PSA Peugeot Citroen is sticking to its sales targets for the Peugeot 207, a small model that needs to become an engine of growth for the Peugeot brand, its chief executive said on Thursday.
The carmaker, faced with a three-year decline in market share, has said it will cut costs and accelerate new model launches to reduce the average age of its line-up.
It introduced the 207 earlier this year as its offering in the competitive small-car segment.
"We said we would sell 300 000 in the first year; we will sell 300 000 in 2006. We said we would sell 500 000 in the first year of full production, and we will sell 500 000 models in 2007," PSA Peugeot Citroen Chief Executive Jean-Martin Folz said at the official opening of a new production plant.
"The start of the 207 is going better than that of the 206 (its predecessor). And our policy of making the 207 and continuing the 206 is also paying off. The sales of the two combined are up 41% (since the launch of the 207). Anybody who does not see the take-up is perhaps short-sighted," Folz added.
Folz said that sales of the 207 would be boosted by the launch of new shapes of the car - now only in three - and five-door sedan versions.
The Trnava plant will make 55 cars per hour, the standard for big PSA factories, mainly for the eastern and central European market, but Italy and Germany are also within reach. The plant is specialising in the so-called "small A" platform of the group, together with Poissy in France and Madrid in Spain.
It will also make other body styles based on the platform, but Folz declined to say which model and whether that would be for Peugeot or its sister brand Citroen.
The Trnava plant is based on a 193 hectares area and is one of the company's largest plants, constructed in two years' time for an investment of €700m.
PSA had planned to add a second phase to the project but recently cancelled it due to its reduced expectations for growth prospects in the European market.
PSA's decision to build Trnava and close Ryton in Britain has been criticised by labour unions as a move to low-cost countries, but Folz played down labour costs as a reason.
"It is true that the wages here are a third or a quarter of what they are in west Europe. But the logistical costs are more important. A car is made up of 2,400 pieces that have to be at the assembly line at the right time," Folz said.
He said the decision to build in Slovakia was made out of commercial considerations, because the sales in eastern and central Europe are rising fast.
"The centre of gravity of our logistical operations was more to the west, and the centre of gravity of our commercial operations was moving east. Now we have brought these two centres closer to each other," he said.
He added that the other European plants of Peugeot and Citroen did not have to fear competition from Trnava.
"There is no competition between plants, the question is the overall competitiveness of the group, and we have to optimise our industrial implantation," he said.
PSA has a site in the Czech Republic, Brazil and Argentina and will next week start with work to triple its production in China.
Folz said the group was also studying possibilities to make cars in Russia. He said fiscal reasons made it unattractive to import cars into the Russian market and that the firm was looking at ways to make 50 000 to 100 000 cars per year there.
"We have no intention to export cars from Russia to other markets," Folz said.
He declined to comment on the group's current performance ahead of the third-quarter sales figures due on Oct 26.
In September at the Paris Auto Show, Folz described August and September as bad months for the group.
The group has stepped up a cost-savings programme by chopping &euor;500m from its capital expenditure budget and seeking to lower development costs per model while launching new versions of existing models.
Folz is set to take early retirement in 2007, and the supervisory board, headed by Thierry Peugeot, is looking for a successor.
The Les Echos newspaper on Thursday identified possible candidates including Jacques Aschenbroich, a managing director with Saint Gobain, Corus head Philippe Varin, former Airbus CEO Christian Streiff, Areva head Anne Lauvergeon and PSA's strategy director, Gilles Michel.
PSA had no comment on the article.