Christian Streiff is relaxed and grinning as the 767 makes the final approach to Rio de Janeiro airport, writes Rob Golding.

He needed a bit of luck and he has had it. When he took on the position of President of PSA Peugeot Citroen a year ago he made some bold promises to shareholders about the rate at which he could restore profitability. Most observers were sceptical. Now they have to join the faith - for a while at any rate.

The emerging markets worldwide have been growing at an extraordinary rate and it is that unpredicted growth that could make the difference between Streiff trebling operating margins to 6% by 2010 and not. Russian sales of foreign cars are up 64% year to date. China and Latin America are both up 30%. Eastern Europe (the new EU members) is up 15%.

Seeing is believing, and Streiff is taking a bunch of analysts and journalists to see for themselves how well the PSA scrap for market share in Brazil and Argentina is doing.

Streiff has abundant praise for his men on the ground. When asked how Brazil had been such a quick success his answer was the single word: "management."

His commendation was directed principally at Vincent Rambaud, director general of the region and a veteran of overseas assignments for the French company. But senior people in Rio say that part of the management success has been Streiff's. One of the directors in the region said: "Streiff has made us an independent company able to take our own decisions and move very fast."

PSA Mercosur now has its own engineering team empowered to design and specify its own local market derivative models. The rollout has started with a three-box version of the Citroen 4 Pallas which will be exported to both Spain and Turkey.

Under the previous PSA president, Jean-Martin Folz, who was in post for ten years, the stance at HQ was to discourage power bases growing up in the overseas territories. "That was a perfectly sensible way to operate and we have no complaints. But it did mean that in the to-ing and fro-ing between Rio and Buenos Aires and Paris, decisions were getting lost," the local director confided.

With the freedom to react quickly, PSA has suddenly raised its game from steady performer to market out-performer. In the first ten months of the year, sales were up 30% year on year with 64,000 cars and light vans driving market share up to 3.4%. Citroen, which has managed to slip into the unlikely position of a premium producer in Brazil, grew by 36% with 38,000 vehicles claiming 2% of the market. Peugeot 206s and Boxer vans are made in the Brazilian Port Real factory.

In Argentina, at El Palomar, Peugeot makes the 206, 307 and the Partner van. It also makes a 307 sedan - like the Citroen C4, a special treat for the local market. It is very similar in concept to the three-box variants built and sold by PSA in China. One of the few common features of emerging markets is that customers like plenty of mass for their cash as mass is deemed to represent wealth. Each territory though has done its own engineering for its own derivative to hone engineering skills. There is tough banter over which is the better job. Citroen specs the Pallas version to a very high standard and sells at a very attractive price which is the way in which it is earning the near-premium reputation. Until the real premium players decide the market is big enough and rich enough for them to enter in strength, Citroen may have found a valuable niche.

Streiff says that South America is not the biggest earner in the PSA emerging markets portfolio - but it is the one with the biggest swing from loss to profit. Last year it lost EUR100m and has lost more than half a billion over the preceding five years as volume built up sufficiently to cover overheads. South America this year could make better margins than the parent in Europe. It is a thought that has Streiff smiling as he paints a picture of what the attentive observers will see when they emerge into the early summer sunshine of Rio.

Streiff has now taken the bet that South America will keep on growing and has invested heavily so that PSA can lift its market coverage from 40% this year, to 80% by 2010. He has given the local boys EUR400m for the product plan and EUR100m to expand capacity from 300,000 cars in Brazil and Argentina to 500,000. There will be more derivatives of the parent range aimed at the specific needs of the local markets. Present forecasts are that the new capacity will not be fully used before 2015.

The Argentinean press rated the C4 Pallas as car of the year last year. It was commended as sophisticated and richly equipped. The three-box segment is the fastest growing and the EUR10,000 price band is 70% of the market. Paying heed to local need pays dividends.

Despite being early into China (and then letting its lead slip) PSA is running behind all other European makers when judged by the percentage of operating income not derived from US, Europe or Japan. It's actually only 8% or half the next worse which is its compatriot, Renault, with 16%. Fiat tops the charts with 60%.

It is quite remarkable how the task of selling cars internationally has become a game of two halves. Demand in Europe, the US and Japan will cumulatively fall 2% this year. Yet the hot spots cumulatively are growing at 20%. Research from the stockbroker Adam Jonas at Morgan Stanley estimates that for the immediate future, the mature two thirds of the car market will grow at 1% a year while the hot third will average 11% growth a year.

There is the thought that rushing into fickle markets and tossing half billions from cockpit windows may prove to be unwise and it is only six years ago that the Argentine and Brazilian market cracked completely under rampant inflation and devaluation. In a single year, Argentinean demand shrunk from 67,000 cars to 18,000.

Although he will not say so, Streiff probably signs up to the general advice in the motor industry which was explained to me by a very grown up GM board member five years ago. "If you don't invest in the new markets and they go up, you look a fool. If you do invest and they go down everyone is in the same boat and that's OK."

The French equity analysts worry about the two French car companies Renault and PSA and so they should. On most measures, they are under-investing, under-engineering, under-pricing and over-promising. The share prices might have done better as well.

But they reserve special concern for Christian Streiff who has not run a company on his own before (ignoring the six months in charge at Airbus Industrie) has not been in the auto industry before and has not had to manage a public company, its analysts and its share price before.

But what they like least - and perhaps it arises because of that restricted experience - is the fact that he is saying that all is well with the profit forecasts for this year, then rehearses the objective of 6% margins by 2010. The bit in the middle is, for those analysts, as cloudy as the River Plate.

"I want to say how confident I am about achieving the objectives in 2007," Streiff said at one presentation. In private he agreed that: "I have not achieved to convince people on the business model." (sic)

It was less than a year ago that Streiff came to London and announced to a small room full of people that he had studied PSA from the inside and found the car market extremely complex. But the solutions for PSA were very simple.

In a year he has taken out cost, put in new people and processes in a way that has let a fresh sense of purpose into the company according to leading participants, and empowered the good guys in the overseas markets.

If there is one single thing that defines him it is the ability to absorb vast amounts of information and cut to the chase. The teams to transact the initiatives are all in place and the goals are set.

But as the 767 set off home for Paris, the French Press wanted more - just as the French analysts had wanted more. One year on, and the honeymoon is over for Streiff. Vision is not enough. The pursuing pack of observers needs details about the future to reassure them that the national treasure is in safe hands.

Well mes amis, situation normal: the guy is only human and some of the guesses will be wrong. But for now, in South America at least, the guesses look like good ones.

Rob Golding

See also: EMERGING MARKETS ANALYSIS: PSA's Mercosur plants - a tale of two factories

EMERGING MARKETS ANALYSIS: PSA empowers its local managers in Mercosur