The Chang’an & PSA Peugeot Citroen Joint Venture
Instituto Tecnologico de Monterrey Campus Guadalajara
Negotiation Techniques
Professor Rodrigo Levy
26 of April 2012
I. Introduction
In difficult times due to the radical effects of globalization and economic crisis, countries
need each other more than ever to get through these tough time periods. The Financial
Crisis the world suffered in 2008 made all global markets rethink their plans and strategies.
The automobile sector was not an exception, European and Asian manufacturers were the
most affected, the increment in fuel also brought important reductions to production and
sales of automobiles. In 2009, the automobile industry was hit tough by the global
economic crisis as the CEO of Peugeot put it “Clearly, this will be less favorable economic
environment and will have a negative impact in the second half“ (International Business
News, 2010) that is why PSA Peugeot Citroën had to tackle several challenges particularly
driven by massive declines in demand in Europe and the U.S. PSA Peugeot Citron put a
strong emphasis on emerging markets in China, Russia and Latin America, These are
important markets for global carmakers and have a high potential for growth. PSA joined
Volkswagen Group and General Motors among the first foreign carmakers to arrive in the
Chinese market.
The negotiation we are going to analyze throughout this paper is the joint venture that
Chang’an, the fourth major manufacturer of cars in China and PSA Peugeot Citroen
decided to establish this venture in order to overcome the economical crisis that has been
affecting their sales and revenues in previous years. This negotiation can be considered an
integrative or win-to-win negotiation. Chinese manufacturing group will be gaining
technology and will increase its influence towards the automobile market, and PSA
Peugeot Citroen will increase their sales and profits and reducing their debt. A merger
between Chang’an and PSA could be beneficial for both countries, for China in terms of a
further development of its automobile industry and for France in order to find a way out of
its economic slump.
II. Parties Involved
1. a. The Chang’an Automobile Group
Chang’an Automobile Group Co., Ltd is a major multinational company in China that was
created through the restructuring of the automotive businesses of China South Industries
Group Corp (CSGC) and Aviation Industry Corporation of China (Avichina). The
state-owned enterprise is headquartered in Chongqing; the group is 77% owned by CSGC
and 23% by Avichina. China Chang’an is currently comprised of 21 automobile production
companies, including a number of joint ventures such as Chang’an Ford Mazda and
Chang’an Suzuki. It has annual production capacity of more than 2.2 million units, with
product line-ups ranging from passenger cars to light commercial vehicles. China
Chang’an is China’s fourth largest and ranks fourth most-productive automaker. In 2010
the company manufactured and sold 2.38 million vehicles, which equates to more than
13% market share in Chinese automobile industry.
1. b. PSA Peugeot Citron
Founded in 1976 the French automobile manufacturer PSA Peugeot Citroën belongs
nowadays – after the Volkswagen AG –to Europe’s second-largest carmaker. With a
turnover of 56.061 € billion and 3,605,500 vehicles sold worldwide in 2010, PSA is the
European leader in light commercial vehicles with a 22.7% market share. Backed by its
two internationally recognized brands, Peugeot and Citron, the Group has sales and/or
manufacturing operations in 160 countries around the world. It employs 180,000 people.
PSA Peugeot Citron already produces and sells motor vehicles in China through Dongfeng
Peugeot Citron Automobile Company (DPCA), a joint venture with the Dongfeng Motor
Corporations (DFM), the third-biggest auto group in China. It also imports vehicles,
maintains an R&D and design center in Shanghai and operates through its other
subsidiaries: Faurecia (automotive equipment), GEFCO (logistics), Banque PSA Finance
and Peugeot Motocycles. PSA Peugeot Citroën employs more than 16,000 people in
China. With record results of more than 376,000 vehicles sold in 2010, a 36% increase
from 2009, China is now the Group’s second-largest market. Nevertheless, the company is
aiming to become a key player as mentioned by the CEO of PSA “We are not satisfied
with our market share of 3.5 percent in China“ (CAIN, 2011) Therefore, raising its market
share from 3.6% to 8% by 2015.
1. c. Government
China decided to promote foreign investment in its country. Thus, foreign-oriented firms
were invited to settle their Research and Development departments in China. In 2010,
Chinese firms managing strategies were willing to attract foreign investment by promoting
corporate mergers and acquisitions. To facilitate this, a tax incentive policy was
implemented to attract foreign direct investments to China, especially to gain investors for
the high-tech sector in order to modernize this industry. The Chinese Government is also
an important party of this negotiation. They play an important role in order to maximize
profits for both companies and make a more attractive deal for PSA Peugeot Citroen.
Chinese government is implementing tactics to attract technology from European and
American manufacturers, a long-term plan to become auto-sufficient and in future years
depend only in their manufacturing processes. China was one of the countries that suffered
less from the 2008 financial crisis so they were in great position to offer rounded deals for
both companies.
III. Interests and Positions:
1. a. Chang’an Automobile group and Xu Bin:
They are looking to increase their company’s infrastructure; they have interest in having a
western ally to become one of the major car producers of the Chinese market. They have a
lot influence and power in their hands and they know the harsh economic conditions PSA
