COMPANY ANALYSIS

Company Analysis

Company Analysis

Introduction

PSA Peugeot Citroën (Peugeot) was the second largest passenger car and commercial vehicle manufacturer in Europe after Volkswagen. Peugeot made cars and light commercial vehicles under the Peugeot and Citroën brands. Other products included motorbikes, scooters, and light-armored vehicles. Peugeot also offered parts (Faurecia), transportation and logistics (Gefco), and financial services (Banque PSA Finance) to dealers and customers. The Peugeot family controlled nearly 42% of the company's voting stock. During a period of automotive industry consolidation, Peugeot had preferred partnerships to mergers. The company had focused on efficiently rolling out new models and technologies and cutting expenses through alliances with low-cost car component makers. With Europe accounting for 90% of sales, Peugeot was attempting to broaden its markets. In 2002, Peugeot recorded revenues of $57,054 million and a net income of $1,771.3 million.

Background Note

In 1810, brothers Frédéric and Jean-Pierre Peugeot made a foundry out of the family textile mill in the Alsace region of France. They invented the cold-roll process for producing spring steel. Bicycle production began in 1885 at the behest of avid cyclist Armand Peugeot, Jean-Pierre's grandson. Armand turned to automobiles and built Peugeot's first car, a steam-powered three-wheeler, in 1889. In 1894, the budding carmaker built the first station wagon, followed in 1905 by the first compact, the 600-pound "Le Bébé (Humphrey Lecler and Salerno 2000 12-37)."

Peugeot built factories in France and made the first diesel passenger car in 1922. The 1929 introduction of the 201 model was followed by innovations such as synchromesh gears in 1936. The company suffered heavy damage during WWII, but quickly bounced back and began expanding overseas after the war. In 1976, the French government persuaded Peugeot to merge with Citroën, another leading, struggling French car manufacturer. In 1978, Peugeot bought Chrysler's aging European plants and withering nameplates, including Simca (France) and Rootes (UK).

Jacques Calvet took over as CEO in 1984. He cut 30,000 jobs and spent heavily on modernization. Aided by the strong launch of the 205 superminicar, Peugeot returned to profitability in 1985, and by 1989 had halved its production break-even point. In the 1980s, Peugeot signed production assignments with Renault (industrial vehicles, motors, gearboxes) and Fiat (light trucks) and introduced a reasonably priced electric van in 1990.

In 1991, Peugeot withdrew from USA after five years of declining sales. A year later, Renault and Peugeot developed electric cars and set up servicing centers throughout France. Following an economic slump in 1993, Peugeot suffered its first loss ($239 million) since 1985. A French government incentive to replace cars over 10 years old, boosted sales in 1994.

Peugeot and rival Renault together introduced a V6 engine in 1996. Jean-Martin Folz replaced Calvet as chairman and CEO in 1997. In 1998, the company began building Peugeots and Citroens in the same plants and set up its Faurecia unit when its ECIA (Equipments and Components for Industry Automobile) subsidiary merged with car parts maker Bertrand Faure.

The Marketing Strategy

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