By Maurice Glover
David Peel is the first to admit that it will take more than smarter operating processes, upgraded premises and a £30 million investment plan to steer a major British car business back to profit.
“Greater volume is the key – a little bit extra market share would make a world of difference,” said the man in charge of the UK and Ireland Peugeot Citroën Retail Group.
But despite losing money for the greater part of a decade and ending 2010 more than £10m in the red, the company responsible for overseeing both PSA manufacturer-owned retailing channels is already on the right road to better balance sheets, he believes.
Peel, who ran Robins and Day before becoming chief executive of 50 Peugeot and Citroën dealerships two years ago, said: “We will return to operating at a profit by the end of 2015.
“We are retailing 45,000 new and 36,000 used cars a year and completing 750,000 workshop hours. As an enterprise with annual turnover in excess of £800m, this is a very important element in PSA’s business in the UK.
“With 38 sites compared with 220 dealerships, we’re accounting for around 28% of the total Peugeot dealer volume. And with 13 sites compared with 180 dealerships, we’re achieving 18% of Citroën car sales – so I’d say we certainly punch above our weight.”
So why has the group lost money over the last seven years? “Before I joined, the person in my position reported directly to the managing director of Peugeot UK and that meant he was obliged to take over failing dealerships and achieve the volumes that were set. Today, we operate as a totally separate business and I report into Paris. Our objective is to support the brands in metropolitan areas and I’m also required to make money. While our current results show a substantial loss, I can demonstrate to everybody that at all operational levels, we outperform all the regional groups and private capital dealers in the British Peugeot and Citroën networks.
“On the number of cars we sell per salesman, profit per unit and finance per unit, I can demonstrate that our profitability in new and used cars, profit per hour sold in the workshops, our workshop efficiencies and profit in parts are all ahead.
“My problem is that most of our operations are located in the high-cost areas where private capital businesses would not choose to be represented. As a result, my overheads are massive. At £50m a year before I start, they are absolutely massive and salary costs alone account for £3m a month.
“That leaves me between a rock and a hard place because we have 12 sites in central London and our strategy is to represent Peugeot in the top 13 metropolitan areas and Citroën in the top 10.”
Factfile: Peugeot Citroën Retail Group
Annual turnover: £800m
AM100 ranking: 10
Franchises: Citroen (13), Peugeot (38)
Annual sales volumes: 45,000 new, 38,000 used
Annual servicing: 750,000 hours annually
Peel recently opened a Robins and Day flagship site in Coventry after a £3m rebuild. Following modernisations and upgrades elsewhere that have cost £10m, he toasted approaching the halfway point in his plan to overhaul the group with a glass of champagne.
“Before I joined, there had been no investment in Robins and Day for 20 years, so I began from a low base. One-third of our sites still don’t reflect the latest corporate image, but they will be up to date by 2015.
Birmingham North has been modernised, I’ve just opened Preston and Stockport is to come shortly. Citroën will open in Birmingham and Coventry before the end of the year and we’ve acquired a new site in east London that will be developed into another flagship facility,” he said.
He’s particularly proud of the latest Coventry site, which was initially sketched out by Peel and the company’s six directors. It meets all the latest efficiency standards and boasts a new workshop flow arrangement based on ideas prompted by the Toyota lean production system.
“We piloted it at Birmingham North and it has doubled our efficiency by being minimal and easy to operate. The Coventry site has been designed to fully benefit from it. It’s already been described as the most efficient workshop by the official who came to accredit our MoT work.
“I’m particularly keen about efficiency here – every minute saved adds up to a considerable amount when you think about 10 technicians working for 220 days per year at a recovery rate of £60 per hour – so I have high hopes for the site, which caters for twice the number of used cars, has 50% more parking and is backed by bigger showroom and workshop space.”
At the end of his five-year plan, Peel wants to be leading the way: “I want us to be an industry example and I think the managing directors of both PSA brands in Britain should be able to show current and potential investors they have the best standards and operating practices. We should be the specialists in what we do and my ambition is to achieve that.
“The way to get there is via continuous development. Up to two years ago, all our sites had teams dealing with accounts, marketing and human resources. Today, they’ve all gone – every site now uses centralised operations and we have reduced headcount by two-thirds. Our operations team is very small and we’ve reduced our cost per unit as a result,” he says.
While he admitted much remains to be done regarding delivering upgraded premises, he insisted he is on track with his plans for people and processes, but cites profitability as his biggest challenge.
“Operationally, across up to 90% of the key performance indicators, we can show we’re better and in most cases in the top quartile, but that means we have less opportunity to be more efficient in the way we operate. We can always push our performance, but my cost is fixed, so to be profitable, we need to maintain our operational levels and sell more units.
“I need more throughput and for that I need help from both brands on market share. An increase of just 1% from each would make a huge difference. Both Peugeot and Citroën product lines have never been stronger and if the 208 meets our expectations, that in itself could add a percentage point.
“Peugeot has 5.1% market share and Citroën 4%, and if those figures were to increase to 7% and 5% respectively, our business would be at least £10m in profit. The signs are good – more than 3,000 orders have already been placed for the 208 – and we have lots of new product on the way, so I’m optimistic, even though we’re facing increasing competition.”
Click on page two to read the second part of AM's face to face interview with David Peel.