The company said it plans to appoint a successor for Folz, who turns 60 in January, by the end of the year. The new chief executive will take the helm by March 31.

Shares in PSA Peugeot Citroen SA were up 3.3 per cent at 43.88 euros (US$55.86) in Paris trading.

Folz, whose mandate was renewed in April 2004 for four years, joined Peugeot Citroen from sugar and food company Eridania Beghin-Say in 1995, becoming head of the automobile division the following year and chief executive in 1997.

Peugeot Citroen's earnings have suffered over the past two years from an aging vehicle model range, sharply higher raw material costs and fierce price competition.

Its share price fell sharply in July, when the company issued its third profit warning in a year, cutting its operating margin forecast for the second half to about 2.4 per cent from above 2.8 per cent.