Carlos Tavares is a man used to taking chances, whether seated at his desk or behind the wheel of a race car.
The 61-year-old CEO of PSA Group is about to take the biggest risk of his long automotive career, convincing the board of the Paris-based company to approve a merger with the Italian-American Fiat Chrysler. The announcement jolted the industry, coming barely five months after Fiat Chrysler saw a similarly structured marriage with PSA’s French archrival Renault collapse at the 11th hour.
Those who know Tavares well, however, say they’re not surprised by the move. Even before he signed on as PSA’s chief executive in late 2013, the Portuguese-born executive was determined to head one of the auto industry’s biggest companies. He even openly expressed his interest in taking the helm at either Ford or General Motors while working at Renault. Now Tavares is putting together what will become the world’s fourth-largest automaker, valued at around $50 billion.
“Like most successful CEOs, Carlos Tavares is not afraid to take risks – intelligent risks,” said David Cole, chairman emeritus of the Center for Automotive Research. But unlike traditional automotive executives who tend to be slow and cautious in how they move on an opportunity, Tavares operates “more like a Silicon Valley entrepreneur,” quickly and aggressively, added Cole, noting that this approach has been paying off.
When it was announced that Tavares would join PSA in 2013, the smaller of France’s two automakers was bound for bankruptcy until it received a bailout from the French government — which now owns 12.2% of the company through BPI France — and Chinese automaker Dongfeng. PSA lost about 5 billion euros the year before he took over the company, or about $6.6 billion at 2012 foreign exchange rates. Last year, it reported a profit of 3.3 billion euros, or roughly $3.8 billion as of Dec. 31.
Tavares proved that wasn’t a fluke when he led the 2017 acquisition of General Motors’ long-troubled Opel and Vauxhall brands. The subsidiary had been hemorrhaging cash for two decades. Barely 12 months later – and two years ahead of Tavares’ original plan – Opel was back in the black.
“You hear nothing but how capable he is,” a senior Fiat Chrysler executive told CNBC this past week. It was a reputation that quickly proved out as he and his team got to know Tavares through months of secret negotiations.
What really makes a difference, according to those who’ve watched Tavares over the years, is his breadth of understanding of a very complex business.
The PSA CEO “knows all aspects of the business, which is especially beneficial if your reports are going to try to snow you,” said John McElroy, a veteran automotive journalist and host of the TV show Autoline. “You can’t hide anything from him.”
But perhaps most importantly, added McElroy: “This is a guy who truly has gasoline in his veins. These days, there aren’t many executives left like that.”
Tavares can often be found weekends at a racetrack wearing a fire-retardant racing suit in the blue-and-red livery of the PSA race team, Peugeot Sport.
By his own count, Tavares has done well over 500 races through the decades. His increasingly demanding business career forced him to give up his seat as a rally driver in the 1990s. Even so, he still manages to squeeze in about 20 track events annually, and has been considered a serious contender in the European touring car endurance series in recent years.
As with his ability to navigate all aspects of the car business, from finance to manufacturing, Tavares readily jumps from one car to another, one race series to another. He has earned a respectable reputation in not only the rally and endurances series, but also while piloting an assortment of classic cars, like his own 1969 Lola T70, a 1976 Alpine and a 1966 Porsche 912.
Despite his strong record, Tavares is quick to downplay his skills on the track, telling Automotive News in a 2017 interview, “You quickly discover that the limit is the driver, not the car,”
Every race requires a serious driver to put his life on the line, so it’s likely no surprise that Tavares has been willing, over the years, to take similar risks with his career. Nowhere was that more apparent than when, on Aug. 14, 2013, his 55th birthday, he dropped a bombshell during an interview with the Bloomberg news service.
Tavares, who had been a Nissan director since June 2005 and chief operating officer of Renault since May 2011, had grown increasingly frustrated in his hopes of becoming the CEO of the French carmaker. His then-boss Carlos Ghosn, who also ran the global Renault-Nissan Alliance, made it clear he was there to stay.
But Tavares said he had “the energy and appetite for a No. 1 position.” Asked what he had in mind, the executive responded that, “My experience would be good for any car company,” then pointed to Ford Motor and its own crosstown rival. “Why not GM? I would be honored to lead a company like GM.”
Behind the scenes, things blew up and, within the week, Tavares tendered his resignation. Few thought he would be out of work for long, however, as he demonstrated by taking the CEO job at PSA barely three months later.
At 61, Tavares will soon take on the most demanding position he has ever held, at least as long as the PSA-Fiat Chrysler merger goes through. The partners expect that things should wrap up by late 2020.
Ironically, the tie-up might have happened several years ago. A merger actually came up in conversations with the late Sergio Marchionne, the former head of Fiat Chrysler, Tavares said in an interview earlier this year. But the PSA chief said at the time that he already had too much on his plate. He was focusing on several other challenges, including the return of the French automaker, after a quarter-century absence, to the U.S. market.
In a move somewhat out of character, he’s laid out what he described as a “low risk approach,” one that is expected to stretch out through the middle of the next decade.
“I don’t think the merger impacts that,” said a senior PSA executive, asking not to be identified by name, due to the sensitivity of the subject. But, he quickly added, the deal could change just about everything.
Tavares, he emphasized, “is a practical guy” who knows that in the current environment it is becoming increasingly “hard for companies to survive.” Success won’t go to those who play it safe, but to those, like Tavares, who are willing to risk everything as long as they have a clear understanding of what they’re facing.