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Peugeot counts on new 407 for 2004 growth in Germany

Germany boss Olivier Veyrier plans new sales records for 2004. All of Peugeot's own branches are supposed to become profitable by 2007.

Frankfurt/Saarbricken. Olivier Veyrier flew in straight from the Caribbean. A day before the annual earnings press conference in Frankfurt the Peugeot Germany boss was still celebrating last year's sales successes with his top dealers on St. Maarten. Sixty chosen dealers and their companions spent a week on a luxurious four-masted sailing ship at Peugeot's expense.

They were celebrating a successful 2003. With a sales increase of 14 percent -- 123,791 units -- Peugeot outpaced the growth of both other importers and domestics during a difficult year for German retailers. Peugeot Germany also was the brand's best selling market within western Europe, which might further strengthen Veyrier's position at PSA/Peugot-Citroen headquarters in Paris.

The top models were the 206 and 307, with sales of 55,275 and 34,802 respectively. Their lifestyle coupe-convertible versions further improved the brand's image. The 206 CC was the best selling convertible in Germany and waiting times for the 307 CC are up to three months.

In 2003 revenue rose by 11 percent from 1.59 to 1.77 billion euros. Veyrier said profits showed a "strong increase." He did not want to disclose any precise figures: "We only communicate European figures." But he told Automobilwoche that his company managed a double-digit figure growth and said that business in Germany is highly profitable.

"We revive the market with products and not by taking artificial measures," Veyrier said. "Otherwise customers will lose their trust in price lists, dealers and manufacturers."

He said he would "prefer losing market shares to doing any unprofitable business." This is a reference to German competitors and specifically French rival Renault. Renault sales dropped by 0.78 percent in Germany in 2003, despite plenty of day registrations and a wide range of consumer incentives.

Veyrier's showpiece was the total restructuring of the German dealer network, called "Today 2005." Some dealers say the Frenchman -- who always has a friendly smile on his face, loves posh bow ties and whose German skills are improving year after year -- was pretty tough in realizing the restructuring program.

"We chose the dealers strictly on their profitability, financial strength and customer orientation," Veyrier explained.

Those who could not comply with the requested standards but fulfilled the service requirements were moved down to only providing service. About 80 percent of the formerly independent dealers at least received the right to act as new-car sellers.

But the network has changed completely. Although there are still 657 Peugeot locations, there are only 205 franchised dealers of new cars (with 326 locations), 255 service partners who are agents for new cars and 76 service partners who cannot sell new cars.

The top of Veyrier's network is 16 Peugeot-owned branches with 60 locations, which represent 26 percent of new-car sales. By 2005 they are expected to sell 33 percent.

Peugeot is investing 500 million euros to construct or convert the showrooms, which the French manufacturer located in expensive town centers. By 2006 the number of locations will have risen to 86. But so far only one of the 16 branches has made a profit: Kassel. Another branch, Hamburg, is close to making a profit.

According to Veyrier's plan, by 2007 all of the branches, which are supposed to act as examples of positive return on investment, will be profitable. Once that stage is reached Peugeot will consider selling the branches.

Veyrier takes a similar approach to increasing the quality of repair workshops.

The number of workshop inspections, undertaken by an external service provider, will rise from 300 to 1,500 in 2004.

Veyrier says: "Good or bad marks will have an effect on bonuses."

He has high hopes for the new 407, which goes on sales May 15.

Until then Peugeot Germany must hang on. In January Peugeot sales in Germany fell by 16 percent. Expectations for February and March are no better, especially with delivery problems for the 307 CC and the diesel models.

Veyrier sticks with his 2004 targets of 141,000 units and a market share of 4.3 percent, but only if "the overall German market is somewhere near 3.3 million."

He wants to avoid additional incentives, but they already represent 20 percent of sales.

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