PSA Peugeot Citroën is facing challenging times this year. It may get worse before it gets better. At the end of last year, the company turned to a man with aviation industry and company turnaround experience to become its CEO (where have we heard that before?). Rob Golding sat down with PSA CEO Christian Streiff and heard how he is setting a course for PSA's resurgence. This article first appeared in Lotus Engineering's newsletter, proActive. 

Christian Streiff, 52, specialises in trouble – high-profile trouble at that. He was the turnaround man at Saint-Gobain, the French glass and building materials where he spent 24 years and rose to chief operating officer in 2004 as a result of his success in turning round troubled divisions.

He then went to the top job at Airbus, charged with sorting out the mess in the commercial airliner business. But he found it impossible to manage the two warring shareholders of French and German governments and resigned within three months to emphasise the gravity of the position and the need for difficult decisions.

He was immediately recruited by PSA Peugeot Citroën to succeed Jean-Martin Folz as chief executive and chairman of the new PSA Managing Board. Folz had also been a predecessor of his at Saint-Gobain.

The PSA structure had its own difficulty in that Robert Peugeot, who chairs the holding company managing the family’s 44.9% share in PSA, was a member of the vehiclemaker’s executive board. His job was director in charge of innovation and quality. When Streiff arrived from his spat with the French (and German) government, he became Robert Peugeot’s direct boss, while Robert Peugeot was Streiff’s superior as largest shareholder on the supervisory board.

It took a little while to simplify – particularly when Streiff’s first 100 days of research into the company’s difficulties revealed that major change was needed in product innovation and quality. Streiff has given ten teams of ten people until the beginning of May to come up with a number of solutions to problems that he has identified.

Problem number one is that PSA is losing market share in Europe and has been for five years. The problem had been masked by success in China, Eastern Europe and South America. It was falling profit that bought matters to a head. After making 3,115,500 cars and selling them for GBP30bn in 2006, the group made a profit close to zero.

“I am passionate about this business but it is not an easy one. It encompasses fashion trends which have to be created in volume production. And they are very complex products.

“The environment in which these products are created is constantly evolving.

“Having said that, I have only been here for three months so I have to remain cautious. There is a limit to the number of hard conclusions that I can draw.

“We had a good five years between 1997 and 2001. Volume grew from 2,200,000 to 3,500,000 and we managed the renaissance of the Citroën brand. Our international volumes trebled to a million.

“We introduced the platform strategy (common platforms and their derivatives for Citroen and Peugeot models) and developed the co-operation strategy.” (PSA is the pre-eminent manufacturer for reducing costs by sharing engine development and whole vehicle development with other makers.)

“However, from 2002 onwards we have seen a drop in European market share. We know the reasons.

“The rhythm of product roll-out was too slow or mistimed; we were not in the right segments and the range did not have the right breadth; the design was missing the vital spark.

“There was poor quality and costs were running out of control.”

As a result, profitability moved from the best in the industry to amongst the worst.

Streiff said that quality was the number one priority. Nothing else would work unless the product quality was right. Throughout Europe, both Peugeot and Citroën brands score low on customer and dealer satisfaction indices.

Streiff believes that there is a great opportunity within Peugeot because of the joint venture cooperation agreement on the production of small cars. Toyota is not just the most admired volume car company in the world and the most profitable; it also has the best quality and reliability record. By working together, Streiff believes, Peugeot will learn much from the Japanese giant.

“Quality needs fundamental change over the next three years. This will remain a key battleground for the next decade and must be a constant priority throughout the company.”

The problem of costs is being discussed with the unions who have already expressed opposition to the closure of another plant. The British plant at Ryton in Coventry was closed last year.

Despite the declining sales and profit, personnel cost had increased by 10%. The sales decline in Europe meant that fewer people were needed.

Purchasing is the second target for cost saving. “We must increase the number of winning projects but on a win-win basis with our suppliers.”

The way to reduce the cost of vehicle assembly was to produce even more economic vehicle platforms and to simplify procedures.

“We must make productivity gain an universal obsession within the company.”

It seems that there was too much centralisation of operational responsibility so that within the cost centres there was no culture of preoccupation with profitability.

Streiff said that he had ordered a six-month review of future product plan which would report in September. The next raft of products had to have reduced costs and development times and all procedures had to be simplified. The international spread of the PSA vehicle business is strong.

“We have a good existing base providing an excellent spring board for the future. But to be international we have to act local.”

That means using Chinese, Argentinean and Brazilian skills in their own countries.

The main operating board has changed radically. Streiff has created heads of the Citroën and Peugeot brands that both focus on selling. The other two full-timers are a director of programmes and a director of operations. Gregoire Olivier came from the telecoms company Sagem and had been CEO of Faurecia for just over six months before being plucked out to run vehicle programmes. It is a rapid promotion and potentially makes him a right-hand-man to Streiff.

The head of operations is Roland Vardnega, who is a long serving PSA executive with many years of experience in manufacturing. Frederick Saint-Geours is in charge of the Peugeot brand and Gilles Michel takes charge of Citroen after previously being responsible for platform sharing.

Before the Peugeot family recognised the need for change, Michel had looked like a natural successor to Jean-Martin Folz. He also was a Saint-Gobain senior executive.

The executive committee that Streiff chairs runs the broader affairs of the company. Yann Delabrier, who was the CFO, has gone to fill the hole as CEO of Faurecia and is succeeded by Sylvie Rucar, who has risen through the finance department for thirty years. Innovation is the responsibility of another woman, Isabelle Marey-Semper. She is another telecoms expert, having been recruited from Thomson to do long-range strategy.

A third woman is Liliane Lacourt, the very experienced head of communications for the group. Streiff has two men to keep him company in that forum – Jean-Luc Vergne who is head of human resources and Jean-Claude Hanus, the company lawyer and head of institutional relations and the internal audit.

The changes will put the responsibility for the product plan in one division. “We must continue to differentiate the brands but that change will make us more efficient.”

By grouping together engineering and production in a single team, designers and  development engineers will share with the production staff the quest for productivity gains “that must underpin development.”

Streiff has personally taken responsibility for purchasing and will have to deliver component cost savings which are always so elusive in the motor industry. Interestingly, he will have to negotiate with Delabriere at Faurecia. Some working groups will have reported back in May (some of them have been given six months rather than three) and Strieff said he will then review them for a further 100 days before sharing the grand scheme with 1,000 managers at meetings in September.

That will coincide with announcement of the interim financial results. The expectation is that losses will worsen.

Streiff said: “Capacity utilisation will remain lower than the new targets and the high cost of raw materials will continue to have an impact.”

Some of the important models are coming up for replacement and sales could be slower than in the last six months but there is a rich seam of new models coming through. The Peugeot 207 and Citroën C4 Picasso have already been very well received as has
the new jointly developed light van (Fiat was also a partner) – the Peugeot Expert/ Citroën Dispatch. Close behind come the launches of the 207 convertible coupé and the Citroën C-Crosser which is the first attempt at a compromise between SUV and large saloon. There will be three further cars in the year – all in what is described as the profit “sweet spot” for
the company.

The average age of the passenger car line-up had risen to an unacceptable four-and-a-half years last year. By 2009 it will have fallen to three years. But with new product pouring out of all the major vehiclemakers, it will be expensive to maintain and may not even create competitive advantage. But it has to be done.

In this financial year, the product quality initiative will have an impact on warranty payouts, and the closure of Ryton and the ramp-up in Slovakia will cost money that did not have to be spent last year. But the team is budgeting for a saving of EUR600m in manufacturing costs.

Streiff has joined the company at a difficult time. But he looks like he is enjoying himself and expresses no misgivings. When reminded of the difficulties by his interrogators he has a stock answer: “I do have a certain reputation for turnarounds.”

- Rob Golding

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Christian Streiff

Education

  • Engineering degree from the Ecole Nationale Supérieure de Mines de Paris.

Career

Saint-Gobain

  • 1979 – 1982: Production Manager, Halbergerhütte foundry,
    Germany (cast-iron automotive components).
  • 1982 – 1985: Vice President, Planning and Strategy, Fiber Reinforcements Division.
  • 1985 – 1988: Director, Gevetex Plant, Germany (fibreglass for electronics).
  • 1988 – 1991: General Manager, Gevetex.
  • 1991 – 1994: General Manager, Vetri SpA, Italy (packaging).
  • 1994 – 1996: General Manager, Saint-Gobain Emballage, Paris.
  • 1996 – 2000: President and Chief Executive Officer, Pontà-Mousson SA, Nancy.
  • 2001 – 2003: President and Chief Executive Officer, High-Performance Materials Division, Paris.
  • 2004 – 2005: Deputy Chief Executive Officer of Saint-Gobain.

Airbus

  • 2006: President and Chief Executive Officer of Airbus.


PSA Peugeot Citroën

  • 7 November, 2006: Special Advisor, reporting to the Chairman of the Managing Board.


This article was first published in the March/April issue of the Lotus Engineering newsletter proActive. proActive is available as a free downloadable pdf. To register for proActive and to download back issues, click here.

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