PARIS: French auto giant PSA Peugeot Citroën has undergone a steady decline both in unit sales and operating margins over the past decade - a trend it attributes to an increasingly geriatric model range. But all that is about to change.

On Tuesday the automaker's new chairman Christian Streiff (pictured) outlined his plan to move the company back into top gear, by boosting annual car sales 19% from 3.3 million last year, to 4m by 2010.

At the same time restoring operating margins from their current miserly level of 1.9% to an ambitious 5.5% to 6% of sales. And 6% to 7% by 2015.

If achieved, the strategic plan will make PSAPC the most competitive carmaker in Europe,' says Streiff. Other plan objectives are:

  • A strong improvement in product and service quality, reducing the number of quality incidents by half; and shortening incident resolution times by two-thirds. The goal is for Peugeot and Citroën to rank among the European Top Five in service quality.

  • A product offensive with twenty-nine product launches planned in Europe between 2007-2010, with differentiated models for each brand in order to improve market coverage. A further objective is to maintain the average age of the lineup at three years, compared with 4.5 years in 2006.

  • A European marketing offensive designed to sell an additional 300,000 units annually by 2010, via a new fleet market strategy, specific actions in dealerships to support the product offensive, a greater return on media spend and conversion of proprietary dealerships into real profit centres.

  • A cost-cutting program in order to reduce warranty costs by half, increase purchasing productivity from 4% to 6% a year, reduce overheads and fixed costs by 30%, and shorten development cycles by 30%.
Homeric though Streiff's plan may be, the traditional sceptics remain - well - sceptical.

Opines Jürgen Pieper, analyst at Metzler Bank in Frankfurt: "It's going to be very, very tough [for Peugeot to regain lost ground]. In the late 1990s, Renault wasn't teamed up with Nissan. The competitive environment is absolutely a different game than five to seven years ago."

Garel Rhys, professor of automotive economics at Cardiff University in Wales agrees: "The new regime has started off well, but PSA has a long way to got to get where they were, at 15% to 16% of the market. The truth will be in delivering."

But let the last word go to European arch-rival Volkswagen, whose design chief Walter Maria de Silva purrs: "The question is whether Steiff will be able to give Peugeot pizzazz."

Data sourced from Business Week (online) and PSA Peugeot Citroën; additional content by WARC staff