PSA Peugeot Citroen has unveiled a recovery plan to double its profitability by 2010 by cutting costs, driving up efficiency and rolling out new models including a low-cost car.

Europe's second-biggest car maker, which still employs around 1,000 people in Coventry, set a 5.5 to six per cent operating profit margin target by 2010 and 6-7 per cent after that.

The company, which competes with Europe's top car maker Volkswagen and others, said it wanted to sell more than four million cars worldwide a year by the end of the decade.

It sold 3.36 million in 2006, which put it at number eight in the world.

PSA saw a rise in its first-half operating margin, a key profitability gauge, to 2.7 per cent from 2.4 per cent in 2006.

"We are engineering Peugeot's powerful comeback and accelerating Citroen's revival," chief executive Christian Streiff said.

He said the group aimed to sell 3.27 million cars in Europe by 2010, up ten per cent from 2006, with most of that growth coming from eastern Europe.

"We are not going to launch an onslaught on our competitors. We want to regain lost market share but we want to do that in a a profitable way," he told analysts.

Mr Streiff, aged 53, became PSA chief executive in February, succeeding Jean-Martin Folz, after a tumultuous 100 days at the head of plane maker Airbus and a 26-year career at building materials group Saint-Gobain.

The four million cars per year target had also been one of Mr Folz's aims.

PSA's margin goal is roughly in line with analysts' expectations and compares with French rival Renault's target of six per cent by 2009.

"PSA has a problem of credibility," said a London-based car industry analyst who declined to be named.

"The four million cars and the 5-6 per cent was expected, but their plan is not very convincing.

"And why do they expect to raise the margin by three points in three years and only one point after that?" he added.

PSA has been plagued by eroding profit margins due to stagnant sales in its main west European market, high raw material prices and fierce competition in an industry suffering from structural overcapacity and a lack of pricing

power in the face of large steel firms and integrated parts suppliers. PSA also set goals for its parts supplier Faurecia, in which it has a controlling stake, its Gefco logistics group, and its car sales financing bank, Banque PSA.

"Faurecia aims to be among the worldwide leaders in each of its activities, Gefco expects to become the European leader in automotive logistics, and Banque PSA Finance is determined to remain the benchmark in profitability," it added.

PSA was aiming for a strong improvement in product and service quality, with the Peugeot and Citroen brands ranking among the European top five.

It was also aiming for a European product offensive signalling a comeback for Peugeot and an acceleration for Citroen, with 29 product launches in Europe between 2007 and 2010, totalling 53 new car models.

It plans a cost-cutting programme to reduce warranty costs by half, reduce overheads and fixed costs by 30 per cent, shorten development cycles by 30 per cent and reduce supply-chain costs by ten per cent.

PSA said it wanted to increase capacity utilisation by 20 per centage points. It also aims to strengthen its position in environmentally friendly cars.

In July, the group reversed a four-year decline in its European market share. Its first-half market share rose to 14.2 per cent from 14 per cent a year earlier.

The turnaround follows a steady drop from 15.8 per cent in the first half of 2003.

PSA Peugeot Citroen already has announced plans to cut 4,800 jobs through voluntary redundancy in France in 2007, out of around 122,000, after a hiring freeze in 2006 and the closure of its Ryton plant near Coventry.