PSA Chairman, Jean Martin Folz

Back at the tail-end of the last decade, at the height of the merger m" />

Issue: Mar 2003

Europe Report

Independence Day

by Anthony Lewis

PSA proving it can go it alone and still be successful.


PSA Chairman, Jean Martin Folz

Back at the tail-end of the last decade, at the height of the merger mania that gripped the auto industry, pundits were writing off PSA Peugeot Citro?n.

To survive, they said, the French automaker needed to be swallowed up by a larger automotive fish, or at least merge with someone bigger.

It was a belief not shared by PSA, at the time under new management and emerging from the stewardship of the inimitable Jacques Calvet. Today PSA is one of the most successful automakers in the world.

Announcing a 5.4 percent hike in sales over 2001 to $54 billion, Chief Financial Officer Yann Delabriere says that the thought of a merger or sell out was never on the PSA agenda.

To understand why, you have to understand the culture of PSA, he says. There is a very strong belief in the PSA brands, its products and its customers. All we needed was a simple, clear strategy.

That was provided by Jean Martin Folz, the man who took over from Calvet and surely one of the most energetic and enthusiastic auto industry leaders in the business.

Folz regularly works 14 to 16 hours a day and just as regularly visits every corner of the world where PSA has a presence, instilling a high level of motivation in those around him.

His simple and clear strategy has three strands: platform sharing between the Peugeot and Citro?n brands, manufacturing efficiency, co-operation with other vehicle manufacturers and partners.

This course is aimed at producing four million cars a year by 2006, up from two million in 1997, and generating more than $1 billion a year in savings.

The recently announced new plant at Trnava, Slovakia, will allow the group to reach its target of producing four million vehicles a year in the same timescale.

Existing production capacity is saturated, particularly in Europe, says Folz. He adds that the group would now look to see how it could squeeze more from its other plants around the world.

PSA built just 48,000 vehicles at its Porto Real plant in Brazil. Capacity at the plant tops 100,000 units.
There is some spare capacity in South America and China. The Porto Real plant in Brazil has a capacity of 100,000 vehicles but produced just 48,000 last year. At Buenos Aires just 17,800 cars were built at the factory capable of producing 140,000 vehicles a year while in Wuhan, China, PSA built 84,400 vehicles, well short of the plants limit of 150,000.

Additional capacity will be available in 2005 when PSAs joint venture plant with Toyota opens. It will make 200,000 small cars for the Peugeot and Citro?n brands with another 100,000 for Toyota. Trnava, where production is scheduled to start in 2006, will have a capacity of 300,000.

PSA has 14 assembly plants and total 2002 output was 3,262,000, an average of 14,000 cars a day. In addition, it operates two engine plants at Tremery and Douvrin, both in France, it also assembles engines in Brazil and China two transmission plants, Caen and Mulhouse, both in France, plus one in China, and two chassis plants also at Caen and Mulhouse. Average 2002 output was 15,000 sub-assemblies a day of each.

Folz says: All of the groups European plants are operating totally or partially in three or four shifts but there are three drivers to make the production base more efficient deployment of our platform strategy, the implementation of our manufacturing efficiency improvement plan and improving ease of assembly and working conditions.

Platforms for the groups cars are designed for both Peugeot and Citro?n marques while it has two joint platforms with Fiat for MPVs and utility vehicles, plus the new small car platform being developed with Toyota.

Folz says that while the Volkswagen Group inspired the platform policy, he believed PSAs execution of the strategy was very different. We are not interested in putting different badges on the bodywork, he added. Citro?n and Peugeot vehicles look very different.

Platform production has also been assigned geographically. Platform 1 (C3, Saxo, 206 and 106) are at Aulnay and Poissy in the Paris area, Ryton in the U.K., Madrid in Spain, Porto Real in Brazil and Trnava in Slovakia.

Platform 2 (307, 406, Xsara) are at Mulhouse and Sochaux in Eastern France, Vigo in Spain, Buenos Aires in Argentina and Wuhan, China.

Platform 3 (607, C5) is at Rennes in Western France.

Folz says: Deployment of the platform strategy and the resulting standardization of shared parts underpins a more rational manufacturing organization which is having an impact on procurement, the supply chain, maintenance and production allocation by line.

After full implementation of the platform strategy in 2006, with the final phase-out of the old platforms and the production of a single platform per site, PSA will leverage the full benefit in terms of lower costs and shorter cycle times.

Currently, the only plant producing a single platform is Ryton.

PSA, says Folz, had also embarked on a factory upgrade plan to help improve production processes. This includes a 10-year, $60 million a year replacement of stamping lines, 160 million to upgrade body-in-white facilities and a 10-year renovation program at paint shops Sochaux and Rennes have already been completed. Total investment volume is $1 billion a year.

Folz says there is still some work to do on PSAs Convergence Plan designed to bring together and standardize work practices at the groups plants.

There is a historical reason for the variety of plant practices, since the Peugeot and Citro?n assembly plants were not combined until 1998. This means there is significant room for improvement.

Efficiency, he says, may differ from one plant to another, with logistics costing twice as high and quality control twice as poor. Alignment with internal and external best practices should drive significant improvement. This is a major focus of the groups production base improvement strategy.

All of these practices will come together at the new plant in Slovakia, which will become showcase for PSAs new production techniques.

This article was provided exclusively to Automotive Industries by Interchange, U.K.-based automotive business agency and consultancy servicing media and corporate clients. Anthony Lewis is a partner in Interchange and can be contacted via e-mail

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