PSA Peugeot Citroen is discussing hiring former Renault SA chief operating officer Carlos Tavares to replace Philippe Varin as chief executive officer at the French manufacturer, two people familiar with the matter said.
Varin, 61, is planning to step down next year as head of Europe’s second-largest automaker and wants Tavares, 55, to initially serve as his No. 2, said the people, who asked not to be identified because the search has not yet been made public.
Tavares, who left Renault three months ago, would join Peugeot as the automaker struggles to return to profit, stop cash consumption and expand outside Europe.
As the third CEO to lead Peugeot in the last seven years, he would also be charged with bringing stability to the automaker in an industry where strategic plans take years to unfold.
During that time, rival automakers in France, Germany and Italy have all been led by the same CEO.
“The market would definitely welcome the arrival of Tavares,” said Jose Asumendi, a London-based automotive analyst at
JPMorgan. “He is a highly regarded manager. After working for some time with Varin to understand the dynamics of the group, he would be an excellent candidate to lead the transformation of PSA.”
Peugeot gained as much as US$0.51, or 5 percent, to 10.74 euros and was up 3.4 percent as of 10:34am in Paris trading.
The stock has advanced 93 percent this year, valuing the manufacturer at 3.75 billion euros (US$5.07 billion).
Tavares has yet to sign a contract and the Peugeot board would still need to approve an agreement, one of the people said.
Pierre-Olivier Salmon, a Peugeot spokesman, declined to comment. Varin declined to comment on succession plans when asked over the weekend at a conference in Berlin. Tavares did not respond to requests from reporters for comment.
Tavares left Renault at the end of August, two weeks after Bloomberg published an interview with him saying that he would like to run another automaker because CEO Carlos Ghosn, 59, planned to stay for the foreseeable future.
Tavares spent more than three decades at Renault and affiliate Nissan Motor Co, rising through the ranks to eventually take over as Ghosn’s second-in-command at the French automaker. Tavares, who races cars himself, was working to add a sports-car brand and luxury marque at the Renault group.
Before departing, Varin plans to focus on expanding an existing partnership with Dongfeng Motor Corp (東風汽車) to lower Peugeot’s reliance on Europe, where it sells more than 50 percent of its vehicles, the people said.
Peugeot has proposed a capital increase of at least 3 billion euros, in which Dongfeng and the French state would take equal holdings of about 20 percent, people familiar said last month.
That plan has hit a snag as Dongfeng seeks a smaller stake than first discussed, people familiar with the matter said last week.
Dongfeng is weighing buying about 10 percent, half the size of the original proposal, said the people, who asked not to be identified discussing private talks.
The Chinese company is more interested in expanding an existing industrial venture than purchasing a stake, they said.
“To get Tavares would be attractive from two perspectives,” said Erich Hauser, a London-based automotive analyst with International Strategy & Investment Group, in an e-mail.
“Firstly, Tavares is a real ‘car guy.’ Secondly, he spent his career at Renault-Nissan and perhaps this is being seen as a potential role model for a Dongfeng-PSA alliance,” Hauser added.
A key challenge for a new leader at Peugeot will be returning the French manufacturer, which reported a first-half operating loss of 510 million euros in its automotive unit, to profit. The carmaker is also working to reduce cash consumption by 50 percent this year to 1.5 billion euros.
Under Tavares, Renault reported unexpected growth in first- half profit as labor-cost reductions and higher vehicle prices more than offset an industrywide slump in European deliveries.
When Tavares oversaw North America for Nissan, 43 percent owned by Renault, he helped the company earn ￥209 billion (US$2.05 billion) in the region in the year ended March 2010, versus a ￥46.7 billion loss in 2009.
Peugeot first hired Varin as CEO in 2009, following the departure of Christian Streiff, and his contract was renewed by the supervisory board on March 12 for another four years.
Under Varin, Peugeot has cut investments, closed a factory on the outskirts of Paris and moved to eliminate 11,200 French jobs.
The CEO, who had not worked in the the auto industry before joining Peugeot, also cut the management board to four executives from six to streamline operations.
More recently, he signed a three-year labor agreement with the company’s unions to reduce overtime pay and freeze salaries in exchange for investment guarantees and a pledge not to close any French factories before 2016.