PSA PEUGEOT CITROËN CHARTS ITS OWN WAY FORWARD

Soon after announcing that it would create two competing design teams for both its Peugeot and Citroën brands, PSA Peugeot Citroën said it will embark on an efficiency program designed to control costs, enhance R&D, redefine its product plan, and identify new markets.

Soon after announcing that it would create two competing design teams for both its Peugeot and Citroën brands, PSA Peugeot Citroën said it will embark on an efficiency program designed to control costs, enhance R&D, redefine its product plan, and identify new markets. PSA has seen growth outside of Europe, a sharp improvement in vehicle quality, and successfully launched its 207 compact. Unfortunately, market share within Europe continues to fall, new model start-ups are slow, and competition is growing.

In the short term, there will be a hiring freeze, and “measures to contain payroll costs and other overheads.” Whether the French automaker will resort to buyouts like its American counterparts is as yet unclear. However, the number of temporary employees is being reduced, departing employees are not being replaced, and at least one plant—Ryton in the UK—is gradually being phased out. Plants building vehicles on the same platform are being asked to develop synergies, and the capacity utilization goal is to exceed 100% in 2007 with a further rise to 110% by 2010. In addition, the group’s annual capital expenditure budget is being reduced from €3 billion to €2.5 billion, though this reportedly will not affect the product plan.

Despite these cuts, PSA says it will renew its core models more frequently in order to keeps its product line fresh, and introduce six new body styles in new segments by 2009. While this is taking place, it also promises to cut its vehicle R&D expenditures by 15%. Since the overall expenditure will remain frozen at current levels, the company says this means it will be producing more models more quickly, and at a lower cost per vehicle. It is also studying a potential cooperative agreement with Malaysian automaker Proton that would give it an expanded Asian presence, and searching for local production capacity in Russia.

By establishing competing design teams for both Peugeot and Citroën without increasing the number of designers, PSA says it will have smaller, more nimble groups with which to produce highly distinctive design themes. The head of each studio will report to the brand’s design manager whose job it is to foster competition while ensuring the brand’s values are maintained. The PSA Group also will continue to work with outside design houses, like Italy’s Pininfarina, as it has in the past.