EMERGING MARKETS

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Be a player in the entry-level segment. Strengthen and extend the ... Citroën Xsara Picasso .... Become an established and profitable industry player. Objective: 1 ...
EMERGING MARKETS - GLOBAL SOURCING An international purchasing strategy serving the PSA Group ambitions

ANFIA – May 26, 2008 - Torino

Bernard BRASEY Purchasing Executive Director

AGENDA

CAP 2010 – Ambition 2015 Emerging Markets Purchasing Organisation Strategy and Global Sourcing

Strategy and Ambition 2010 - 2015

3

2010 Challenge Back to growth and profit

2015 Ambition Each business: Among the best in the industry in growth and profitability To reach the highest possible enterprise value

Key Drivers Our employees’ commitment to winning A move towards a culture of speed, action, results An outstanding relationship with a remarkable and first class supplier base 4

Automotive Division From CAP 2010 … Product and service quality European product offensive Competitiveness plan International offensive

… to Ambition 2015 The most competitive carmaker in Europe The leader in environmentally friendly cars With a broad and profitable international base Delivering long-term profit growth

5

Product and service quality A customer-centric company

Product quality Halve the number of quality incidents Divide by three incident resolution time

Service quality Peugeot and Citroën ranking among the European Top 5 A “revolution” in customer service One back office for both brands

6

European product offensive Broaden the Peugeot and Citroën lineups Take our share of the growing market segments Boost our leadership in commercial vehicles Develop “competitive premium” models in each segment

European product plan 2003-2006

Peugeot 308

Citroën C4 Picasso

2007-2010

New concept Lineup extension Model renewals Restylings Total

2 4 9 7 22

5 5 18 1 29

Sedans Non-sedans Light commercial vehicles Total

11 7 4 22

9 14 6 29

Citroën Jumpy

7

International offensive : Mercosur A new dimension through product coverage

2010 Mercosur

Peugeot 307 Sedan

Citroën C4 Pallas

Peugeot 206 SW

Citroën C3 XTR

Citroën Berlingo

Citroën Xsara Picasso

Double the number of model launches to 12 Be a player in the entry-level segment Strengthen and extend the two brands’ dealer networks Swiftly free up additional production capacity Increase local content, strengthen R&D

2015 Ambition Brazil : join the "Big 4" Argentina : become the undisputed market leader Objective : 400,000 unit sales

8

International offensive

New growth regions

Eastern Europe Plant search underway – decision mid 2008 Small gas engine Capacity : 600.000 engines/year SOP in 2012

India & Mexico Strategic assessment underway

9

Competitiveness plan Cap 2010 : on track ! Halve our warranty costs Increase purchasing performance : global sourcing up to 40% Reduce overheads and fixed costs by 30% Shorten development cycles by 30% Reduce supply chain costs by 10%

2015 Ambition Become the most competitive carmaker in Europe

10

Competitiveness plan Cap 2010 … and beyond Roll out the “PSA Production System” – Lean Engineering & Manufacturing Develop flexible, modular platforms Extend the manufacturing and sourcing base in emerging markets

2015 Ambition A highly competitive manufacturing base

11

Worldwide sales : over 4 million vehicles in 2010 Russia + Mercosur + China sales

Total Europe* sales X

up 300,000 over the period

X

up 400,000 over the period

+ 10% 3,094

2,965

®

+ 100%

3,270

®

800

401 173

2002

2006

2010

2002

2006

2010

*Western Europe + Eastern Europe + Rest of World (excluding Russia, Mercosur and China)

12

AGENDA

CAP 2010 – Ambition 2015 Emerging Markets Purchasing Organisation Global Sourcing

Automotive Market in Russia

6th largest world automotive market 4th largest in Europe - ahead of France Russian car fleet is over 28 million cars 50% of Russian fleet is more than 10 years old Car density (per 1000 inhabitants) = 210

A continuous and steady growth since 2002

2007 2002

In a fast growing market, foreign built-up and imports are taking over Russian brands 3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0 2003

2004

2005

Russian Production

2006

CKD/SKD

BU

2007

Russia will catch up with Germany by 2010 MARKET FORECAST 2007- 2015 4500 4000 3500

3500

x 1000 vehicles

3100 2850

3000 2500 2000 1500

2450

650

3300

550

940

1200

500

450

3955 400

1400

1600

1800

1920

2055

350

2190

655

1000 500

4090

600

720

800

3685

3820

995

1190

1250

1300

1350

1385

1450

1500

1550

2008

2009

2010

2011

2012

2013

2014

2015

0 2007

IMPORTS

CKD/SKD and modern Russian cars

Current Russian cars

PSA Peugeot Citroën in Russia

OEMs Manufacturing Footprint SOK

Avtotor Production :

20 000

RusPromAuto Production : Production :

Production :

90 000:

Production :

70 000

66 000

500 000 1)

500 000

Production

AvtoVAZ Production :

Production :

800 000

15 000 SOK

GM-AvtoVAZ Production: 75

Production :

000

30 000

Project Russia Kalouga 180km SW of Moscow

• JV PSA 70 % – Mitsubishi 30 % • Greenfield manufacturing project : final assembly plant (body-in-white, painting, vehicle assembly) • PSA Capital Investment : in excess of 300 Million Euros • Cooperation SUV and PSA mid-sized platform vehicles • SOP : Q1/2011 • Capacity : 150.000 veh/year with a possible extension to 300.000 v/year

21

XIANGFAN WUHAN

Automotive Market in China

CHINA - Vehicles in use (in thousands) 18,7%

18,6%

USA in 1982

17,8% 17,0%

16,5%

144 900

15,4%

131 460

14,1% Number of vehicules (x 1000)

Japan in 2006

Growth

158 530

12,8%

118 510

106 050

11,7% 10,9%

94 050

10,2% 9,4%

82 420 71 450 61 310 52 050 43 880 31 600

2005

36 970

2006

2007

2 008 F

2 009 F

Source : State Information Center (S.I.C.)

2 010 F

2 011 F

2 012 F

2 013 F

2 014 F

2 015 F

2 016 F

2 017 F

CHINA - Car density (per 1000 population) Japan in 1968 Korea in 1992 17,9%

18,2%

17,9%

114 105

16,7% 15,2%

95

15,1%

86 13,1% Number of vehicules for 1000 people

69

Growth

78 13,0% 10,3%

61

10,5%

10,5%

53

8,6%

46 39 33 24

2005

28

2006

2007

2 008 F

2 009 F

Source : State Information Center (S.I.C.)

2 010 F

2 011 F

2 012 F

2 013 F

2 014 F

2 015 F

2 016 F

2 017 F

Car production (local production and import) Imports are less than 5 % Trend and forecast (in thousand)

65%

12 987

63%

11 940 10 905 9 919 8 992 8 142 7 353 6 297

30% 27%

5 301

25%

24%

4 282 19% 17%

3 282

15%

213% 594 2 301

11%

10%

10%

10%

9%

2013F

2014F

9%

1 391 684

2000

855

2001

2002

2003

2004

Source : State Information Center (S.I.C.)

2005

2006

2007

2008F

2009F

2010F

2011F

2012F

2015F

XIANGFAN WUHAN

PSA Peugeot Citroën in China

International offensive: China A new dimension through an extended geographic coverage

2010 China JV with Dongfeng Start-up manufacturing facilities on the East coast Renew the Peugeot and Citroën lineups and double the number of model launches to 12 North North East East

Feasibility study for a JV with Hafei Extend product coverage to 80% of the market Light commercial vehicles and sub-compact cars 3rd plant in the South East

China Business Unit

Beijing Beijing West West

Center Center Hubei Hubei

East East

South South West West

Develop R&D and styling centers Strengthen purchasing

South South East East

2015 Ambition Become an established and profitable industry player Objective: 1 million units in the mid - term 27

Automotive Market in Iran

IRAN

A unique Geographical and Strategic position

● Border line of Europe & Asia ● Surrounded by some 20 developing countries ● Connecting bridge between Central Asia and rest of the World ● Potential market with a 300 million population ● Plenty of natural Resources ● Fairly cheap Labor and Energy 29

Iran Automotive Industry VEHICLE PRODUCTION IN IRAN 1400

(1993-2008)

(UNITS,000)

1200 1050

1100

1150

1200

950

1000 750

800

Average annual growth

540

600 379

400

68

71

92

1993

1994

1995

200

124

176

206

240

297

24.5%

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

0

• Growing young population - 70% aged less than 30 years

• An ageing 6 million car fleet • 30% of car fleet is over 20 years old and needs to be replaced for saving energy and reducing pollution 30

Automotive Market in India

The demand drivers for the auto industry Short Term

Long Term

Infrastructure development ($500 billion in the next 5-6 years)

According to McKinsey, the middle class will grow from 50 million to 550 million by 2025

Low car density (8/1000)

Continuously Improving Quality resulting in Export of Automobiles and Auto components

Access to capital

Supply side – Low cost of Skilled Manpower, Design Capability

Passenger Vehicle Production

( in thousands)

PROJECTED CAGR 2007-2014 Cars = 10.1% MUV’s = 2.4% Overall=9.6%

3 500 3 000

2001-2007 CAGR Cars =17.5% MUV’s = 15% Overall=17.2%

2 500

3.0m 277

2654

1.8m

2 000

1729 1545

1 500 1 000 500

1210

1309

1488

207 1575

1323

988 669 564

105

722 842 608

114

1028

1113

146

182

196

222

2003-04

2004-05

2005-06

2006-07

241

0 2001-02

2002-03

Cars

MUVs

2007-08* 2009-10

Total Pass Veh

* Estimated on the basis of 11 months actual data Source: SIAM & ACMA-McKinsey Report

2014-15

Strengths Cultural « distance » to Western Europe 4 hours of time difference allow good coordination English as official language Multicultural environment and awareness Good knowledge of the European culture

Experience in automotive industry Network of Automotive carmarkers and suppliers for decades Leadership in R&D and software development Maturity to develop strategic relations with customers

Good macro economic drivers Competitive labor cost High level of education Efficient manufacturing processes and practices Quality awareness (QS, ISO TS 16949…)

34

AGENDA

CAP 2010 and Ambition 2015 Emerging Markets Purchasing Strategy and Organisation Global Sourcing

ANFIA May 26th 2008 - Bernard BRASEY

35

Purchasing overview (2007 Spend – in million of €) PRODUCTION Europe Mercosur Vehicles SPARE PARTS NON PRODUCTION Equipments and Machines Services Prototypes TOOLING SPORT ACTIVITES TOTAL

23 057 22 334 715 8 1503 4500 2000 2500 155 320 60 29 595

36

PSA Purchasing offices Russia (2008)

Turkey (2005)

Central Europe (2005)

China (2004) Trnava : Poland, Hungary, Czech rep, Slovakia

India (2006

Shanghai : China, Taiwan, Korea Istanbul : Turkey, Bulgaria, Romania Mercosur : Latin America Téheran : Iran

Mercosur (2004)

Iran (2006)

India South Africa

South Africa (2007)

Without offices : Maghreb, Serbia & Montenegro, Asean, Russia ANFIA May 26th 2008 - Bernard BRASEY

37

Purchasing headcount Close to 1 300 professionals EEC

963

France Spain Germany UK Slovakia Rep Turkey Russia Iran India

Asia

173*

Shanghai Wuhan

Mercosur 144 Argentina Brazil

* : including DPCA

South Africa 38

AGENDA

CAP 2010 and Ambition 2015 Emerging Markets Purchasing Organisation Strategy and Global Sourcing

ANFIA May 26th 2008 - Bernard BRASEY

39

Why Global Sourcing ?

PSA international growth

Need of total competitiveness

« GLOBAL SOURCING = A NECESSITY TO KEEP OUR SUPPLY CHAIN CONTINUOUSLY COMPETITIVE » ANFIA May 26th 2008 - Bernard BRASEY

40

Strategy Develop “Low Cost” based suppliers AND at the same time Develop the “Low Cost Sourcing” of our “High Cost” suppliers

Manufacturing and Sourcing initiatives in LCCs

Tier 1 Western suppliers : offer high-tech solutions Improvement of Quality and Engineering capabilities

New LCC suppliers LCC : Leading Competitive Countries ANFIA May 26th 2008 - Bernard BRASEY

41

Forecast 40%

LCC content in the total purchasing spend

15%

2005

19%

2006

23%

2007

2008

2009

2010

Outstanding opportunities for all of us

ANFIA May 26th 2008 - Bernard BRASEY

42

New LCC Suppliers To identify, evaluate and develop new suppliers

Serial production Development RFQ on project parts Serial production RFQ on existing parts Qualification Audits

Major role of purchasing international offices

Prospecting

ANFIA May 26th 2008 - Bernard BRASEY

43

A strong determination 100 % of commodities have a LCC strategy

Supporting PSA objectives (Quality, Procurement, Cost, Design)

GLS Road Map for each commodity

« Balanced Sourcing » - Historical suppliers - New LCC suppliers ANFIA May 26th 2008 - Bernard BRASEY

44

Exemple of a Purchasing Matrix Difficulté technique

Fonctions complexes •Airbags •Étanchéité carrosserie •Direction électrique •Système navigation •ABS, ESP, BSI •Eclairage

Commodités •Matières premières •Fixations •Roues tôles •Pièces fonderie •Emboutissage •Eléments BV •Alternateurs, Démarreurs

ANFIA May 26th 2008 - Bernard BRASEY

Fonctions stratégiques •Système d’injection •Turbo •Planches de bord •Sièges

Commodités coûteuses •Catalyse/filtres à particules •Roues aluminium •Pneumatiques •Culasses •Systèmes carburant •Faisceaux

45

Purchasing Matrix Difficulté technique Fonctions complexes •Sourcing phase amont •Devlpmt/Validations lourdes •Panel réduit •Co-conception éventuelle •Approche plateforme •Resourcing rare •Fort impact garantie Commodités •Stratégies achat uniquement •Compétition •Resourcing par ensembles •Qualité pré-requise. Peu de PSF •Enchères •Sourcing projet tardif •Peu d’écotechs •Développement léger

Compétition

Coopération Fonctions stratégiques •Stratégie d’entreprise •1 ou 2 fournisseurs par famille •Relations durables •Collaboration amont (avant projet) •Co-conception •Fournisseurs mondiaux •Collaboration en garantie Commodités coûteuses •Audits coûts •Ajustements matières cotées •Contrôle éventuel rangs 2 •Recherches matière alternatives •Ecotech transversales

Coût/véhicule 46

GLOBAL SOURCING ‰ Corporate commitment PSA to engage in a global sourcing strategy ‰ Not an objective but a mean to ensure a sustainable competitiveness for our supply chain ‰ Will eventually become standard Sourcing in a well-balanced approach between historical western suppliers and LCC suppliers ‰ Risks but also outstanding opportunities in front of us

ANFIA May 26th 2008 - Bernard BRASEY

47

Thank you for your attention …

EMERGING MARKETS - GLOBAL SOURCING An international purchasing strategy serving the PSA Group ambitions

QUESTIONS ANFIA – May 26, 2008 - Torino