Peugeot chief renounces $29 million pension deal after outcry

Peugeot chief renounces $29 million pension deal after outcry
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By Gilles Guillaume

PARIS Wed Nov 27, 2013 1:40pm EST

Philippe Varin, Chief Executive Officer of French carmaker PSA Peugeot Citroen, speaks to journalists at the Peugeot headquarters in Paris November 27, 2013.

Credit: Reuters/Benoit Tessier

PARIS (Reuters) – The outgoing chief executive of French carmaker PSA Peugeot Citroen (PEUP.PA) said he would forego his pension package after an outcry from government ministers and labor unions.

Peugeot has set aside 21 million euros ($ 28.5 million) for Philippe Varin’s pension deal. The company is cutting more than 10,000 jobs as it struggles to recover from a six-year European market slump.

“Given the immense respect I have for our staff and the consequences of the difficult but necessary decisions I had to take, I have decided to relinquish the present provisions of my pension package,” Varin told a news conference on Wednesday.

Varin acknowledged the “polemic and emotion” caused by his pension said the company’s supervisory board would decide on the new terms of his departure after consulting a corporate governance advisory body in the French employers’ organization.

The ministers and unions bristled at the fact that Varin, who will be stepping down three years before the end of his contract, would receive an annual 310,000 euro ($ 420,000) pension net of tax and social charges.

Peugeot announced this week that Varin would be replaced next year by former Renault (RENA.PA) No. 2 Carlos Tavares in a move that may help it secure new funding from Chinese partner Dongfeng.

Peugeot and Dongfeng are in talks to build on their existing Chinese joint venture with cooperation in other markets and a multi-billion-euro share issue that could see Dongfeng and France’s government acquire stakes in the French carmaker, sources familiar with the matter have said.

STATE GUARANTEES

The French government told Peugeot earlier on Wednesday to review the “inappropriate” pension award for Varin.

“Given PSA’s difficulties and given that the state has already underwritten (finance arm) Banque PSA Finance to the tune of 7 billion euros, we have asked for some very thorough explanations from PSA on the financial arrangements of his retirement,” Industry Minister Arnaud Montebourg said as he left a cabinet meeting.

In keeping with company practice, Varin will receive no severance payment when he leaves the group, unlike most of his counterparts at other major French companies.

Varin has received no bonus since 2011, a Peugeot spokesman said, and his pension arrangements are more modest than those at other French corporations.

The 21 million euros set aside in Peugeot’s 2012 accounts is designed to cover payouts of 310,000 annually over 25 years, the company spokesman said.

($ 1 = 0.7374 euros)

(Reporting by Gilles Guillaume and Laurence Frost; writing by Mark John and Geert De Clercq; editing by Tom Pfeiffer)

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Reuters: Business News

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Peugeot names former Renault No.2 as next CEO

Peugeot names former Renault No.2 as next CEO
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By Laurence Frost and Gilles Guillaume

PARIS Mon Nov 25, 2013 1:20pm EST

Renault Chief Operating Officer Carlos Tavares poses after the company’s First-Half 2013 results presentation in Boulogne-Billancourt, near Paris in this July 26, 2013 file picture.

Credit: Reuters/Benoit Tessier/Files

PARIS (Reuters) – PSA Peugeot Citroen (PEUP.PA) named former Renault No.2 Carlos Tavares as its next chief executive on Monday, in a move that may help to secure new funding from Chinese partner Dongfeng.

Tavares, 55, will join CEO Philippe Varin’s team on January 1 and take over later in 2014, the loss-making carmaker said in a statement, confirming widespread reports of the appointment.

Peugeot shares had closed 5.1 percent higher at 10.75 euros following the reports, also lifted by a temporary easing of Iran sanctions that may soon allow car sales to resume there.

The CEO switch “signals that PSA and the Peugeot family are willing to make far-reaching changes”, said Erich Hauser, a London-based analyst with International Strategy & Investment.

“We consider Tavares to be a strong hire,” he added.

Varin, 61, has led ongoing talks with Dongfeng Motor Group (0489.HK) to deepen an existing joint venture with a multi-billion-euro share issue, in which the Chinese carmaker and the French state would acquire stakes in Peugeot, sources have said.

The surprise succession cuts short the Peugeot CEO’s contract, which was renewed for another four years in May. Sources have said the handover is designed to address Dongfeng concerns about management quality and continuity as it weighs investing in an expanded alliance.

The appointment of Tavares will allow the company to pursue its “strategy of recovery and development”, Chairman Thierry Peugeot said in the statement.

Peugeot, one of the carmakers worst-hit by the European market slump, is cutting jobs and plant capacity as it struggles to halt losses within two years.

Even then it will lack the financial clout and industrial scale to compete globally on its own. Varin has acknowledged that Peugeot will need new partners and fresh capital to support future vehicle and technology investments.

“UNWRITTEN RULE”

Varin, who previously ran Anglo-Dutch steelmaker Corus, joined Peugeot in 2009 and has steered the company through the worst of the six-year European auto market slump.

But his support for a deeper tie-up with 7 percent shareholder General Motors (GM.N) or Dongfeng has led to bouts of tension with members of the founding Peugeot family, which would lose control of the company in the planned capital hike.

“A PSA led by Tavares might seem a safer place to invest for Dongfeng and it might thus potentially be prepared to commit more capital,” Societe Generale analyst Stephen Reitman said.

The appointment raised eyebrows among French car executives, for whom career moves between Renault and Peugeot are usually barred by an “unwritten rule”, insiders say.

“This is unheard of in France,” said one industry source close to both manufacturers. “Renault won’t be happy – Tavares knows all their product plans for years to come.”

Tavares left Renault abruptly in August after saying publicly he was ready to lead another carmaker.

He began his career there in 1981 and moved to Japanese affiliate Nissan (7201.T) 23 years later, going on to hold senior roles that have given him first-hand experience of managing a global auto alliance across cultural boundaries.

Nissan, which is 43.4 percent-owned by Renault, also has a longstanding joint venture with Dongfeng in China.

Tavares is understood to have “a close relationship with Dongfeng management, built up during his time at Nissan”, Societe Generale’s Reitman said.

(Editing by Mark John and Pravin Char)

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