At the end of March, PSA Philippe Varan quietly arrived in Beijing. The most important agenda of this trip was to participate in the board of directors of Shenlong Company and conduct final discussions on the integration of Dongfeng and Dongfeng.
According to sources, the integration of the two brands that have been rumored in the industry recently has been officially finalized at the board of directors. The Ministry of Commerce of Shenlong’s Dongfeng Citroen and Dongfeng Peugeot brands will be integrated into a unified Dongfeng Peugeot Citroen sales company (hereinafter referred to as the "sales company"). The current general manager of Dongfeng Citroen, Wei Wenqing, will serve as the head of the sales company and oversee the operation of the two brands. The sales part that is not involved in this integration may be moved in the next step. The news is expected to be officially announced on the eve.
In fact, it was not the first time that the integration of Shenlong dual brands was proposed, but it was always difficult for Dongfeng and PSA to reach a consensus. With PSA’s global strategic adjustment, the "door" was opened for the substantive passage of the proposal…
Two into one
The current organizational structure of Shenlong Company is divided into Dongfeng Citroen Ministry of Commerce and Dongfeng Peugeot Ministry of Commerce under the top management of Shenlong Board of Directors. Under these two departments of Commerce, there are departments involved in procurement, research and development, sales, quality, planning, branding, production, and personnel.
It is understood that the integration of the two major ministries of commerce will involve personnel, administration, finance, parts procurement, after-sales services and many other fields, but the sales and marketing departments will still maintain relatively opposing operations. In the words of the above-mentioned people familiar with the matter, except for sales and marketing, all places that consumers cannot see will be integrated.Despite this, the sales and marketing departments will still be managed by the newly established sales company. If successful, this integration plan will be fully completed by the end of April 2012.
"Current General Manager of Dongfeng Citroen Wei Wenqing"
This will inevitably lead to a series of personnel changes. The most important of which is the adjustment of the two top executives of the current Ministry of Commerce.According to reports, Wei Wenqing, the current general manager of Dongfeng Citroen, will become the head of the sales company and oversee the operation of the two brands.Regarding the news that Lei Xin, general manager of Dongfeng Peugeot, will be transferred to the director of Shenlong Strategic Planning Department, the above-mentioned person denied that it is unlikely.Lei Xin is likely to be the Chinese executive for the planned Dongfeng joint venture.
In addition, on the Dongfeng Peugeot Ministry of Commerce will also move from Beijing to Shanghai rumors, we learned that the Dongfeng Peugeot Ministry of Commerce will not be relocated to Shanghai as a whole, sales and marketing departments will remain in Beijing, personnel, administration, finance and other functional areas of business will be relocated to Shanghai, in the future, the sales company will implement multi-site management.
After the completion of this integration, it means that the dual-brand independent operation model that has lasted for nearly a decade in Shenlong will become history.
Shenlong insiders revealed that this is a major event for Shenlong Company, so a "reorganization committee" was established within Shenlong to promote the integration. Members include: Sun Xiaodong, director of product planning and market strategy for Asia, PSA, Liu Weidong, deputy general manager of Dongfeng Company, Wei Wenqing, general manager of the Ministry of Commerce of Dongfeng Citroen, and Lei Xin, general manager of the Ministry of Commerce of Dongfeng Peugeot.
In fact, the integration of Dongfeng Citroen and Dongfeng Peugeot had already begun as early as 2009. When Tang Teng, the former deputy general manager of Dongfeng Peugeot, was transferred to the head of the strategic planning department of Shenlong Automobile, he also had a new identity, that is, the dual-brand marketing director. This is a new position that has never existed in Shenlong Automobile’s organizational structure.
The establishment of the dual-brand marketing director position is a signal, the above person said. Subsequently, before the original PSA China headquarters was relocated to Shanghai, the two brands’ parts and after-sales services systems began to be initially integrated. At present, the integration of parts and after-sales services systems has basically met expectations. After this series of events paved the way, Dongfeng Peugeot Citroen Sales Company has really raised the agenda.
"Left hand" hit "right hand"
The person said that the formation of Shenlong’s "dual-brand independent operation" model has its own unique background. As early as 1992, when PSA entered the joint venture with Dongfeng Motor Company in China, only Citroen was introduced. In 2002, Dongfeng Motor Company signed an expansion cooperation contract with France’s PSA Group, and the Peugeot brand was included in Shenlong’s command. The dual-brand operation model was also formed.
At first, it was hoped that the two brands could have synergies and differentiated operations. PSA Global has always adhered to the structure of independent operation of Peugeot and Citroen for many years. Unfortunately, it backfired.
When talking about the products of Dongfeng Peugeot and Dongfeng Citroen, a senior product editor said that He, Citroen, and Yu are like twin brothers, whether it is product positioning or price range, they are direct competitors of each other.
Liu Weidong, deputy general manager of Dongfeng Motor Company, has also mentioned many times that Citroen and Peugeot share platforms and technologies, and there is not much difference in terms of accessories, after-sales maintenance, etc. Therefore, there is no need to set up two teams to operate.
The implementation of the dual-brand strategy for so many years has obviously not brought Shenlong the rewards it deserves. It is understood that PSA is the earliest international brand to enter the Chinese auto market after that. However, according to relevant statistics, from the implementation of the Shenlong dual-brand strategy in 2003 to 2010, the total sales volume of Shenlong in 7 years was 1.56 million vehicles, while Volkswagen’s joint venture in China, Shanghai Volkswagen, achieved sales of more than 1 million vehicles in 2010 alone. On the contrary, "left hand" plays "right hand", and the establishment of two sets of teams and two sets of personnel has caused a significant increase in operating costs.
PSA’s global strategy realigns behind the scenes
However, this situation is obviously not new today. According to people familiar with the matter, a global in-depth strategic adjustment of PSA has become the key to promoting the substantive integration of the two brands.
It is understood that PSA Group Global is rearranging the two major brands of Peugeot and Citroen through a series of restructurings, not only establishing two new positions of commercial operation director and international operation director of Peugeot and Citroen in Europe, but also two former executives in China. Additionally, a general manager is assigned to each European country market to be responsible for the business of Peugeot and Citroen, and to develop and manage the sales network.
In fact, PSA’s global integration is far from over, even beyond PSA itself. Recently, General Motors and PSA announced that they will form a long-term and large-scale global strategic alliance. The content of the alliance between the two parties is mainly focused on two aspects. First, the two sides share in the field of complete vehicle platforms, parts and modules. Second, the two sides will establish a joint venture global procurement enterprise to be responsible for the procurement of raw materials, parts and other products and services of the alliance. The joint venture global procurement enterprise will have an annual comprehensive procurement volume of 125 billion US dollars. In addition, the alliance will also lay the foundation for the two sides to explore cooperation in other fields.
"Sharing resources and reducing costs are the keywords for PSA’s integration, whether it is restructuring the two brands or marrying GM," a PSA insider said. This idea also applies to the integration of the two brands under Shenlong.
Coincidentally, in the eyes of veteran automotive expert Zhang Zhiyong, Shenlong’s integration plan is very similar to the existing model of Shanghai GM. He believes that this is closely related to Sun Xiaodong, one of the four core members of Shenlong’s "reorganization committee". After all, the reform of Shanghai GM’s brand business unit was carried out by Sun Xiaodong.
Zhang Zhiyong said that Peugeot Citroen is more like two companies than two brands to the outside world. The disadvantage of this company brand system is that the overall operating cost of Shenlong is relatively high, and the cooperation between the two brands in business, procurement, communication, personnel and other aspects cannot form complementary advantages. Shanghai GM’s brand structure is obviously very different from Shenlong. Shanghai GM has three brands. Each brand was more in charge of marketing and marketing functions. However, the personnel, administration, and finance of the three brands were uniformly owned by Shanghai General. The characteristics of this system were to centralize power first, then decentralize power, first establish the leadership of Shanghai General, such as personnel, finance, etc., and then let each brand operate independently in terms of business policy, market positioning, and marketing communication. In comparison, the current Shenlong Company was more like a puppet head office.
However, many people in the industry still have reservations about how much the integration of a company’s internal functional structure that does not involve sales and marketing can enhance the market competitiveness of the two brands. It is worth noting that the sales part that is not involved in the integration of the two brands may be moved in the next step. Shenlong Automobile will try to set up some 3S stores and 2S stores in the third- and fourth-tier markets to connect the two brands for sales.
In fact, similar thinking has also appeared in the channel reform, which is called channel coordination internally. That is, for the third and fourth lines, the models of the three independent series of Dongfeng, Dongfeng Liuqi and Zhengzhou Dongfeng brands will be sold in the same exhibition hall. In April and May this year, collaborative investment promotion will be carried out. At present, the coordination store has launched three franchise stores in Hunan Xiangtan, Fujian Longyan and Jilin Xinhui, which are blank in the network. It is also reported that SAIC has also begun to try to sell online with MG in some areas where sales are not good.
An industry insider believes that the number of 4S stores in China is unique in the world. At present, when the market has bid farewell to the previous rapid growth, some brand manufacturers and distributors are a little overwhelmed by the huge operating costs of 4S stores. When the operating conditions are not enough to support the basic survival of 4S stores, for brands belonging to the same company, online sales can be a response.
However, the strategy is still in the exploration stage. Perhaps, the integration of Shenlong Company is not over. (Text/Li Lin)
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