Peugeot Rules out Chrysler Bid, Too Busy Taking Care of Business

GENEVA March 6, 2007; Marcel Michelson writing for Reuters reported that PSA Peugeot Citroen Chief Executive Christian Streiff said a strong euro was a handicap for European automakers and would require extra efforts to reduce costs that could involve producing more in low-cost countries.

PSA was focused on improving its profitability and its quality, he said on Tuesday, and therefore "did not have time" to look at U.S. auto maker Chrysler, which many speculate could be sold by parent DaimlerChrysler AG after a strategic review.

"We don't have time to look at Chrysler, which isn't to say that such an operation would be stupid. But to launch this now would be such a distraction of effort that it isn't possible," Streiff told reporters at the Geneva motor show.

"I do not think we will conclude another industrial alliance," Streiff said.

He said PSA had decided not to enter into a local alliance with Malaysia's Proton because the Malaysian market was in decline and a production base in the region did not give sufficient cost advantages.

He said PSA Peugeot Citroen already held the 'world record' in alliances in the automobile sector -- having precise product pacts with the likes of Ford, Fiat, BMW, Toyota and Mitsubishi Motors.

The latter provided PSA with a sports utility vehicle which is being launched at the Geneva show here as the Citroen C-Crosser and Peugeot 4007.

DEEPEN EXISTING ALLIANCES

He said the group wanted to 'deepen' its existing alliances to reduce costs, accelerate product development and boost quality. He was prudent about considering any capital alliances because the majority of such alliances had failed in the past.

Streiff became chief executive in February, succeeding Jean-Martin Folz, after a tumultuous 100 days at plane maker Airbus during which he laid the basis for the Power8 restructuring plan there.

At PSA, he has installed teams to study ways to improve the organization and production methods and these will report back in early May.

Streiff intends to unveil the outcome and some targets at the annual general shareholders meeting also in May and declined to give any targets on Tuesday.

But he did outline his principles. He said that for PSA an operating margin target in itself -- as set by Carlos Ghosn at Renault - was not the main figure to look at but this needed to be combined with turnover of working capital into a target for return on capital employed (ROCE) -- which was about 7 percent in 2006 and for which his predecessor aimed at 13.

PSA needed to boost its quality because it had 'fallen back' after having made good strides in the past. Japanese and other Asian manufacturers were the models to look at and co-operation with Toyota and Mitsubishi allowed PSA insight, he said.

PSA needed to reduce fixed costs - at headquarters and at factories - and speed up the roll-out of new models and multiply their number. He said he also wanted a clearer decision-making process to end 'internal sniping' and round-robin decision-making that caused delays.

"We have to do things more quickly and less expensively. The big challenge is to boost quality while at the same time adding more models," he said, adding the next generation of vehicles needed to have a lower cost base than the current one.

Quality being a prime concern, the group is now testing models for at least 60,000 km to iron out weaknesses.

Streiff wanted to concentrate on three regional areas -- Asia with China, Europe including Russia and Latin America.

For Russia, the group is still studying whether to set up production facilities there with a partner or on its own.