PSA pledged to develop new plug-in hybrids, four-wheel-drive powertrains and self-driving cars as it increases spending on research and development to an average of 7 percent to 8 percent of revenue in the next three years.
Tavares said PSA plans to move 20 percent of research and development activities out of France. It will save more cash by doubling the supply of parts from lower-wage countries and "rightsizing" French plants, he said, while raising production at more competitive sites in Slovakia, Spain and Portugal.
PSA is targeting 2 billion euros in operating free cash flow in 2016 through 2018, the company said.
Investors welcomed a return to positive earnings goals but were skeptical at the size of the task. The margin goal, while short of the Volkswagen brand's 2.9 percent and far behind such rivals as Toyota, nonetheless cheered analysts: PSA's 1.04 billion euro auto division loss last year amounted to a negative 2.9 percent margin.
"While they see themselves as back in the race, they don't seem to realize that the competition is moving forward just as quickly," said Barclays analyst Kristina Church. "They actually need to start spending ahead of the competition."
Erich Hauser, a London-based automotive analyst at International Strategy & Investment Group, said: "It seems to be the minimum requirement, but it’s a start. When you run a big ship like this, you can’t expect to turn it around in a few years."
“What’s really interesting is that Tavares is clearly taking a leaf out of Renault’s Drive the Change plan,” Hauser said. “It’s very similar: in the very near term, it’s about fixing cash and in the longer run, it’s about returning to profitability.”
Tavares joined PSA in January from French rival Renault, where he was chief operating officer, to succeed Philippe Varin as CEO. The business plan puts Tavares’s stamp on the carmaker’s revival after Varin, 61, arranged to bring in the outside investors and started developing upscale models for the Peugeot brand.
Varin introduced Citroen’s premium DS vehicles in 2009, taking the name from an iconic model produced from 1955 to 1975.
PSA was among the carmakers hardest hit as industrywide European auto sales contracted over six years to a two-decade low, with the company’s market share narrowing to 10.9 percent in 2013 from 12.8 percent in 2007.
Varin responded by starting a cutback of 11,200 jobs in France, or 17 percent of its work force in the country, shutting a plant near Paris last year and bringing out new models, such as the 2008 small SUV, to revive demand.