Yahoo CEO Marissa Mayer Faces Morale Challenge

Marissa Mayer has repeatedly said reviving growth at Yahoo Inc. would take multiple years. But many insiders have lost patience, saying the embattled chief executive has no clear sense of direction and has misled investors and advertisers about the company’s progress.

In recent months, a crisis of morale has gripped Yahoo, as dozens of executives who had been instrumental to Ms. Mayer’s turnaround plan have left for jobs elsewhere.

Ms. Mayer called a meeting with senior executives in August and asked them to sign a written agreement to stay with the company for at least three more years, according to two people familiar with the meeting.

Finance chief Ken Goldman was one of the first to pledge his commitment, but some executives left the room unsure they could make such a promise, one of the people said.

In January, Ms. Mayer expects to complete the spinoff of shares in Alibaba Holding Group Ltd., putting the focus squarely on Yahoo’s core business. Sales from that business continue to shrink, from $4.5 billion in 2012 when Ms. Mayer arrived to $4.4 billion last year and even less expected for 2015.

Under Ms. Mayer, Yahoo’s forays into mobile software, online video and search have cost the company hundreds of millions of dollars but yielded no meaningful growth in total users or revenue. Ms. Mayer said last month the company would adopt another strategy to “reset” the company’s focus, without providing details.

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The CEO has hired management consultant McKinsey & Co. to look for areas of the company to cut, said a person familiar with the matter.

Forbes and Recode earlier reported aspects of Yahoo’s troubles.

The stagnation prompted activist investor Starboard Value LP last week to call on the company to halt its Alibaba spinoff and instead find a buyer for its core business. Yahoo has failed to get prior approval of its plan from the Internal Revenue Service, raising the risk that the agency could later challenge the spinoff’s tax-free status.

On an October earnings call Ms. Mayer said the company feels strongly the deal meets requirements for tax-free status.

A Yahoo spokeswoman declined to make Ms. Mayer available for an interview. She pointed to earnings calls in which Ms. Mayer has defended the progress she has made in adding new lines of revenue from mobile ads and other areas.

The company declined to comment further.

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When the Ms. Mayer is forced to deliver bad news, she employs what she calls a “jiu-jitsu move”—trying to create a diversion by producing tantalizing information, according to people who have worked closely with her.

For example, Ms. Mayer created an accounting metric called “Mavens” designed to spotlight the growing parts of Yahoo. The grouping includes revenue from mobile, video, native and social ads but excludes Yahoo’s largest portion of revenue—its shrinking business of display ads on desktop computers.  

Analysts say much of Mavens growth comes at the expense of Yahoo’s desktop business, since many advertisers are shifting their ad spend from older formats that are more expensive and considered less effective.

“The Mavens number was ridiculous because the vast majority of what they are generating was not new revenue,” said Brian Wieser, an analyst at Pivotal Research LLC.

When Yahoo announced its $1.1 billion acquisition of Tumblr Inc. in May 2013, Ms. Mayer said that adding the blogging site’s 300 million users would put Yahoo over the 1 billion mark.

That year, Ms. Mayer led an overhaul of the methodology it used to measure its audience across desktop computers and mobile devices, according to people involved in the project. The CEO weighed in on debates about different techniques, and she often leaned on the method that produced the larger number, said one of the people.

In October 2014, more than a year after Ms. Mayer’s prediction, Yahoo said it crossed 1 billion monthly users, more than half of whom were on mobile devices. That was also the first time Yahoo relied on a new methodology to track users, the people said. On a call with analysts, Ms. Mayer said Yahoo used a different metric but didn’t disclose the methodology.

As her strategy has shifted, Ms. Mayer has variously cast Yahoo as a challenger to Netflix Inc. in online video content and as a threat to Google Inc. in Web search, but has made little progress toward either goal.

Yahoo spent more than $100 million over the past two years producing original video content, excluding the cost of employees, according to people familiar with the matter.

Yahoo Screen, a portal for professional content from media partners such asWalt Disney Co.’s ABC and The Wall Street Journal as well as Yahoo-produced content, had 25 million unique video viewers, about the same number it had early 2014, according to comScore, whose data excludes mobile users. Yahoo wrote off a $42 million expense for the cost of online shows including “Community” in the third quarter.

Yahoo’s focus and investments appear to be shifting to search. An internal project called Yahoo Index aims to build a new search engine geared toward mobile phones, people familiar with the company have said.

Yahoo relies on partners to generate search queries, sell ads and to capture users.

Perhaps the most significant partner for Yahoo to secure in search, Apple Inc.,appears to be elusive. Though Ms. Mayer has stated she is open to negotiating with the iPhone maker to become the default search provider for Apple’s mobile Safari browser, no discussions have occurred, according to people familiar with the matter.

Source : WSJ

Sony CFO looks to turn company away from cuts to growth

For most of the past decade, employees of Sony sweated over where the job axe would fall next as sales declined in almost every consumer product division from television and laptops to smartphones. Former executives complained bitterly about the loss of innovative spirit at the Japanese company famous for giving birth to the Walkman music player.

Kenichiro Yoshida, chief financial officer who has a key role in the turnround strategy launched by chief executive Kazuo Hirai says it is time for the electronics and entertainment group to shed this negative legacy and start investing in the future “What this company needs is a positive mindset that is willing to grasp future opportunities. That’s the challenge for our management team,” he tells the Financial Times.

Mr Yoshida was speaking in his first media interview since becoming CFO and second in command to Mr Hirai, in April 2014.

“Until now, we rarely turned to mergers and acquisitions for our research and development, but we will be looking for those opportunities to take on new challenges,” Mr Yoshida says.

But changing the mindset of employees used to tough times will not be easy. The company racked up losses totalling more than $8.8bn in the past seven years, and in excess of 35,000 employees have been let go in the past decade. Much of that time was spent on scaling down Sony’s businesses, resulting in the sale of its Vaio PC business and the spin-offs of its TV and Walkman divisions.

It is still plugging losses from its smartphone business. Some investors are not convinced it needs to keep the unit but Mr Yoshida says the company has no plans to sell its mobile division.

Sony signalled the first signs of a shift in approach last month when it announced a plan to raise Y420bn ($3.4bn) through the sale of new shares and convertible bonds. About 84 per cent of those proceeds will be spent to strengthen its camera sensors, while the rest will be used to repay its debt.

Having relinquished its lead in portable music players and TVs, image sensors is one of the few areas in which Sony still holds sway. In terms of value, the company controls about 40 per cent of the global market for CMOS sensors which are used in Apple’s iPhone 6 and Samsung’s Galaxy S6. Its image sensor business accounted for nearly a third of its first-quarter operating profits.

As more homes and cars become connected to the internet, Sony hopes the demand for higher-quality sensors will expand further. Mr Yoshida says potential M&A targets include start-ups with skills in computer algorithms to perform image processing.

Since Mr Yoshida became CFO, share prices have nearly doubled. Investors have welcomed greater transparency he has brought to the company including the disclosure of financial targets for each business segment and an increase in investor briefings.

People who know Mr Yoshida describe him as blunt and ruthless in seeking explanations for failure to meet targets, although he rarely raises his voice. He also has a reputation for digging up embarrassing numbers that employees would rather forget — such as a poor record of 15 profit warnings in the past seven years.

“You have to face reality. I feel disclosing the bad parts will lead to accountability and transparency,” Mr Yoshida says.

Sony’s previous restructuring attempts were often hampered by former executives who continued to see the company’s future in gadgets instead of software. In April, Mr Hirai received a scathing letter from a former chief financial officer, calling for the instalment of more engineers to revive “the Sony spirit”.

“It’s very difficult to move a company with the size of Sony from one way of thinking to another. To a large extent, the current management has achieved that,” says Pelham Smithers, who runs a boutique research firm focused on Japan.

When Mr Hirai turned to Mr Yoshida to help with his turnround plan, the new CFO warned employees that he would not be able to make everyone happy. Those words quickly turned true as Sony jettisoned its PC business and announced plans to cut more than 2,000 jobs in the mobile segment.

“There is nothing that is everlasting,” Mr Yoshida says. “But we want Sony to survive in a good shape.”

Analysts say a bigger test for Mr Yoshida is to come as Sony completes its final leg of fixes to its businesses.

“Sony needs to go beyond a restructuring phase for its next stage of growth. This is only the beginning and we still do not know whether Mr Yoshida can deliver on that front,” says Eiichi Katayama, head of Japan research at Bank of America Merrill Lynch.

Mr Smithers adds that Sony’s recovery still seems cyclical. “We need to see how Sony does in a downturn to be able to demonstrate the extent of its improvement.”

Source : FT

P&G’s slow turnround frustrates analysts

Analysts expressed frustration with the slow pace of Procter & Gamble’s turnround after a collapse in fourth-quarter profit and muted outlook sent shares in the world’s largest consumer products group down nearly 4 per cent.

P&G, which has been divesting tens of billions of dollars worth of brands, reported sales down 9 per cent to $17.8bn in the three months ended June, highlighting the challenges facing incoming chief executive David Taylor.

Net income for the maker of Tide laundry products and Pampers nappies shrank 80 per cent to $521m, or 22 cents a share, dragged down by restructuring costs, currency effects, and a $2bn charge to reflect the impact of Venezuela’s currency crisis.

The company said it had become impossible to convert the volatile Venezuelan bolívar or pay dividends in the country, forcing it to stop consolidating the results of its local operations under GAAP. It will instead report dividends from its Venezuelan subsidiaries as operating income once the cash has left the country.

P&G’s fourth quarter showed productivity improvements and a 22 per cent increase in earnings excluding restructuring costs and the impact of a stronger dollar. However, in a company conference call, analysts asked why there was still no real evidence of underlying earnings growth, whether there was a “Plan B”, and whether the company should be split up.

One highlighted the fact that fiscal 2015 organic sales growth, which strips out extraordinary items and forex effects, was 1 per cent higher, but for the 10 key business segments P&G is focusing on, that growth stood at only 2 per cent.

Chairman and chief executive AG Lafley and chief financial officer Jon Moeller batted off the frustrations, promising to deliver stronger growth in the coming year. They said that if parts of the strategy were not working then they would change them, but that the company still needed time for the turnround to take effect.

“Clearly we recognise the need to grow faster and think we’re making the right choices to do that,” Mr Lafley said. “The last thing I want to do is chase volume and share that has no value. We’ve been to that movie before. We’re picking our spots, and doing it with products that consumers prefer.”

The company’s outlook remains subdued for the current year, amid currency and macroeconomic headwinds in emerging markets and Europe. P&G’s shares dropped 3.9 per cent to $77.44 by close of trading in New York.

It expects revenue to fall by “low to-mid single digits” this year. An expected EPS increase of 53-63 per cent this year from $2.44 will come as it rebounds from the Venezuelan charge.

Even when extraordinary charges and currency movements are excluded, organic sales are expected to meet forecasts of “low-single digits”.

“We do well when we focus on following the shopper and consumer,” Mr Lafley said. “One of the big questions is how fast can we do this and my view is that we are much more interested in getting it right and making changes that sustain value creation.”

P&G, like many multinationals, is suffering in the emerging market slowdown. It faces particular pressure in Russia, where P&G has dominant market share, and where sales tumbled nearly 60 per cent in June.

Having sold nearly 100 brands, the company is promising to shift to growth mode in areas such as beauty and grooming, and nappies. As part of this transition, David Taylor will replace AG Lafley as chief executive in November.

For the full-year ended June 30, sales dropped 5 per cent to $76.3bn, while EPS dropped 21 per cent to $3.06.

Source : FT

Failed Retail Brands Get New Lives on Web

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An investor group led by New York businessman Steve Russo bought Delia’s intellectual property and customer lists for $2.5 million. 

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The going-out-of-business sales had already ended at Delia’s, a teen-clothing chain. But then, this message popped up on Delia’s dormant Instagram page: “The internets have spoken! We are coming BACK!” it said, below tiled images of a model mugging at the camera in Delia’s shirts.

Entrepreneurs and investment firms are snapping up the intellectual-property rights to retailers that have fallen on hard times, taking advantage of a built-in audience to launch lower-cost small businesses online without the overhead of maintaining dozens or hundreds of locations.

But capturing enough attention with online- and catalog-only strategies can be difficult, retail analysts say, and longtime customers of a particular brand will be quick to flee if they don’t see the kinds of products they grew to love.

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As liquidators cleared Delia’s stores earlier this year, for instance, an investor group led by New York businessman Steve Russo in February bought the brand’s intellectual property and customer lists for $2.5 million. Now, he and his partner owners are preparing to relaunch Delia’s as an online- and catalog-only store as soon as the end of July.

Other brands making a comeback as smaller businesses include the now-defunct children’s clothing purveyor Naartjie Kids, which in November sold its name in bankruptcy to a South African company that has promised to reopen its U.S. online store. And the lingerie chain Frederick’s of Hollywood, which recently closed its fewer than 100 remaining stores and filed for bankruptcy, is planning to sell its e-commerce business to a company that revives and licenses brands.

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“I think this can be a viable strategy, particularly if you’re correcting what might have been a fundamental flaw in the original business model,” said Cathy Leonhardt, a managing director at Peter J. Solomon Co. and co-head of its retail group.

“Barriers to entry and execution are fairly low” with e-commerce stores, added David Peress, executive vice president at intellectual-property advisory firm Hilco Streambank.

Bradley Snyder, executive managing director at asset-valuation, advisory and liquidation firm Tiger Capital Group, said every intellectual property sale has several considerations, including, “What’s the future of the brand? Is it interesting to people? Where should it logically be?”

Last year, private-equity firm Sycamore Partners bought the intellectual property rights to Coldwater Creek, the women’s retailer that filed for bankruptcy and closed its 365 stores. Sycamore is backing a catalog and website that it says feature the same “beloved basics” and new products the retailer used to carry.

Longtime Coldwater Creek shopper and Philadelphia-area resident Karen Staub said she was surprised to find a Coldwater Creek catalog in her mailbox in March.

“I was like, hmm, where’d this come from?” Ms. Staub, 63, said recently. “Then I got another one, and I realized they were back in business.”

Sycamore, which also owns women’s clothing chain Talbots and other retailers, declined to comment on Coldwater Creek’s relaunch.

Delia’s rose to popularity in the 1990s and had 92 retail stores when it went out of business last month. But Mr. Russo believes the brand is strong enough to survive and even thrive in a leaner format, because he believes the brand still appeals to young girls and moms looking for clean, age-appropriate fashions.

A key part of the chain’s possible appeal is its social-media following. The “coming BACK” post, for instance, got more than 15,000 Instagram “likes” and comments. To spread the word about its relaunch, the business is now using the hash tag #DeliasForever and such messages as “Online only = ALWAYS OPEN!”

Mr. Russo is taking advantage of the followers Delia’s built up on social media before its bankruptcy, and he kept on an assistant in her 20s from Delia’s social-media department to manage the Instagram account.

The founder of FAB Starpoint, a youth-accessory and backpack maker that licenses Hello Kitty, Nickelodeon and other brands, Mr. Russo believes Delia’s fell into bankruptcy in December because the chain’s previous management “didn’t focus on the back-end of the business” for years. “They just bled tremendous amounts of money.” A publicly traded company until its shutdown, Delia’s brought on retail-industry veteran Tracy Gardner as chief executive in May 2013. Ms. Gardner declined to comment.

In 2008, Mr. Russo started Artisan House, a handbag and accessory wholesaler that sells to department and specialty stores. He also owns the rights to operate Hello Kitty stores in the U.S.

All told, Mr. Russo said, his businesses bring in $250 million in revenue annually and employ around 200 people.

He said he expects the new Delia’s to bring in $40 million in sales by 2017 and eventually top $75 million.

Mr. Russo is working on ways to overhaul operations, including by improving the mobile shopping site and making sure that catalogs go only to the brand’s target audience. That’s a process he undertook in 2013, he says, when he and one of his partners on the Delia’s deal bought Alloy, an online- and catalog-only women’s retailer that was owned by Delia’s.

Without a physical presence, it can be difficult for small businesses to reach potential shoppers. “The retailer has to stand for something,” said Steve Reiner, managing director at B. Riley & Co. “You can’t just close the doors and become e-commerce unless you were really a player beforehand.”

The brand’s strength on social media helped to persuade vendor Taylor Shapiro to commit to doing business with the new operation. “Quite honestly, what intrigues me about Delia’s is the fact that they have 300,000 followers on Instagram,” said Mr. Shapiro, president of Los Angeles-based wholesaler Sunrise Brand’s private-label division. “I can see an audience.”

Working with the scaled-back new Delia’s is akin to working with a retailer with just a handful of locations, something he typically wouldn’t do, he said.

Source : WSJ

P&G CEO Lafley Lays Groundwork for Exit

Procter & Gamble Co. appears to be laying the groundwork for Chief Executive A.G. Lafley to step down as soon as this summer and hand the top job to an internal successor.

In private meetings with Wall Street analysts and investors, senior P&G executives including Mr. Lafley himself have made comments that signaled the 67-year-old CEO, now in his second turn at the helm, could vacate the post this year, people who attended the meetings said. Mr. Lafley is likely to remain chairman for another year or two to help smooth the transition to a new CEO, several analysts have concluded.

The leadership change could set up another period of uncertainty for the world’s largest maker of household products. The maker of Pampers diapers, Olay skin creams and Bounty paper towels has struggled to post solid sales growth since the 2007-2009 economic recession ushered in an era of pickier and more frugal consumers.

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P&G also faces challenges including a struggling beauty business and a strong dollar that hurts its overseas earnings. The company reports results for the first three months of 2015 on April 23.

Mr. Lafley declined to comment through a spokesman.

The CEO’s new successor is widely expected to be David Taylor, a 56-year-old P&G executive who has also been at the company for close to 35 years.

Earlier this year, Mr. Taylor was elevated to oversee businesses that generate close to half of P&G’s sales and profits, including the troubled beauty division.

Mr. Lafley, a 35-year P&G veteran who previously was CEO from 2000 to 2009, came out of retirement two years ago with a mandate to revive the company’s fortunes and find a new successor. His original successor, Robert McDonald, left in 2013 amid shareholder discontent about sluggish performance during his four years in charge.

Mr. Lafley hasn’t publicly mapped out a time frame for his departure, saying he will serve for as long as P&G’s board wants him in the job. “We are not schedule driven,” he said last August on the company’s full-year earnings call when asked how long he would stay.

Since then, recent discussions during meetings with Mr. Lafley and P&G Chief Financial Officer Jon Moeller have led the analysts to conclude P&G could name a new CEO at the end of its current financial year, which concludes in June.

Mr. Lafley has told investors that one of his predecessors, John Pepper, was chairman for the first two years Mr. Lafley was CEO, “and that this co-operative but distinct relationship...was enormously beneficial to the company,” Citigroup analyst Wendy Nicholson wrote in a March report after she spent a day with Mr. Lafley hosting investor meetings in New York.

Ms. Nicholson said one of the biggest takeaways of the meetings was that Mr. Lafley could step down this year—adding she was surprised and disappointed that it might happen so soon, as there is still much work to be done at P&G.

Back in 2009, Mr. Lafley remained chairman of P&G after handing the CEO job to Mr. McDonald. But he resigned from the chairmanship six months later, earlier than many analysts and investors had expected.

Nearly two years into Mr. Lafley’s second term as CEO, there are few signs that P&G has turned things around.

Since his return, the company’s stock price has risen 6%, well below the S&P 500 stock index’s 26.7% gain over the same period. P&G’s sales growth rate has remained stuck in a range of 2% to 3%, excluding currency moves.

On Mr. Lafley’s watch, P&G has stepped up efforts to cut costs and increase manufacturing productivity, simplified its organizational structure and tightened its focus on its biggest, best-known brands like Tide detergent, Crest toothpaste and Pampers diapers.

The company has rolled out new premium-priced goods such as a nimbler Gillette razor and has re-entered the adult incontinence market with a line of products under its Always brand.

Last summer, Mr. Lafley declared P&G would further streamline its operations and try to speed growth by exiting about 100 brands that have dragged down the company’s performance, and narrow its focus to around 65 leading brands.

So far, P&G has moved to shed roughly 40 brands, from well-known names like Duracell batteries and Iams pet food to smaller ones like Camay soap and Vicks VapoSteam, a liquid medication that is poured into steam vaporizers.

The company is aiming to detail plans for the remainder of the divestments or brand exits by this summer.

Mr. Lafley is now working to clean up the sprawling beauty business he built during his first turn at the top. Sales at the division were the worst among P&G’s main business lines in the last three months of 2014—down 6% and the only line to post a drop excluding currency effects.

He is moving to dismantle parts of the division after concluding that expanding aggressively into beauty didn’t play to the P&G’s strengths of mass-marketing products with well-defined benefits to consumers.

Investment bankers representing P&G recently started soliciting bids from potential buyers for chunks of the beauty business, including its Wella and Clairol salon hair-care products division, its cosmetics brands like CoverGirl, and a portfolio of designer fragrances. Those brands collectively generate close to a third of P&G’s beauty sales.

The company is planning to keep its biggest brands such as Pantene shampoo, Head & Shoulders shampoo and Olay skin creams.

To be sure, P&G is regaining its footing in some areas. In the U.S., its largest market, Mr. Moeller recently told investors that P&G is growing or holding market share in 70% of its product categories, according to a March research update from Deutsche Bank analystBill Schmitz. That percentage was around 50% a few years ago.

The company’s profit margins have also expanded, reflecting the initial fruits of its restructuring, but the weakening of many foreign currencies against the U.S. dollar has dampened the effect on P&G’s bottom line and weighed on its sales.

In the year that ends this June, P&G has forecast slightly lower net sales and flat if not lower net profit from the previous year.

“The jury is still out on what Lafley has achieved,” said Bill Chappell,an analyst at SunTrust Robinson Humphrey. “I’m not sure there’s been a lot of tangible change to P&G that’s visible to investors.”

Source : wsj

Peugeot CEO Uses Cost Cuts to Turn Corner on Profitability

Not long after Carlos Tavares became chief executive of struggling French car maker PSA Peugeot Citroën a year ago, he ordered employees to work smarter, not harder.

“There was disarray. People were working like hell, but the methods weren’t appropriate,” said the 56-year-old former race-car test driver. Employees, from the factory floor to sales teams, lacked proper benchmarks, and much effort was wasted as the company drifted farther behind the competition, he said.

The former chief operating officer at Renault SA, Mr. Tavares landed at Peugeot following his abrupt resignation and an unusual public declaration of his frustration at waiting for his boss to retire. Immediately, he slashed costs, by reducing the number of cars it makes and cutting the workforce.

Since then, the company appears to have turned a corner, with the auto division posting an operating profit for the first time in three years.

Peugeot shares have soared 53% so far in 2015. The company will be readmitted later this month to France’s top stock benchmark, the CAC-40 index, following a three-year absence—a symbolic victory for a company that was bleeding cash and mired in an existential crisis during the depths of the eurozone recession.

The auto maker still has much to do, however. It posted a net loss last year and profit margins are lower than its rivals. And, like other legacy car makers, it faces the disruptive threat of tech giants, likeGoogle Inc. and Apple Inc.

Mr. Tavares recently spoke with The Wall Street Journal about cutting costs and finding future growth in a saturated European car market. Edited excerpts:

WSJ: What is your outlook for the European car market?

Mr. Tavares: In Janu Citroenry and February, the growth of the European market was higher than what we expected. We’re a little bit cautious about 2015 because we still believe there is a lot of volatility ahead, mostly coming from the situation in Ukraine and Greece. We still think the overall market in Europe will grow 1%.

WSJ: When you arrived at the company, what did you think had to be changed?

Mr. Tavares: There was a lack of benchmarking that was creating some blindness. In some areas, like inventory management, net pricing management, and manufacturing efficiency, there were big contrasts with the rest of the industry. The company was improving, year after year, but the progress was below the pace of the industry. We were going backward. When I came in, I could see with my eyes, tons of things we could do. That was very striking.

WSJ: Can you give an example?

Mr. Tavares: The Peugeot 308 was the European Car of the Year in 2014. But the car was being discounted at a level that wasn’t consistent with the quality of similar cars and compared with our German competitors. There was no reason we couldn’t price higher. There was some lack of confidence in our capability.

WSJ: The company posted better financial results this year, largely due to lower costs. What did you cut?

Mr. Tavares: Most of it was waste. In the plants, we improved the quality on the line, improved the internal logistics, [reducing the size of] the sites so we can have lower energy costs.

It was about empowering people to make the right, good decisions. If I tell the head of a plant he can [reduce] his plant, sell part of the land and keep the money to reinvest that cash in new equipment, he will look at me and be surprised. Nobody told him before he could do it. That’s the autonomy that we’re trying to deliver to our people.

WSJ: Which factories most needed improvement?

Mr. Tavares: Most of our European plants. They are 30 to 50 years old. Back then, the plants were big, big, big. Now, in some cases, it’s better to be compact and efficient.

WSJ: Peugeot’s inventory levels declined significantly. How did you reduce them?

Mr. Tavares: Raw materials, semiproduced goods, complete cars, even replacement parts. We reduced €1.6 billion (US$1.7 billion) of inventory, with no impact on the business.

If you have two plants that are apart by 50 miles, you don’t have to duplicate all your spare parts for the equipment. You can use one and send it to the other plant if they need it. It’s not rocket science; it’s about good sense.

WSJ: Some analysts applauded the cost cuts but expressed concerns about revenue growth. How do you respond to that criticism?

Mr. Tavares: It would be unfair to say that we didn’t grow. Our volumes grew by 4.3% in 2014. We sold 120,000 more cars. Our progress was 32% growth in China and 8% growth in volume in Europe. We restructured deeply without losing growth in volume.

There’s huge overcapacity in Europe, which has destroyed pricing power. Growth can be generated at the expense of profit, but if there’s no recurrent profit, there is no future.

Many people look at the top-line improvement as more important than profitability. But we are not a startup. There around 200,000 employees. It’s a three-million-car company. It’s a fine balance in the financials. Growth, yes. But only if it’s profitable.

WSJ: Where is Peugeot in its development of autonomous cars and how big is the competitive threat from Google, or other tech companies, in the auto business?

Mr. Tavares: I consider automated drive very important. We will bring back more quality time to the driver. For instance, we want to give you the opportunity on a Sunday night when you come back from the countryside to talk with your wife and kids without being completely focused on the driving.

Tech companies will soon realize that the cost of entry into the auto industry is extremely high. It’s not only about intensive investments but the accumulation of expertise. At one point in time, they’ll realize it’s better to collaborate with auto makers.

WSJ: Are you working with Google or Apple now?

Mr. Tavares: We don’t have discussions with them at this stage. But that doesn’t mean we won’t one day.

Source : WSJ