Newly-appointed PSA Peugeot Citroën managing board chairman Christian Streiff on Wednesday (7 February) defined four operating priorities that he said must be urgently addressed to return the French car-making group to growth and profitability.

He called on the company to redouble its efforts to improve quality. “The objective is to rapidly position Peugeot and Citroën among the market leaders in both product and service quality by stepping up the programs already underway in automotive design, in the production plants, with suppliers and with dealers,” he said.

The second priority is cost reduction. Streiff said the group previously prepared for sustainable growth, but when that slowed, costs spun out of control. Costs will have to be reduced much more quickly in the short term, through measures implemented in the coming months to manage headcount, cut overheads, quickly improve plant and office productivity across the group and streamline the organisation.

His third priority is product strategy. The product plan will be stepped up and broadened to improve response to changing customer expectations and more aggressive competition in the global marketplace. In particular, with the market increasingly driven by new models and features, the group will have to refocus on shortening time-to-market for future projects.

The fourth priority is international operations, with three ‘bridgeheads’ that need to be rapidly expanded. The group’s short-term objectives are to grow in China, become a major industry player in the MERCOSUR (South America, where it is well established in Brazil and Argentina) region and continue to expand in eastern Europe.

To manage these priorities and lead the strategy, Streiff has set up a new “highly operational organisation”.

To bring new models to market more quickly, a programmes department has been created to bring together, in a single organisation led by a single executive, all the responsibility for product plans, programmes and vehicle projects.

To reduce production costs and improve productivity more quickly, an operations department has been created, comprising engineering, production, plant scheduling and logistics.

The heads of these two new departments, along with the chief executives of the Peugeot and Citroën brands will sit on the five-member managing board, and be part of a close-knit team, capable of quickly making all the decisions concerning a given model.

A strategy and innovation department has been created to consolidate all of the processes that enable the group to anticipate and prepare for its growth, including market forecasting, sustainable development, research and innovation and cooperative ventures. The objective is to make the group’s research more customer-focused and ensure that corporate strategy and research are seamlessly linked.

Three business units have been created, reporting to Streiffand with a broad range of delegated responsibilities, in order to drive faster growth in operations in China, Mercosur and the replacement parts business.

In addition, the purchasing department will now report directly to Streiff, in a commitment to stepping up global sourcing and to actively developing relationships with partners (such as the deal with Mistubishi who are building Outlander-based SUVs for Peugeot and Citroen as well as buying diesel engines from PSA for these versions and its own).

Strieff called on the entire PSA organisation to implement a new action plan, called CAP 2010 (for Customers, Acceleration, Products).

From now until May, 10 cross-functional teams will prepare clearly defined projects in the four priority areas of quality, costs, products and international operations.

The teams will comprise 100 people and will have 100 days to prepare the projects, which will be implemented by 1,000 managers across the group. This turnaround programme will then be adopted by the entire organisation in a commitment to moving the group forward to clearly defined objectives.

The teams will be fully backed by senior management, which is focusing on defining four strategic projects: the 2010-2013 product plan, international development, technological development and the cooperation and alliance strategy.

All of these projects and programs will form the basis of a new corporate mission project that Streiff will announce next September.

Streiff acknowledged that there had been highlights over the last 10 years including a 60% increase in unit sales and the launch of highly successful models such as the Peugeot 206 and 307, the Citroën Xsara Picasso and the Citroën Berlingo and Peugeot Partner “which helped to shape their markets and create new trends in automotive design”.

He noted that sales outside western Europe tripled over the period, the group developed the three shared platforms on which nearly 70% of Peugeot and Citroën vehicles are now built, and the cooperation strategy was stepped up.

Growth in Europe, however, has been flat and over the past three years, the group has lost 1.5 points of market share.

“The reasons have been clearly identified. They include the difficulty in managing quality levels at a time of fast growth, an aging model line-up, an increase in competitive pressures and a sharp fall in profitability due to factors that are both internal (decline in capacity utilisation, over-staffing) and external (raw materials prices), Streiff said.