(Rewrites with details from presentation, background)
By Rebecca Harrison
PARIS, Jan 28 (Reuters) - French automaker PSA Peugeot Citroen said on Tuesday sweeping plans to produce cars using shared parts would save it one billion euros ($1.08 billion) per year by 2006 and help it meet lofty sales targets.
Chairman Jean-Martin Folz said in a presentation of PSA's industrial strategy that sharing parts across different model lines by using common platforms had already saved Europe's number two carmaker 300 euros per car over the last four years.
The firm could shave half as much again off the cost of each vehicle by 2006, Folz said, adding that the strategy would save PSA 800 million euros a year over the next four years.
When combined with other plans to boost efficiency by standardising manufacturing methods for its two brands, the company would net over one billion a year in savings by 2006.
"We have achieved impressive growth. We still have progress to make on industrial efficiency," said Folz. "We have only reaped a fraction of the potential gains...and will have no problem generating savings of over one billion by 2006."
The strategy would also allow the carmaker, which increased car sales last year despite a sliding western European market, to meet ambitious targets unveiled last year to produce four million cars in 2006 and to double output in 10 years.
Last year, PSA sales rose 4.3 percent to 3.267 million units, bucking a negative trend in the western European car market and lifted by buoyant demand in Brazil, central and eastern Europe and China.
Shares in PSA stood 1.47 percent higher at 37.24 euros by 1250 GMT, after rising as much as 3.38 percent earlier. The DJ Stoxx European auto index was half a percent firmer.
SPEEDIER OUTPUT
Changing production methods to build almost all its models on three basic platforms means cars are produced faster and more cheaply, Folz said, adding that by focusing each plant on one platform the firm can also cut transport and distribution costs.
Platforms are the basic chassis of a vehicle including the floorpan, suspension and other mechanical parts. These provide the underpinnings for different body styles and engine choices.
Some 60 percent of PSA's cars are already made on one of the three new platforms and this should swell to almost 100 percent by 2006.
As well as its three main platforms, PSA also shares two platforms for utility vehicles and multi-purpose vehicles with crisis-hit Italian carmaker Fiat and one platform for small cars with Toyota .
Folz said the firm would also slash costs by standardising the production of its two Peugeot and Citroen brands, which have only shared assembly plants since 1998.
By combining the best practices of each brand and modernising factories, the group would save 350 million euros by 2006 -- a figure included in the one billion euro total, Folz said. He said the group invests one billion euros per year to improve production methods.
The company would also modernise factories and manufacturing processes to improve performance and flexibility.
PSA, which has just announced plans to build a new plant in Slovakia to boost sales in central and eastern Europe, said that by streamlining logistics and better organising the layout of its plants it would reduce stocks and shave two days off the time needed to make a car from start to finish.
It has increased its European capacity utilization rate to 117 percent from 69 percent at the start of 1998 by introducing round-the-clock shifts that have boosted production by 55 percent during the period.
PSA's domestic rival Renault has also introduced a common platform strategy as part of its partnership with Japanese auto maker Nissan .