The Truth About Cars » Dongfeng The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 27 Jul 2014 20:45:49 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Dongfeng New PSA Boss Tavares Prepares To Rebuild Company Mon, 14 Apr 2014 14:15:58 +0000 Carlos Tavares

Though PSA Peugeot Citroen secured funding in a three-way deal between itself, the French government and Dongfeng, new boss and former Renault COO Carlos Tavares has a hard road ahead of him as he rebuilds the ailing automaker.

Reuters reports Tavares will focus using the joint venture it shares with Dongfeng to go after 1.5 million sales by 2020, bring exports to Southeast Asia and establish a research center. He will also tighten up both working capital and the number of models sold in each market, as well as squeeze savings from PSA’s suppliers.

However, development woes, pricing issues on some models, and the use of heavy discounts and incentives are all roadblocks on Tavares’ “Back in the Race” plan expected to be issued in full Monday, as well as currency challenges in Latin America and Russia and lower-cost products from around Asia.

As part of the plan, Tavares is expected to halve the number of models it currently offers. On the bright side, the 308 and 2008 both delivered a combined 5.2 percent sales increase in the first two months of 2014, as well as an 8.5 percent Q1 2014 gain over PSA’s home market.

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Fushou: Donfeng’s Dragon Won’t Eat PSA’s Lion Mon, 17 Mar 2014 12:08:15 +0000 Peugeot Display in China Circa 2013

In light of fears regarding the three-way deal between Dongfeng, PSA Peugeot Citroen and the French government leading toward a time where Dongfeng would take the reins of the ailing automaker, CEO Zhu Fushou assured his company would not do so.

Automotive News Europe reports in an interview between Fushou and French newspaper L’Alsace, the 14 percent stake in PSA is a “win-win cooperation, not a purchase deal but a way to help PSA return to growth.”

In return for a capital increase of 3 billion euro — made up of 800 million euro contributions from both the Chinese automaker and the French government in exchange for 14 percent of PSA — the two automakers will begin work on conquering the Asia-Pacific automotive market with an aim of 1.5 million units annually, as well as helping Dongfeng better compete against local rivals.

As for Europe, the deal will help PSA reduce its share of vehicle sales in its local market from 62 percent to 50 percent as focus turns toward emerging markets, including Russia and South America. In turn, 10,000 jobs will be cut in the next three years as part of the recovery plan for the French automaker.

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PSA-Dongfeng Deal Backed By EU, Skepticism Remains Fri, 21 Feb 2014 17:00:40 +0000 Dongfeng Peugeot 308

The PSA Peugeot Citroen-Dongfeng-French government deal agreed upon by the three parties earlier this week received initial backing from the European Union, though skepticism remains as to whether the deal will bring stability to the ailing French automaker.

Bloomberg and Automotive News Europe report French Finance Minister Pierre Moscovici received a letter of initial backing from European Competition Commissioner Joaquin Almunia, confirming the 3 billion-euro deal met “at first glance” European Union rules related to state aid. The EU also approved an earlier 7 billion-euro guarantee to help Peugeot made by the French government via new bonds issued by Banque PSA Finance, which are set to expire next year.

Fellow Minister of Industrial Renewal Arnaud Monteburg, in an interview with France Inter this week, said the deal allows Dongfeng and PSA to use their complimentary strengths in building their respective brands, defending the French government’s decision to sign based on “economic and industrial patriotism”:

PSA is a company with the technology, the marques, but has not been able to grow in Asia, while Dongfeng doesn’t have the technology or the marques, but has the growth in Asia.

Analysts and observers close to the matter remain skeptical of the deal, especially as to whether it would ultimately stabilize Peugeot. GERPISA director Bernard Jullien told French newspaper Les Echos the deal has no precedent, and comes with the potential for instability down the road. Meanwhile, Financial Times voiced a similar concern over how incoming PSA CEO Carlos Tavares will be able to execute his reform plan with a board consisting of Dongfeng, the French government and the already divided Peugeot family.

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Tavares-Led Peugeot Gains 5.27 Billion Euro Makeover Thu, 20 Feb 2014 17:00:10 +0000 Carlos Tavares

Former Renault executive and incoming PSA Peugeot Citroen CEO Carlos Tavares aims to use the 3 billion euro investment made in the three-way pact between the automaker, the French government and Dongfeng as part of a 5.27 billion euro makeover of the automaker’s line of vehicles over the long-term.

Bloomberg reports Tavares is directing Peugeot to use the funds gained from the deal — as well as capital provided by Banco Santander via the automaker’s lending arm — to boost R&D funding, and to focus model expansion on the most profitable units.

Though the plan will focus on fewer models in the present with future works released down the road along the way to becoming “a global car company,” Tavares said his plan will not fix everything immediately; growing the DS line from a subbrand to a full line to compete against Audi, as one case in point, would take the better part of two decades to accomplish.

The plan will also decrease the number of models sold in unprofitable markets such as Russia while expanding into potential goldmines such as China with the help of partner Dongfeng, both of whom aim to move 1.5 million units annually by 2020.

Complete details of the plan — aimed at ending the steady decline experienced by Peugeot in their sales fight with regional leader Volkswagen AG, as well its six-year slide in overall sales in Europe — will be unveiled in mid-April, weeks after Tavares takes the helm from current Peugeot CEO Philippe Varin.

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PSA-Donfeng Deal Injects New Capital, Extended Life Into Peugeot Wed, 19 Feb 2014 06:23:50 +0000 2011 Peugeot China 508 With Couple

The 3 billion euro ($4.1 billion USD) three-way deal between PSA Peugeot Citroen, Dongfeng and the French government, signed this week, is set to inject new capital and a much needed life extension for Peugeot, though at the expense of the Peugeot family ceding control after two centuries.

Reuters reports Dongfeng and the French government will each pay 800 million euros ($1.10 billion) for a 14 percent stake in the new alliance while existing shareholders will receive warrants entitling them to purchase new stock at 7.50 euro, ultimately adding 1 billion euros to the memorandum of understanding signed by the three parties. In return, the Peugeot family’s 25.4 percent stake and 38 percent of voting rights in their namesake company will be brought to parity with their new partners, ceding control after over 200 years of business while surviving the end of guarantees totaling 7 billion euros next year.

Aside from the new infusion of capital, the MOU calls for Peugeot and Dongfeng to sell 1.5 million units annually beginning in 2020, jointly establish an R&D center in Dongfeng’s home market, and consider a new sales wing focused specifically upon Southeast Asia. The third point in the MOU would allow Peugeot to fare better than it does currently, having only sold 6,500 units last year in its largest regional market, Malaysia.

As for Peugeot’s home market and the European market as a whole, analysts warn the MOU doesn’t address how Peugeot will address the ongoing problems the automaker has undergone over the past several years. Though some suggested freezing investments and selling more plants to save itself, French industry minister Arnaud Montebourg stated no further closures were “on the agenda.”

The deal will be formally signed in late March around the time of China’s president Xi Jinping visit to Paris.

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PSA-Dongfeng Deal Approved, Chairman Urged To Scrap Deal Tue, 18 Feb 2014 14:16:06 +0000 Peugeot China 508

The founding family behind PSA Peugeot Citroen has approved the 3 billion euro ($4.1 billion USD) deal between the French government and Chinese automaker Dongfeng just an industry analyst penned an open letter for PSA chairman Thierry Peugeot to reconsider before it becomes too late to turn back.

Automotive News and Reuters report the deal would give Dongfeng and France each 14 percent controlling interest at 7.50 euro/share, while the family’s 25 percent stake and 38 percent of voting rights would be brought down to parity with the two parties. The increase in capital — sought by Peugeot as a last-ditch effort to remain solvent after 7 billion euros in state guarantees expire in 2015 — comes with a warrants issue for current shareholders to buy additional stock worth 1 billion euros.

The vote was met with opposition from within the family and from industry analysts, such as Max Warburton of Bernstein Research. In an open letter to PSA chairman Thierry Peugeot, Warburton urged him to scrap the deal and follow the roadmap taken by Ford and Fiat by hiring a chief executive to help turn around his namesake company without bringing in outside parties into the fold:

Their family stakes remain intact. Their shareholders are happy. Neither are reporting to government officials. There are lessons for you and the rest of the Peugeot family from their experiences. It’s not too late to turn back from Wuhan and fight on.

Warburton’s other suggestions include closing a Spanish plant, halt R&D for a year, and sell their controlling stake in supplier Faurecia.

Within the family, Theirry pushed an alternative plan to his cousin Robert by selling new stock on the market without seeking help from France or Dongfeng, warning that the deal would create an unmanageable three-headed hydra of a governance structure. He was also concerned by a clause in the deal that would prevent the three stakeholders from increasing their stakes over several years, fearing that the Peugeot family wouldn’t be able to regain their company at a future date. Thierry was overruled, and support for the three-way deal moved forward.

As for who will become the new chairman of the company, Dongfeng wants a chairman independent of Peugeot while the French government support PSA board member and former Airbus chief Louis Gallois. The Peugeot family have suggested former Nexans CEO Gerard Hauser, as well.

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PSA Peugeot Citroen, Dongfeng, France Reach Outline Deal Thu, 13 Feb 2014 16:30:36 +0000 dongfeng-peugeot-citroen

PSA Peugeot Citroen, Dongfeng and the French government have reached an outline deal to raise $5.5 billion in capital through a planned share sale in a last-ditch effort by PSA to remain alive after General Motors walked out of a similar deal over the Iranian market last year.

Reuters reports the deal will be presented to the Peugeot board February 18, at which point the board will sign a non-binding memorandum of understanding that same day according to sources closest to the matter. The plan would allow Dongfeng and the French government to each own 14 percent of PSA, while the two automakers retain and expand upon their alliance toward their goal of penetrating further into the Southeast Asia market.

With most of the plan settled, the only item needed to pull everything together is an independent chairman who will oversee the plan’s implementation. The French government wants senior civil servant Louis Gallois, brought aboard under the existing agreement between the state and PSA since 2012, as their champion, while Dongfeng is pushing for French businesswoman and independent Peugeot director Patricia Barbiezt to fulfill the role.

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PSA Board Holding To Dongfeng, French Government Stock-Sale Plan Fri, 07 Feb 2014 15:48:19 +0000 2014 Peugeot 508

With PSA Peugeot Citroen’s supervisory board’s blessing, CEO Philippe Varin is continuing talks with partner Dongfeng regarding the stock sale to both the Chinese automaker and the French government.

In a release made by the French automaker this week, the board expressed their full support for the plan, with the aim for approval by February 18, though the board also said that a successful completion of the plan wouldn’t be guaranteed.

The restatement of the sale, alongside a planned capital increase, came on the heels of reported divisions among board chairman Thierry Peugeot and his cousin, Robert Peugeot, over the $4.1 billion deal; Thierry wanted to sell all of the new stock on the market without Dongfeng or the French government. Meanwhile, the French shareholders’ rights group ADAM voiced concerns over the issue of two major shareholders governing PSA leading to governance issues, stock dilution, and the possibility of a mandatory buyout of the remaining shareholders by the three majors.

The sale would each give Peugeot, France and Dongfeng a 14 percent holding, with the latter two paying just over $1 billion a piece for their holdings. The overall plan would be equal to 75 percent of PSA’s market value, and would help the automaker weather the ongoing sales slump that began in 2012. This follows a similar sale made to General Motors in the same year for $1.35 billion, giving GM 7 percent of PSA that was later sold following the dissolution of a planned partnership in Iran.

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Tavares Could Take Reins at PSA Peugeot Citroen in March Mon, 27 Jan 2014 12:00:41 +0000 Carlos-Tavares_b

Sources close to the situation tell Reuters that Carlos Tavares, Carlos Ghosn’s former second in command at Renault, could start running rival PSA Peugeot Citroen as soon as March. Tavares officially joined PSA as CEO-in-waiting on Jan. 1. According to Reuters, Peugeot had previously said only that Tavares would take over sometime this year. Peugeot Chairman Thierry Peugeot told Le Figaro in an interview published over the weekend that the company’s board of directors would soon decide on the official transition date.

“Some observers had thought Tavares could take over by Feb. 19 when Peugeot announces its annual results. That was the plan … but Philippe Varin wants to remain in his post until the Chinese president visits France in March,” said one of the sources. “Given that Varin played an important role in the Dongfeng deal, it is completely possible that the replacement can wait until March.”

The Chinese president, Xi Jinping will make his first state trip to Europe in March, to meet with China’s trading partners after a year of trade tensions with the EU.

Dongfeng, a state-owned Chinese automaker, has agreed to join the French government in taking minority stakes in PSA, and will be investing $4.1 billion in the French automaker. The Peugeot board has agreed in principle to the deal, which would result in the Peugeot family losing control of the company.

Peugeot needs a source of cash to develop new product and stay competitive as sales decline in its core market of Europe. It also wants to expand the relationship with Dongfeng. The two companies currently operate a joint venture assembling cars in China. Dongfeng and PSA have been in discussions to expand their cooperative work to other Asian countries.

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GM Sells PSA Peugeot Citroen Stake For A $150 Million Gain, Blesses Dongfeng/PSA Tie-Up Fri, 20 Dec 2013 10:00:45 +0000 GM CEO Dan Akerson and PSA CEO Phillipe Varin when the tie-up between their two companies was announced in 2012. Now, Akerson and Varin are both on their way out and GM has sold its 7% stake in PSA, though the companies continue to jointly work on some projects.

GM CEO Dan Akerson and PSA CEO Phillipe Varin when the tie-up between their two companies was announced in 2012. Now, Akerson and Varin are both on their way out and GM has sold its 7% stake in PSA, though the companies continue to jointly work on some projects.

General Motors sort of has a reputation for bad investments in Europe. In 2000, GM made a deal with Fiat wherein Fiat sold 20% of Fiat Auto to GM for $2.4 billion and the Italian automaker took a 6% stake in GM. GM also received a put option which in certain circumstances would have obligated the largest American car company to exercise that option and buy the rest of Fiat. In 2005, to get out of that deal, GM paid Fiat another $2 billion.


With that kind of history, it’s not surprising that when GM invested $400 million in early 2012 for a 7% share of French automaker PSA Peugeot Citroen many skeptics expected GM to lose money on that deal as well. PSA’s stock prices dropped after GM’s buy-in and in the fourth quarter of last year, GM took a $220 million charge on its books to bring the PSA investment down to market value. GM announced last Friday that it sold its ~24.8 million shares in PSA to institutional investors for $343 million. As a result of all that accounting the Detroit automaker will realize a net gain of $150 million, posted to the company’s fourth quarter earnings as a special item.

A day before GM announced their divestment of PSA shares, the two companies said they had reduced projected annual cost savings from their alliance to $1.2 billion by 2018, down from an earlier projection of $2 billion in savings by 2017. The companies will continue to work jointly on two vehicles based on PSA platforms, a joint purchasing and logistics venture, and also work together on a new small light commercial vehicle.

GM said that their sale of PSA shares was not related to the French concern’s announcement last week that it is exploring a possible capital increase and and considering commercial and industrial projects with partners. One of those partners is Chinese automaker Dongfeng Motor Group. Dongfeng and PSA recently said they would be exchanging 20% stakes after the Chinese company agreed to inject over $2 billion in PSA. Chinese media reports say that prior to its sale of PSA shares, GM gave it’s blessing to the alliance between the French and Chinese automakers.

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PSA Hires Ex-Renault COO Tavares As Next CEO Tue, 26 Nov 2013 16:45:37 +0000 450x222xjpg-3-450x222.jpg.pagespeed.ic.8kqTWHzuOU

PSA confirmed that former Renault COO Carlos Tavares will take over the reins starting January 1st. Tavares assumes the role at a fortunate point in time for PSA: an alliance with Chinese car maker Dongfeng is underway, and Tavares’ predecessor, Philippe Varin, has already completed the difficult task of closing factories and cutting thousands of jobs, a difficult task in a country like France.

Now, Tavares will be tasked with helping PSA turn things around, with a slate of new product, a leaner organization and  reorganized brand structure. Despite Varin laying much of the groundwork for a potentially revitalized PSA, Tavares could end up in the right place at the right time – able to fulfill his dream of running a car company, while presiding over a successful turnaround.

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PSA: Business Model for Joint Small Car With GM “Just Wasn’t There” Thu, 24 Oct 2013 11:00:32 +0000 The next Citroen C3 and Peugeot 208 will not share a platform with Opel's Corsa as originally planned

The next Citroen C3 and Peugeot 208 will not share a platform with Opel’s Corsa as originally planned

In the wake of news that China’s Dongfeng Motors is going to take an equity stake in PSA/Peugeot Citroen, the French automaker says that it is scaling back its alliance with General Motors, which owns 7% of PSA. PSA said that a planned joint subcompact platform that was seen as the basis of the tie-up with GM will probably be cancelled. “Further analysis showed that the business model just wasn’t there,” a PSA spokesman said. Financial statements released by PSA say that anticipated savings of $1 billion due to synergies with GM will be adjusted downward.

The cancelled platform was supposed to have underpinned replacements for the Peugeot 208, Citroen C3 and Opel Corsa. Barclay’s analyst Kristina Church said that a common small car was “absolutely key” to the partnership.”It certainly seems GM has no focus on the alliance with Peugeot any more. They don’t want to be partnered with a struggling company, and they have alternative methods to turn things around [in Europe],” Church said.

Still, GM and PSA spokesmen said that the alliance is going forward. “We have other projects under review. Some projects are not economically feasible, which is why they are dropped, but we’re taking the projects one-by-one and examining their economic feasibility first,” a PSA rep said. The companies will still produce a jointly developed small minivan at GMs Zaragoza, Spain factory starting in 2016. “We are moving forward with the implementation” of the projects which have already been agreed upon, Ulrich Weber said for GM.

The deal with GM was originally a main part of PSA CEO Philippe Varin’s strategy to turnaround the struggling French carmaker. Working with a company of GM’s size was seen as a way of reducing costs. After GM took a 7 percent stake in PSA in February, 2012 the automakers announced plans for at least five joint vehicle and powertrain programs. However, soon afterwards, GM revealed that SAIC, it’s partner in China could veto some of the plans.

Remaining are the upcoming small minivan and another joint vehicle development program working on a crossover, along with joint purchasing. PSA did say that so far joint purchasing has saved the company about 60 million euros so far this year.

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Reuters: Dongfeng/PSA Tie-Up Resulted From GM Scaling Back Cooperation Tue, 15 Oct 2013 14:58:58 +0000 gm-psa-ceos

Reuters is reporting that the reason behind PSA/Peugeot Citroen’s financial tie-up with China’s Dongfeng Motors was the decision of General Motors, which owns 7% of the French automaker, to scale back cooperation with Peugeot. GM also apparently rejected a PSA/Opel merger backed by the French government.

In February of 2012, GM announced its investment in PSA as part of what was publicized as a broad based partnership. However, the relationship had problems only months later when GM announced that Shanghai Automotive (SAIC), its partner in China, vetoed some of the joint GM-PSA product planning.

Also, in June of this year, Peugeot had arranged approval from the French government for a restructuring that involved a merger with GM’s European Opel division, but the Detroit based automaker disapproved the deal. The less than smooth relationship with GM persuaded Peugeot CEO Philippe Varin to find other financial partners, ending in the reported $4 billion capital investment in PSA by Dongfeng and the French government. If that deal goes through, the holdings of GM would be diluted and the Peugeot family, which currently owns a bit more than a quarter of its shares, would no longer control the firm.

In exchange for the investment, Dongfeng will get access to PSA’s technology and markets.

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Dongfeng Motors, French Government to Buy Stakes in PSA Mon, 14 Oct 2013 14:34:29 +0000 dongfengpsa

Reuters has reported that Chinese automaker Dongfeng and the French government will be taking equity stakes in PSA/Peugeot-Citroen after injecting $4.1 billion into PSA.  Under the draft agreement, which is still being negotiated, Dongfeng Motor and the French government will each put 1.5 billion euros into the French automaker, with each of those parties getting a 20 to 30 percent share in the company.


As a result, the Peugeot family, which currently owns 25.4% of PSA, will find its holdings diluted below controlling levels. The sale will also dilute General Motors’ 7% share of PSA. Part of the increased capitalization will come from a sale of stock to the French government by the Peugeots, while the remainder will be raised through a reserved capital increase. The 3 billion euros put into PSA would be the equivalent of 68% of the company’s current market value.

PSA sales were down 18% in August, and its market share has dropped to 11% so far this year, almost a full percentage point decline. The company lost 5 billion euros ($6.6 billion) last year. In July PSA announced that it expected to reduce the cash burn in 2013 to 1.5 billion euros.

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PSA CEO Varin Says French Carmaker to Deepen Ties With Dongfeng in China. GM’s Girsky Unconcerned Mon, 30 Sep 2013 15:12:31 +0000 Dongfeng_Peugeot_Citroen_logo

PSA/Peugeot-Citroen is negotiating with China’s Dongfeng Motor to expand their partnership in the world’s largest car market. PSA CEO Philippe Varin told reporters attending the opening of a new factory in Shenzhen, China, on Saturday that the French company is seriously considering selling equity to Dongfeng to fund expansion outside of Europe. The sale could diminish the holdings of the Peugeot family, which holds slightly more than a quarter of PSA shares, below a controlling stake in the French automaker. Earlier this year, Reuters had reported that the Peugeots were willing to relinquish control so that GM could take a larger stake in PSA, though General Motors has since indicated that they don’t plan to increase their holdings in PSA.

PSA now has three factories in China under a joint venture with Dongfeng and Varin was in China for the launch of their fourth Chinese facility, a joint venture with the Chang’An Automobile Group in the southern Chinese city of Shenzhen where PSA will locally assemble the luxury DS series. Including the new factory PSA will have capacity to build almost a million cars a year in China, more than double last year’s sales of 442,000 units in the country.

Responding to the news about a financial tie-up between PSA and Dongfeng, General Motors’ vice chairman Steven Girsky said that the deal involving Dongfeng taking an equity stake in PSA would not affect GM’s partnership with PSA. “We’re not PSA’s only partner so I don’t think it would complicate our situation any more than it would complicate some of their other partners,” Girsky said in New York on Friday. GM bought a 7% stake in PSAas part of its plan to right its European operations.

Girsky said that the affect of the PSA-Dongfeng capital relationship on GM’s own tie-up with PSA would ultimately depend on how much influence the Chinese automaker had on the partnership and on where the vehicles jointly  made by PSA and Dongfeng would be sold.

The GM vice chairman reaffirmed GM’s position that right now it will keep it’s investment in PSA at 7% of the equity of the French company. “We bought our 7 percent in the first place not because we wanted significant influence in PSA, but because we wanted to help them with their capital raise at the time,” he said.

Girsky said that the priority of the alliance with PSA is fixing GM’s European operations not finance. GM and PSA have previously announced that they will be jointly developing a minvan platform and it’s been reported that GM would like PSA and Opel to be somewhat integrated.

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PSA, Dongfeng Said To Be Exploring A Partnership Wed, 18 Sep 2013 17:22:07 +0000 Peugeot_RCZ_a_St_Trond

PSA, parent company of Peugeot and Citroen, is said to be exploring a partnership with China’s Dongfeng, as Peugeot looks for ways to strengthen itself amid weak sales and a perpetually sputtering European car market.

A number of solutions are being proposed, with France’s La Tribune claiming that a capital increase (with Dongfeng providing cash in exchange for equity), as well as an emerging market joint venture where Dongfeng would also be holding much of the equity, with Peugeot getting the financial resources it needs to expand in the developing world.

Complicating matters is the brand’s alliance with General Motors. GM has a 7 percent stake in PSA and is seen within the company as a key to helping PSA pull through the European crisis, where overcapacity and a need for significant economies of scale are hurting smaller players like PSA. But PSA also wants to follow the lead of rival Renault-Nissan, which has aggressively expanded in emerging markets with Dacia (a runaway success) and now Datsun. Europe is considered a mature market, and emerging markets are one of the only growth sectors left for an established auto maker like PSA (especially given that a North American expansion is off the table, even though it is also a strong market for automobiles).

Currently, the Peugeot family holds roughly 25 percent of PSA’s shares, but any deal with Dongfeng could see them lose their stake – an unthinkable occurrence in past eras.

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Renault About To Get Going In China Mon, 08 Jul 2013 12:32:14 +0000  

Renault China

Renault hopes to get going on its foray into China, and to sign a joint venture agreement with Dongfeng, Reuters says. “We are waiting for an official invitation from the Chinese industry ministry,” Reuters heard from an insider. Rumors of an impending JV kept Chinese media guessing and speculating for years.

Total investment is said to be close to 10 billion yuan ($1.6 billion). Renault and Dongfeng are well acquainted: Alliance partner Nissan has a joint venture with Dongfeng, and is China’s largest Japanese brand. The island issue put a damper on sales of Japanese-branded cars in China, which makes a diversification into European brands extra pertinent.

According to the report, the Renault-Dongfeng JV will start with an annual capacity of 150,000 units, and will begin producing SUVs and minivans in 2014.

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Geely No Longer Interested In Fisker Mon, 18 Mar 2013 14:39:09 +0000

Fisker is still likely to be rescued by a Chinese savior, but it won’t be Geely. Reuters is reporting that Fisker’s outstanding obligations to the Department of Energy have scared off the Chinese auto maker, leaving Dongfeng as the sole suitor for the beleagured EV maker.

According to Reuters, the strings attached to the $529 million loan – such as commiting to restoring jobs and production capacity at American plants on a set timetable – were too daunting for Geely.

“Those obligations are too complicated to handle and seem too risky,” one of the sources said. “The plan’s footprint was too big. It would take a long, long time to fill up the plant with products and restore employment there.”

Originally, Geely was said to be eyeing Fisker’s Delaware plant as a means of producing Volvos in the United States. As of now, Dongfeng is said to be the sole bidder in the final round. Meanwhile, Fisker has yet to produce any cars since July of 2012, and is looking for funding to help produce the smaller Atlantic plug-in sedan.

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EXCLUSIVE: Bernstein Research Literally Dissects Chinese Cars, Auto Industry In 200-Page Report Fri, 22 Feb 2013 18:20:16 +0000

Max Warburton and his team. Warburton, of Bernstein Research, assembled a team to interview over 40 auto executives in China (both Chinese and foreign-born) and even bought two Chinese vehicles from Geely and Great Wall. Warburton had them shipped to Europe, where they were taken to a test track, driven extensively and then taken apart by engineers and automotive consultants. And it was far from pretty.

Warburton and his gang have assembled an epic 200-plus page report that is one part primer on product development, one part spotter’s guide to the Chinese domestic car industry and one part road test feature that rivals anything out of the buff books or Consumer Reports. It is dense, fact-filled and will take a few solid hours to read and absorb.

The first 64 pages are devoted to the ins-and-outs of the Chinese auto industry. Warburton deftly takes us through the various players and their broken-English monikers (Great Wall, Chery, Brilliance and the like) along with thorough dossiers on each one. Who is in bed with whom, which JVs are successful and even interviews with executives where they are asked to praise and criticize the various Chinese auto makers. The consensus seems to be that SAIC is miles ahead of everyone else – thanks mostly to their collaboration with GM.

One OEM executive who had recently left GM China argued that part of the problem was that the international OEMs do not take their responsibilities to the joint ventures seriously — GM being the only exception. What does it take to ensure a joint venture is successful and benefits the Chinese side?

I was part of GM when they put a lot of effort into China…I used to see Rick Wagoner (CEO) in China almost every month…he really spent a lot of time here, especially with the politicians…and they spent millions in the Chinese universities to be good citizens. They’ve built a styling studio, they’ve built a RMB1.6 billion proving ground, they’ve sent their best products to China. They’ve built the engineering function — they went from 400 engineers in 2005 to 2,000 in 2008, now they’re at 2,500. They have a 100% capable engineering center. They are really serious. You need to be serious here. But a lot of [foreign] OEMs are not.

Also in the good books is Great Wall. Along with advanced engineering prowess, Great Wall pays their supplies and vendors on time – apparently, a major issue among the design consultancies and foreign-born experts that, according to Warburton, are responsible for the vast majority of what China’s auto industry does right.

The individuals that Warburton interivews from the engineering firms tend to be extremely bearish on the Chinese auto industry. Managers are largely drawn from the Politburo, engineers are portrayed as incompetent and cutting corners is said to be a way of life. According to one executive, “…a mistake is only a mistake if you are found out.” One auto insider believes that most Chinese sedans of the recent era have been reverse engineered copies of the Toyota Corolla. They key dimensions and “hard points” are identical, and he believes that frankly, the Chinese auto industry is not yet capable of engineering its own car from scratch. Furthermore, they are obsessed with matching VW shot for shot, but their thrifty nature and impatience inevitably hampers their success.

They are all obsessed with matching VW — but we would generally advocate that they would be better going for a twist beam rear suspension with three components, with little to go wrong — rather than a multi-link with 20 that they will then screw up putting into production…to emulate VW or Ford they need to control tolerances within an incredibly tight range — and they end up a long way out.

Along the way, we find out that while Toyota and VW spend in the neighborhood of close to 10 billion dollars on R&D annually, Chinese companies spend around $100 million, largely a combination of stinginess and not having to do so thanks to reverse engineering existing technology. A high-speed drive across a 22-mile bridge illustrates tangible results of this corner cutting.

Later that week, we meet Frank Zhao, Geely’s head of R&D. We mention the Geely EC8′s apparent lack of crosswind stability and ask how much time the car had spent in the wind tunnel during its development. Mr. Zhao is honest, and admits that Geely doesn’t have a wind tunnel (there are only two in China), and that due to alimited product development budget, he needs to choose where to spend his money. Mr. Zhao explains that Geely made the decision not to hone the EC8 in a wind tunnel, because most customers don’t leave cities and very few drive at high speeds on bridges. The money was instead spent on electronic features (satellite navigation, etc.) and solid basic engineering (and we concur, as the body seemed rigid, and noise, vibration and harshness [NVH] were well controlled).
A ride in an EC8 encapsulates where Chinese automobile development is right now. The basics are okay. The cars are adequate. But they are not world-class, in our opinion.

Around page 71, the fun begins, as the team procures, imports and test drives two Chinese cars, the Geely EC7 and the Great Wall H5. Rather than spoil the results for you, I encourage you all to pay close attention to the teardown portion, for an utterly fascinating look at the ins and outs of a Chinese car. There are certain elements that were highly-praised; the Geely’s body-side panel, stamped from one piece, was described as “deeply impressive” and “beautiful” by European engineering consultants. But the engineers and test drives found manifold faults with the car; shabby spot welds, malfunctioning HVAC systems, corroding parts and body panels after just a few hundred kilometers. Ben Oliver, one of the UK’s best auto journalists, was brought in to give his perspective. He declared the Great Wall to be dreadful.

The report seems to conclude that it will take a minimum of a decade before the Chinese are ready to field a competitive product. They are not functioning anywhere close to as competently as a Western auto maker, and the foreign hired help brought in to make them succeed are quickly getting frustrated with the lack of progress and poor attitude.

But Warburton and his team, upon inspecting the Great Wall H6 (successor to the H5) come away impressed with the progress that’s been made. The body-on-frame construction, thirsty Mitsubishi engine and crude engineering appear to have been jettisoned in favor of a much safer and more efficient crossover. Warburton notes that this kind of progress would take a few product cycles at traditional OEMs in past eras and comes away impressed. ” It’s clearly a significant leap forward versus the H5,” says Warburton. “If this is what Great Wall can achieve in 15 months…then it may be building a Bugatti Veyron rival by 2014.”

EDIT: Bernstein requested that the report be removed. The report was generously provided to TTAC but it was not meant for mass dissemination. We apologize for the misunderstanding.

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Fisker Will Be Chinese, One Way Or The Other Mon, 18 Feb 2013 14:40:13 +0000

Not Dongfeng, but China’s Geely currently looks best positioned to profit from U.S. government largesse by buying beleaguered and DOE-funded plug-in car maker Fisker, Reuters reports. According to the report, “Zhejiang Geely Holding Group is favored to secure a majority stake in troubled U.S. electric car maker Fisker Automotive, according to two sources familiar with Fisker’s search for a strategic investor or partner.”

Also according to the report, red flags are sure to flutter over Fisker’s HQ in Anaheim, as Fisker “is currently weighing bids from two Chinese auto makers: Geely, the owner of Sweden’s Volvo, and state-owned Dongfeng Motor Group Co.”

Geely Chairman Liu Shu Fu (left)

Geely and Dongfeng did offer between $200 million to $300 million for a controlling interest in Fisker. Reuters’ sources think Geely has the inside track, because Geely is “more serious” and “passionate” about Fisker and its technology, the company also is said to be able to “move fast in making decisions — unlike Dongfeng, whose responsiveness could be hampered by its multi-layered decision-making structure typical in a Chinese state-owned enterprise.”

In 2009, Fisker received a $528.7 million conditional loan from the DOE. After drawing down $193 million, the credit line was frozen, following a series of scandals surrounding other DOE recipients. Production was shut down in summer of 2012 while fresh capital was sought. The financial troubles of Fisker’s battery supplier A123 gave Fisker another reason not to restart production. A123, another recipient of DOE largesse, was sold off to China.

Which is where DOE recipients appear to get outsourced to.

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Fisker May Follow A123 To China Fri, 15 Feb 2013 17:23:16 +0000

Reports by Bloomberg suggest that Fisker could sell up to an 85 percent stake to Chinese automaker Dongfeng. The automaker apparently bid $350 million for the beleaguered plug-in car maker, according to sources close to the company.

With a $200 million Department of Energy loan still outstanding, and a possible cash crunch looming mid-year, Fisker has been looking for a buyer. Company spokesman Roger Ormisher told Bloomberg

“The company has received detailed proposals from multiple parties in different continents, which are now being evaluated by the company and its advisers,”

If Fisker were to be sold to Dongfeng, the possibility exists that production of its vehicles would move from Finland to China, without the ex-GM factory in Delaware having ever produced any cars. Fisker’s battery supplier, A123 Systems, declared bankruptcy in 2012, and was sold to a Chinese firm.

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Renault Won’t Start A New Chinese Joint Venture. It Already Has One Mon, 26 Nov 2012 13:13:45 +0000

China Business News has the story (via Reuters) that Renault will start a joint venture with Dongfeng, and that “the two firms plan to invest a combined 6.5 billion yuan ($1.0 billion) in a plant in the central province of Hubei with an initial capacity of 200,000 cars a year.” The story promptly went as viral as a story about a Chinese joint venture can go viral.

Officially, the story elicited a “no comment”at Renault. Privately, after they were done yawning, contacts in Paris said that this is a non-story, but a popular one. News about a joint venture between Renault and Dongfeng appear with regularity, but they overlook the fact that Renault has had a joint venture in China for longer than most people seem to remember.

Since 1990, Renault had a joint venture with the China Sanjang Space Group called Sanjang Renault Automobile Co. The JV made vans such as the Renault Trafic, and MPVs like the Espace and the Scenic, built from CKD kits. The venture was not very successful. Eventually, company and contracts were bought by the Dongfeng Nissan joint venture. Years ago, Nissan and Renault CEO Carlos Ghosn referred to a “Golden Triangle” formed by Dongfeng, Nissan, and Renault. Renault had been part of the paperwork with Dongfeng from the get-go, with the understanding that production would start in earnest at an opportune date, says my Paris contact.

New joint ventures need approval from China’s National Development and Reform Commission NDRC, but the reports say that a new production license from the government is not necessary, because there still is one around. True enough, see above.

This does not keep Gasgoo from reporting that “ the National Development and Reform Commission has officially begun reviewing Dongfeng Motor and Renault’s proposal to establish a new joint venture partnership,” and that of the world’s top ten leading automobile enterprises, Renault is the only one presently lacking a joint venture partnership in China.” Not true at all.

So the story about a new Renault JV is a yawner, but what about the billion dollar investment into a 200,000 unit factory? “I have not heard these figures,” said my Paris contact, who, after suppressing another yawn, promised to get back to me.

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China’s Boycott Of Japanese Cars Hits Chinese State-Owned Company Tue, 30 Oct 2012 09:06:28 +0000

A company owned by China’s central government is taking it on the chin as Chinese customers avoid Japan branded cars. Dongfeng reduced production at its joint ventures with Nissan and Honda, the Wall Street Journal reports today. Amount or duration of what the company calls “production adjustments” is unknown.

At the same time, a 35 percent rise in Ford sales helped Ford joint venture partner Chongqing Changan achieve a third-quarter net profit. In September, the Ford Focus was the best-selling car in China.

“The Sino-Japanese tension has affected [demand for] Japanese automobiles, so we are trying our best to regain confidence from our dealers and customers,” Dongfeng said in a statement.

Three weeks ago, TTAC identified Dongfeng and Guangzhou’s GAC (JVs with Toyota, Honda) as among the companies most exposed to the Japanese car boycott.

According to Globaltimes, Nissan said that all their customers whose cars were damaged in recent anti-Japanese protests are entitled to free repairs as well as medical care coverage for personal injuries sustained during the same incidents.

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Retaliatory Carmaking: Dongfeng Makes Ersatz Cadillac SRX. Thank You, Mr. President! Mon, 28 May 2012 14:49:34 +0000

A (hecho en Mexico) Cadillac SRX costs between $67,700 and $91,000 once it’s sold in China. It doubles its price compared to the U.S. because of a monster tariff in China. Soon, there will be a more affordable version. A much, much, much more affordable version. Except that it won’t be from  GM.

The monster tariff was made in the U.S.A. The U.S. had enacted a hamfisted punitive tariff on Chinese tires. Not a single additional tire was produced in the U.S., instead tire production moved from China to Thailand. As a tit-for-tat, China slapped a retaliatory tariff on (mostly) American cars and trucks.

Now, the monster tariff helps sell Chinese trucks. A still nameless SUV will be sold by Chinese government-owned Dongfeng. It looks like a Cadillac SRX that had too hot a car wash and shrunk a bit. In China, it will go for between $12,600 and $18,900, says Carnewschina. It probably won’t take long until one can buy Cadillac SRX badges in China to do-up the Dongfeng.

Once you are on the inside, the trucklet will also look familiar. The inside looks like a last gen Kia Sorrento, Carnewschina says.

Dongfeng did not have to look far for inspiration and possibly tools and parts. The last-gen Kia Sorento is still made in China by a Dongfeng-Yueda-Kia joint venture.

To turn it even more into an international affair, the engine is suspected to be a 2.0 liter 4-cylinder from Nissan, Carnewschina says. This ubiquitous engine is can be found in many Nissan’s that are made by the Dongfeng-Liuzhou-Nissan joint venture. According to the usually well informed Carnewschina, “it is very unlikely that either Kia or Nissan know anything at all.”

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In This Chinese Killing Machine Beats An American Heart Wed, 28 Dec 2011 11:30:45 +0000

Christmas is over so we go back to war. This is the newest kill-machine of the Chinese army. It is a 4×4 armored vehicle based on the Dongfeng EQ2050 (thank you America!). The new car seems designed as a hit-and-run fast attack vehicle with a big turret on the roof for a big fat machine gun or rocket-propelled grenade launcher.

Battle stations. The power is designed in Columbus, Indiana, made in Xiangfan, China: A Cummins V8 diesel made by the Dongfeng-Cummins joint venture. Engines from the same company power many Chinese army vehicles including IFV’s and light tanks. Note the steel bars to support the turret.

The man indicates where the gun will be. It is a huge vehicle, the man is likely around 1.80 m.  The armor doesn’t seem very thick, see door, probably done deliberately to keep it light so it can go airborne.

On your doorsteps soon? Don’t worry, it’s an ABC, an American Born Chinese.

Dutchman Tycho de Feyter runs Carnewschina, a blog about cars in China, from Beijing, China. He also collects die-cast models of Chinese cars.

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