The comparative competitiveness of PSA, Renault and VW, 1990-2015 Origins of differences and strategic choices to do
Freyssenet Michel CNRS Paris, GERPISA
Scientific symposium The competitiveness of automobile industry in France and Germany. Economical, political and cultural context Forschungsinstitut für Arbeit, Technik und Kulture (F.A.T.K.), Tübingen, Institut für Politikwissenschaft, Lehrstuhl für Policy Analyse und politische Wirtschaftslehre, Eberhard Karls Universität Tübingen, Hochschule Pforzheim, Deutsch-Französisches Institut (DFI), Ludwigsburg Tübingen, 23-24 of june 2016 According to managerial mainstream, the conditions for firms competitiveness at globalization era are
outsourcing labour costs reduction offshoring
We now have a sufficient basis for judging the relevance of these recommendations 2
synopsis
• Volkswagen is the most competitive European generalist carmaker since twelve years (2003-2015) in terms of profits, sales volume and market shares • Volkswagen is nevertheless the less outsourced, the higher labour costs carmaker and the less offshored, comparatively to PSA and Renault • the explanation of these counterintuitive facts is to find in the difference of relevancy and consistency of the profit strategies of the three carmakers
3
Average margin rate above break even point, since 2009 Groups: PSA -2,5% Renault +13,1% VW +49,4%
Margin compared to break even point of Fiat Auto, PSA, Renault and Volkswagen Groups, 1947-2015 120
100 VW 80
60
40 PSA 20
Renault 0 % (VA-DC/DC) x 100 % (VA-DC/DC) 2011 2009 2013 2015 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 -20 Fiat Auto -40
-60
-80 Sources: Annual reports of companies. year Elaboration: Jetin B. 1998, Freyssenet M. 2012 and updating 4 Average margin rate above the break even point of Renault and VW parent companies, since 2009 Renault – 20,6, VW + 41,2
Margin compared to break even point of Renault and VW parent companies, 1947-2015 100 90 80 70 VW AG 60 50 Renault sas 40 30 20
% VA-DC / DC / VA-DC % 10 0 2011 -10 2009 2013 2015 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 -20 -30 -40 -50 year Sources: Annual reports of companies. Elaboration: Jetin B. 1998, Freyssenet M. 2012 and updating 5 Worldwide production comparison 2007-2015 Groups: PSA - 0,5 M Renault + 0,1 M VW + 3,7 M
Worldwide production of current European carmakers, 1945-2015 all vehicule
10 000 000
9 000 000 VW
8 000 000
7 000 000
6 000 000 Renault-Nissan
5 000 000
vehicules DaimlerChrysler FiatChrysler 4 000 000 PSA 3 000 000 Fiat Renault 2 000 000 Daimler BMW 1 000 000
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Sources: annual reports, CCFA, OICA. year Elaboration: Freyssenet M., 2009 and uptodate. ISSN 1776-0941 Groupe VW Groupe PSA Groupe Renault Alliance Renault-Nissan Groupe Fiat Groupe Daimler Daimler Chrysler BMW Porsche 6 Production comparison of Chinese joint ventures: 2007-2014 Groups: PSA: + 0,54M Renault: 0 VW: + 2,67M Production of Chinese joint ventures of main carmakers, 1984-2014
4000000
3500000
3000000 GM VW 2500000
2000000 Hyundaï vehicules 1500000 Nissan 1000000 Toyota Honda
500000 Ford PSA BMW 0 Renault-AMC 2 011 1 985 1 986 1 987 1 988 1 989 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 1 984 1 994 2 004 2 014 Sources: CCFA, OICA. Elaboration: Freyssenet M., 2009 and uptodate. year PSA Renault Nissan VW GM Ford Fuji-Subaru Honda Isuzu Mitsubishi Daihatsu Fiat Mazda Suzuki Toyota Hyundaï-Kia BMW Mercedes
7 Western Europe Market shares comparison: 2007-2015 Groups: PSA – 2,3 pts Renault + 1,2 pts VW + 4,3 pts
Market share of automobiles Groups in Western Europe (17 countries), personal vehicles, 1990-2015 26,0
24,0 VW 22,0
20,0
18,0
16,0 PSA 14,0 Alliance Rnlt GM Ford Nissan 12,0 share market 10,0 Renault Tous Japonais 8,0 Fiat, Daimler 6,0 BMW
Autres 4,0 Hyundaï-Kia Nissan 2,0
0,0 2 011 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 004 1 994 Sources: ACEA, AAA. Elaboration: Freyssenet M. 2012 and updatings year 8 World market shares comparison: 2007-2014 Groups: PSA – 1,5 pt Renault – 0,5 pt VW + 2,4 pts
Word market share of main automobile groups, 1970-2014
24,0
22,0
20,0 Others 18,0
16,0 G.M 14,0 Toyota 12,0
10,0 Ford share world market VW 8,0 Hyundaï
6,0 PSA Nissan 4,0 Renault 2,0
0,0 2 011 1 970 1 971 1 972 1 973 1 974 1 975 1 976 1 977 1 978 1 979 1 980 1 981 1 982 1 983 1 984 1 985 1 986 1 987 1 988 1 989 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014
Sources: annual reports of companies, CCFA, OICA. year Élaboration: B. Jetin, 2006; M. Freyssenet, 2009 and updatings 9
Volkswagen, the more competitive European generalist carmaker, was, up to present…
• less outsourced • with the highest labour costs • the less relocated
10 Average outsourcing rate, since 2009 Groups: PSA et Renault 77% VW 65%
Externalization rate n°1 (cost of materials and services / revenue) of Fiat auto, PSA, Renault and VW Groups, 1967-2015
100
95
90
85 Fiat Auto 80 PSA
75 Renault
70
65
60
55 VW % cost of materials and services / revenue revenue / services and of materials % cost
50
45
40 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Sources: annual reports of companies year Elaboration: Jetin B. 1998, Volpato G 2006, Freyssenet M. 2012 and updatings 11 Average outsourcing rate Parent companies: Renault sas 93% VW AG 77%
Externalization rate n°1 (cost of materials and services / revenue) of PSA, Renault, VW parent companies, 1947-2015
100
95
90 Renault sas 85
80 SA Peugeot 75 VW AG 70
65
60
55 % cost of materials and services / revenue revenue / services and of materials % cost 50
45
40 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Sources: annual reports of companies year Elaboration: Jetin B. 1998, Volpato G 2006, Freyssenet M. 2012 and updatings
12 % of purchases from home country, in 2004 Renault sas and its Spanish subsidiary: 44% VW AG German plants: 70%
Percentage of purchases of Renault and VW from their origin country, 1990-2015
100
90
80 6 VW AG plants in Germany 70
60
50 Renault sas 40 and Fasa-Renault of suppliers percentage 30
20
10
0 2 011 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014 2 015
Sources: annual reports of companies year Elaboration: Freyssenet M., 2013 and updatings
13 Average total labour expenses per employee since 2009 Groups: PSA, Renault 44.000€ VW 54.000€ Parent companies: Renault sas: 69.000€ VW AG: 89.000€
Total labour costs per employee in current €, of Fiat Auto, PSA, Renault, VW Groups and Renault, VW parent companies, 1947-2015
110000
100000
90000
80000 VW AG 70000
60000 Renault sas
50000 VW Group PSA Group 40000 Renault Group
total labour costs by employee in € in costs by employee labour total 30000 Fiat Auto 20000
10000
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Sources: annuel reports of companies year Elaboration: jetin B. 1998, Freyssenet M. 2012 and updatings 14 World employees number comparison 2007-2015 Groups: PSA -26.000 Renault -14.000 VW +281.000
Global personnel of Fiat Auto, PSA, Renault and VW Groups, 1970-2015
700000
600000
500000 VW
400000
employees 300000
PSA FCA 200000 Renault
100000 Fiat Auto
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015
Sources: annual reports of Groups year Elaboration: Freyssenet M. 2012 and updatings 15 Europe employees number comparison 2007-2015 Groups: PSA -45.000 Renault -19.000 VW +198.000
Number of employees of Fiat Auto, PSA, Renault, VW Groups in Europe, 1995-2015
500000
450000
400000 VW 350000
300000
250000 Employees 200000 PSA 150000 Renault 100000 Fiat 50000
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Sources: annual reports of Groups year Elaboration: Freyssenet M. 2012 and updatings 16 Offshoring rate to European lower costs countries PSA: 51% Renault: 67% VW: 47% Percentage of vehicules produced in Europe outside the origin country of carmaker, 1945-2014
80
70 Renault 60 Fiat
50 PSA
40 VW vehicules
30
20
10
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 014 Sources: annual report of VW Group year Elaboration: Freyssenet M. 2013 and updatings 17 The A segment car models, relocated in Central Europe, were less competitive than their previous models produced in home countries of the generalist European carmakers
18 A segment Fiat models average sales Panda I (Mirafiori): 280.000 Panda II (Tichy): 220.000 Panda III (Pomigliano d’Arco): 160.000 Cinquecento (Tichy): 210.000 Fiat 500 (Tichy): 143.000
Sales of A segment Fiat models, in Western Europe, 1990-2015
350000
(annual average) Panda I, 300000 (Mirafiori, Termini Imrese) 250000 Panda II, (Tichy) 200000 Seicento Cinquecento (Tichy) sales (Tichy) Fiat 500 150000 (Tichy) (annual average) Panda III Pomiglian d'Arco 100000
50000
0 2 011 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014 2 015
Sources: Automitive News, annual reports Fiat year Élaboration: Freyssenet M., 2013 and updatings 19 A Segment market share of Fiat models
A Segment market share of Fiat models in Western Europe, 1990-2015 according to production location 60,0 Panda I (Mirafiori, Termini Imerese) 50,0
40,0
30,0
sales Panda II Cinquecento (Tichy) (Tichy) 20,0 Panda III Seicento Fiat 500 Pomigliano d'Arco (Tichy) (Tichy) 10,0
0,0 2 011 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014 2 015 Sources: Automitive News, annual reports Fiat year Élaboration: Freyssenet M., 2013 and updatings 20 Average sales PSA 106/Saxo (Mulhouse, Aulnay): 200.000 each PSA 107/C1 (Kolin): 98.000 each
Sales of PSA segment A models in Western Europe by generation and plant, 1990-2015
400000 106 Mulhouse, Aulnay 350000
300000
250000 Saxo (Aulnay) 200000 sales
150000 C1, 107 (Kolin) C1 II 100000 108 Kolin 50000
0 2 011 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 1 994 2 004 2 014 Sources: Automitive News, annual reports PSA year Elaboration: Freyssenet M., 2013 and updatings 21 A segment market share of PSA models
Segment A market share of PSA models in Western Europe by generation and plant, 1997-2011
25,0% 106 22,5% (Mulhouse, Aulnay)
20,0%
17,5% Saxo (Aulnay) 15,0%
12,5% 107
share % market Kolin 10,0% C1 (Kolin) 7,5% 108 C1 II 5,0% Kolin
2,5%
0,0% 2 011 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014 2 015 Sources: Automitive News, annual reports PSA year Élaboration: Freyssenet M., 2013 ans updatings 22 Average sales Renault Twingo I (Flins): 163.000 Twingo II (Novo Mesto): 127.000
Sales of Renault segment A models in Western Europe by generation and plant, 1993-2012
300000
250000 Twingo I (Flins) 200000
150000 sales Twingo II (Novo Mesto) Twingo III 100000 (Novo Mesto)
50000
0 2 011 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 1 994 2 004 2 014
Sources: Automitive News, rapport annuel Renault year Élaboration: Freyssenet M., 2013 et mises à jour 23 Market share of Twingo Renault in A segment
Market share of Twingo Renault in segment A of Western Europe according to generation and plant, 1998-2015
18
16 Twingo I Flins 14
12 Twingo II (Novo Mesto) 10
8
marché de Part Twingo III 6 Novo Mesto
4
2
0 2 011 1 990 1 991 1 992 1 993 1 994 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 014 2 015 année
24 Market share of VW A segment models
Market share of A segment VW models in Western Europe according to their generation and production location, 1997-2015
25
20 VW Up!, Skoda Citygo, Seat Mii
15 (Bratislava)
10 % part de marché du segment A du segment marché de % part
5 VW Fox VW Lupo (Brésil) (Wolfsburg, Bruxelles) Seat Arosa 0 (Martorell) 2 011 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 1 994 2 004 2 014 Sources: Automitive News, rapports annuels des constructeurs année Élaboration: Freyssenet M., 2013 et mises à jour 25 Sales of A segment VW models in Europe
Sales of A segement VW models in Europe according to their generation and plant, 1997-2015 300000 VW Up!, Skoda Citygo, Seat Mii 250000 (Bratislava)
200000
150000 véhicules
100000 VW Lupo (Wolfsburg, VW Fox 50000 Bruxelles) (Brésil)
Seat Arosa 0 (Martorell) 2 011 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 1 994 2 004 2 014 Sources: Automitive News, rapports annuels des constructeurs année Élaboration: Freyssenet M., 2013 et mises à jour 26
Segment A market share of carmakers in Western Europe, 1990-2011
Segment A market share of carmakers in Western Europe, 1990-2011 100% GM Toyota Nissan 90% Daimler Daewoo 80% Hyundaï-Kia Suzuki 70% Groupe VW
60% Ford
50% Groupe Renault share market 40% Groupe PSA 30%
20%
10% Groupe Fiat
0% 2 011 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 1 994 2 004
Sources: Automitive News, annual reports of companies year Elaboration: Freyssenet M., 2013 and updatings 27 What was the real cause of competitiveness difference?
• VW: the relevancy of its “volume and diversity” strategy and the consistency of its productive model ….up to the present • PSA: the breaking of balance between volume and diversity • Renault: investments choices ignore the fact the profit of company is mainly due to its conceptually innovative cars
28 ‘Volume and diversity’ profit strategy, 1
Characteristics
volume 10 9 8 7 Combination 6 cost reduction 5 diversity 4 3 • of economies of scale 2
1 0 for non-visible parts
flexibility quality • And variety of supply for visible parts innovation ‘Volume and diversity’ profit strategy, 2
Conditions of possibility Requirements to implement • Same platform for several car models. Copy • Constantly increasing the successful innovative demand and moderately cars from others hierarchized • Control the management of product diversity, avoid simultaneous • Polyvalent and under and overcapacities unionised workers • Polyvalence of workers and wages moderately hierarchized. Average volume: VW higher than PSA in 2015 platform: 2,2 times model: 2,7 times
PSA and VW Group average volume by platform and model, 1980-2015
600 000 575 000 550 000 525 000 500 000 475 000 450 000 425 000 400 000 VW platform 375 000 350 000 325 000 300 000 275 000 PSA platform 250 000 225 000
of vehicle number average 200 000 175 000 150 000 VW model 125 000 100 000 75 000 50 000 PSA model 25 000 0 2 011 1 980 1 981 1 982 1 983 1 985 1 986 1 987 1 988 1 989 1 990 1 991 1 992 1 993 1 995 1 996 1 997 1 998 1 999 2 000 2 001 2 002 2 003 2 005 2 006 2 007 2 008 2 009 2 010 2 012 2 013 2 015 2 004 2 014 1 984 1 994 Source: annual reports of companies year Elaboration: Freyssenet M., 2012 and updatings 31 ‘Innovation and flexibility’ profit strategy, 1
Characteristics
volume 10 • Profit margins based on 9 8 7 innovative models that are 6 cost reduction 5 diversity 4 a response to new 3 2 1 expectations 0 • Innovation rent exploited flexibility quality as long is possible • Rapid reconversion to innovation other models, in case of failure
‘Innovation and flexibility’ profit strategy, 2
Conditions of Requirements to possibility implement
• Markets partially changed by the • Deliver at the right time the periodical emergence of conceptual innovative cars practical and symbolic expected by new consumers expectations within new • Develop highly responsive social groups organisation in all areas • Encourage creativity, • Individualist and expertise and reactivity of opportunist employees employees
The conceptually innovative car models of Renault many very profitable and some failures
Successes Failures • Espace • Twingo I • Avantime • Scenic • Modus • Kangoo VP-VUL • Lodgy, Dokker • Logan, Sandero, Duster • Captur • Kwid
Electric vehicules ? Zoé, Tweezy, Kangoo ZE, Fluence ZE 34 The worldwide production of Renault Group increases since 20 years only thanks to its conceptually innovative models
Worldwide production of Renault group by innovation level of models, 1945-2015 (light vehicles)
3 000 000
2 500 000 conceptualy innovative models: Espace, 2 000 000 Twingo I, Scenic, Kangoo, Avantime, Modus, Logan, Duster, 1 500 000 innovative models
vehicles of classic range: Captur, Kwid R4, R16, R5 1 000 000
models of classic range 500 000
0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Source: rannual reports and Atlas Renault year Élaboration: Freyssenet M., 2013 and updatings. 35 Main results of analysis
• outsourcing, labour costs reduction and offshoring did not restore the competitiveness of manufacturers that were before insufficiently competitive • the competitiveness of enterprises depends primarily on the relevance and coherence of their profit strategy…
36 • … and not on lean manufacturing, or on best practices, or on "disruption", or on benchmark, or on service, or on financial activities, or on "new economy", or on new mobility, nor on factory 3, 4, 5, 6.0 … nor on any miraculous solutions that are announced periodically, to make more competitive the companies
37 now…
• VW: the crisis of company governance compromise and the crazy run to be the first in everything and in any place • PSA: the will to find the right balance between volume and diversity… but… • Renault: the Carlos Ghosn fantasy of global firm freed of the national constraints
38 … and in the future the second automobile revolution
• VW: the announced strategic change to electric and connected vehicles, a way to be forgiven or an actual conversion ?
• PSA: ditto, with much less means
• Renault: the first can become the last
39 http://freyssenet.com
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40 PSA: too many models and platforms for an insufficient volume since 2003
Number of models and platform of PSA and VW Groups 1945-2015
60,0
55,0
50,0
45,0
40,0 VW models 35,0
30,0
number PSA models 25,0
20,0 VW platforms
15,0
10,0 PSA platforms
5,0
0,0 2 011 1 945 1 947 1 949 1 951 1 953 1 955 1 957 1 959 1 961 1 963 1 965 1 967 1 969 1 971 1 973 1 975 1 977 1 979 1 981 1 983 1 985 1 987 1 989 1 991 1 993 1 995 1 997 1 999 2 001 2 003 2 005 2 007 2 009 2 013 2 015 Source: annual reporst of PSA and VW. year Elaboration: Freyssenet M., 2012 and updatings 41