Peugeot seeks to double profits

PSA Peugeot Citroën has outlined targets that include doubling its profits and developing more upmarket vehicles in an ambitious plan to become Europe’s most competitive car company within eight years.

Christian Streiff, Peugeot’s chief executive, said Europe’s second-biggest carmaker would raise its global vehicle sales to 4m within three years, from 3.4m in 2006. The figure would include doubling the carmaker’s sales in Latin America, China and Russia to 800,000 by 2010.

Revealing details of his three-year plan, called Cap 2010, Mr Streiff also set a target of a consolidated operating margin of 5.5-6 per cent in 2010, and 6-7 per cent by 2015. Peugeot’s current group operating margin is 2-3 per cent, and less than 2 per cent for its core carmaking unit. Should Peugeot succeed in meeting Mr Streiff’s goal, this would put it in the ranks of top-of-the-league European carmakers such as Volkswagen and BMW.

Unlike Renault’s Carlos Ghosn, who is pushing his company aggressively into low-cost vehicles in emerging markets, Peugeot’s boss outlined a strategy that would see it remain focused largely on Europe and include some higher-priced models.

The carmaker would develop “competitive premium” models in each vehicle segment. Peugeot also wants to increase its market share in Germany and reduce the average age of its models to three years after 2010, from about four.

However, Peugeot’s small and midsize cars are fighting for many of the same customers as Renault and Fiat Auto on Europe’s stagnant market. VW, the continent’s biggest producer, is a formidable competitor in Germany, western Europe and overseas. “Neither of the French carmakers is coming back as long as VW remains this aggressive in Europe,” said Max Warburton, auto industry analyst at UBS in London.

After Peugeot’s share price rose in anticipation of Mr Streiff’s presentation, investors sent it back down 3.6 per cent to €59.45 in Paris on Tuesday.

Mr Streiff is the latest industry outsider to lay out a long-term plan aimed at turning round a carmaker. Sergio Marchionne has shown positive early results from a similar plan at Italy’s Fiat, and Alan Mulally is in the early stages of trying to restore Ford Motor to profitability.

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