto market sales in that year was only 12.5 million, down 7.8% year-on-year.

As a result, the deteriorating economic situation in Western Europe has also involved Folgaria in the plan to lay off PSA’s mass layoffs. In November of last year, Faurecia estimated in a statement that the company’s time to achieve an operating profit margin of 5% or more was expected to be postponed from 2014 to 2016. In fact, turning the business outside the European market, especially the Chinese market, Faurecia’s actions are not slow. In 1994, Faurecia began to enter China, and in the last three years, it accelerated its expansion at an average rate of 6 new plants per year. Wei Lan, president of Faurecia (China), believes that in the next decade, the Chinese market will continue to grow at a rate of 7% to 10% per year, of which auto production of self-owned brands will increase significantly.