PARIS - Stepping into the shoes of Jacques Calvet, PSA Peugeot-Citroen SA's longtime, often controversial chairman, was never going to be easy. But one year into the job, Jean-Martin Folz has proved he is very much his own man.
In his first year as PSA Group CEO, Folz already has reshaped and modernized the company. While Calvet was a strong leader and hard taskmaster, he was very much a conservative who kept the company moving along traditional, domestic-market-oriented lines.
Folz has been pushing the Peugeot and Citroen marques closer together with plans for better plant utilization and establishing a unique engineering and manufacturing organization charged with increasing the distinctiveness of the two brands.
Also inside that first year, Folz pulled the plug on two ailing ventures in India and China, while successfully launching a new plant in Brazil. Add to that a joint venture to produce diesel engines in France with Ford Motor Co., and it has been a busy 12 months.
No. 1 priority
There is no indication that his second year in the chair at PSA will be any quieter. He says his No. 1 priority is to restore the company to profitability and strengthen the product lines.
Rationalization of the company will not be at the expense of the separate Peugeot and Citroen brands, however.
'We want to have 75 percent of our vehicles based on three common platforms within four years,' Folz said in an interview in November.
'Peugeot and Citroen already have a large amount of autonomy to develop their own products. We want to have two broad-line brands, each one with a strong personality that can complement the other. In my view, a broad-line brand can offer products that are interesting for 75 percent of the new-car buyers in Europe.'
Folz said he did not want one of the brands to become a niche brand. Customers with a strong loyalty to a particular brand expect the company to provide a broad line of offerings, he said.
'If we designated one brand just for niche markets, that brand would certainly lose a significant share of the market, while the other one would not increase its market share whatsoever,' he said.
'However, we will continue to have different cars for the two brands. We will not again do the (Peugeot) 106 and the (Citroen) Saxo together.'
While he concedes that Peu-geot or Citroen cars cannot compete in the luxury segment, he says they can compete as 'status' cars, the Peugeot 406 coupe being a very good example.
This is part of a broad-line brand strategy that will produce successors to both the Peugeot 605 and the Citroen XM.
'We can find a substantial market share in this segment, at least large enough to make reasonable profits,' he said.
Profits also are affected by plant productivity, but Folz dismisses the overcapacity debate in Europe as 'nonsense.'
He said: 'Nobody knows exactly what the capacity of a plant is except in terms of units per hour.
'The situation is very different from one plant to another in Europe.... In the car industry, you cannot produce any car in any plant. Plants are specialized. It's one reason there have not been many plant closures in the industry in Europe.'
Folz said most of PSA's plants could produce more, as could many of its competitors. PSA has increased output in 1998 and, with the success of the Peugeot 206, expects to increase production again in 1999.
'We're not facing any decision in which a plant is going to close,' Folz insisted.
Despite the plant closures in China and India, expansion outside Europe remains an important issue to PSA.
'We sold 84 percent of our cars in Europe last year and only 16 percent elsewhere. We have been much criticized for this, although when you look at the present crisis in the Asia/Pacific region it might be an advantage more than a disadvantage.'
He said PSA will not build plants in eastern European countries that eventually will be linked to the European Union, but it will proceed with plans to build capacity in South America.
PSA plans to build 100,000 cars in Brazil and has set a target of
winning 8 percent market share in the region by 2003, up from about 4 percent today. The current difficulties in South America will not change this strategy, Folz said.
Asia is a different story, he said.
'We don't have an Asian strategy but selected targets,' he said.
'China, Malaysia and Iran are our three targets. Peugeot was effectively pushed out of China, but Citroen operations are doing well. We have two good plants, good people, a good car. We are developing a dealer network and intend to make 50,000 cars this year and 75,000 next year.'
Folz also said he would like to expand PSA's cooperation with Ford beyond the planned diesel engine project.