Dusson defeats PSA as one-two-master

The "exclusive" agreement between Dongfeng and PSA led to the failure of Dusen's "one-and-two-servant" strategy in the Chinese market, ultimately resulting in his direct replacement. This move not only disrupted PSA’s plans but also exposed a critical misstep that cost them a major opportunity in one of the world’s most competitive automotive markets. In professional golf, if a player hits the club but not the ball, it would be considered an amateur mistake. Yet, something similar occurred in the Chinese auto industry—this time, with Citroën (PSA), Europe’s second-largest automaker, hitting a costly error. The joint venture between PSA and Hafei Motor was supposed to be announced after the Spring Festival, but as of now, no official news has been released. This delay is likely due to the fact that Hafei has already been acquired by Dongfeng, making the joint venture irrelevant. What made this situation particularly embarrassing for PSA was that their plan to establish a second joint-venture company for passenger cars in China became a non-starter because of the "oversight" in the exclusive contract with Dongfeng. This basic mistake directly led to the departure of Dusen, the former head of PSA’s China operations. A strong advocate for the Hafei deal, Dusen was seen as the driving force behind the initiative. This outcome highlights how some Chinese automakers have learned from past mistakes and are now more capable of managing partnerships and negotiations. The evolving landscape of the Chinese auto market has forced multinational giants to rethink their strategies, facing a more complex and competitive environment than ever before. **Fatal Negligence** Upon taking over, Hua Riman, the new head of PSA’s China affairs, faced the challenge of resolving the issues left behind by Dusen. According to insiders at Dongfeng, the idea of forming a joint venture for passenger cars was no longer viable. With Hafei now under Dongfeng’s umbrella, the collaboration between PSA and Hafei lost its significance. Even though Hua Riman and Hafei sought Dongfeng’s input, the latter believed the risk was too high given the current market conditions. PSA had anticipated this response but was now left to cover up a serious strategic misstep. In June 2007, Dusen signed a memorandum of understanding with Hafei, planning a 50/50 joint venture to produce high-end light commercial vehicles. At the time, PSA aimed to expand its presence in China, targeting 1 million sales by 2015. However, just a few months later, PSA abruptly replaced Dusen, who had barely served six months in his role. According to PSA’s official statement, Dusen’s departure was a “normal move.” But sources suggest otherwise. The exclusive agreement between Dongfeng and PSA effectively blocked Dusen’s plans, leaving him out of the loop. Insiders claim that this move was not just a personnel change but a strategic decision to protect Dongfeng’s interests, as the agreement limited PSA to only one joint venture in China—Shenlong. **Remedy** After Dusen’s exit, Steve, the new CEO of PSA, placed a strong emphasis on the Chinese market, considering it a key growth area alongside South America. He entrusted Dusen with the task of leading PSA’s expansion, believing in his potential. However, Dusen’s approach was overly optimistic, especially when he pushed for a second joint venture with Hafei, ignoring the constraints imposed by the exclusive agreement with Dongfeng. Dusen was a big fan of Volkswagen’s "one-servant and two-dominant" model, which allowed the German automaker to maintain control over Chinese partners. He believed PSA should follow a similar path. But once Dongfeng secured its exclusive deal, Dusen’s strategy was doomed from the start. Industry experts noted that even Volkswagen had attempted to form a third joint venture with Dongfeng but was rejected. The "exclusive" agreement not only protected Dongfeng’s interests but also limited the options of other foreign automakers. After the failed Hafei deal, Steve quickly shifted gears, replacing Dusen and trying to mend relations with Dongfeng. Although he had planned to visit Wuhan for the Spring Festival, a snowstorm forced him to cancel. Despite these challenges, PSA remains committed to its long-term strategy in China. According to Shenlong’s latest plan, the company will launch over 20 new models between 2008 and 2013, aiming for a 30% increase in production and sales. PSA also pledged to introduce the Citroën C5, a mid-to-high-end model recently launched in Europe, to Shenlong’s second factory, hoping to revive the brand’s declining image. Despite its early efforts to tap into the Chinese market, PSA has repeatedly made strategic missteps, falling behind its competitors. The collapse of the PSA-Hafei joint venture marked a turning point, signaling that the once-dominant European automaker may be running out of room in China. After such a costly lesson, can PSA truly wake up and adapt? Only time will tell.

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