Peugeot S.A.

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Peugeot S.A.

75, avenue de la Grande Armée
F-75761 Paris 16
(1) 502 11 33

Public Company
Incorporated: 1896
Employees: 187,500
Sales: FFr 97.4 billion (US$15.1 billion)
Market Value: FFr 18.9 billion (US$2.94 billion)
Stock Index: Paris

One of the prominent French families of the past century, the Peugeots have built their success on a painstaking approach to the assembly and quality of their automotive products. The company inspects every individual component that comes into the plant, test running every engine and gear box for about 10 minutes (about one in ten is either rejected or sent back for rebuilding), and track testing every finished car for approximately one hour. On average, seven faults are corrected per vehicle. Some 10% of the total work force of about 60,000 at Peugeot is occupied with quality control.

The manufacture of automobiles at Peugeot began in 1891 when a factory previously devoted to the construction of quadricycles dedicated nearly all of its resources to the construction of the automobile as we know it today. The founder of the company was Armand Peugeot, a Frenchman with a highly individualistic nature. Peugeots success in the manufacture of machine tools resulted in his gaining recognition and influence, and many of his colleagues feared the risks entailed in devoting his complete resources to the manufacture of an automobile. However, this did not deter Peugeot. In 1891 he traveled to Germany in search of the perfect twin-cylinder engine, resolved that he would not come back empty-handed. Two months later he returned with the 525-cc version which was being manufactured by Daimler for its own hand-built cars. This purchase, Peugeot told his colleagues, was the beginning of something grand.

Within fifteen years Peugeot had established manufacturing facilities throughout France. The first Peugeot factories were established in Valentigney and Audincourt, and then in Lille and Sochaux. For a few years after the Sochaux plant was opened, production primarily involved the manufacture of trucks. The first of these to bear resemblance to modern trucks was the type 109 which, with a maximum load of 3 tons, could still reach 20 km/hr. Industrial vehicle production increased dramatically during World War I, but as the war ended it began to recede.

In the period leading up to the war Peugeot cars won many races, including the 1913 Indianapolis 500. During this time the company was producing a complete range of vehicles for all uses with one salient feature which still distinguishes its product line todayits cars were sturdy and dependable vehicles with an excellent finish. Peugeot specialized mainly in the production of utilitarian models like the Bebe. The Quadralette engineered along the same lines as the Bebe and introduced at the Brussels Motor Show in 1920, subsequently led to the development of the model 5 CV which hit a record production figure of 83,000 chassis.

The history of the modern Peugeot automobile, however, did not begin until the 1929 Paris Motor Show with the debut of the 201 model. This completely new car, which was originally fitted with an 1122-cc engine, earned Peugeot its reputation as a manufacturer of reliable vehicles. What distinguished Peugeot from other car companies of its time was the number of technological developments that the company incorporated into its product designs year after year. Indeed, a steady stream of innovations form the core of the companys history during its first century.

By 1932, for example, the company had produced the more refined 301 model, also available in a family version. The lines of the 201 and 301 had become more elegant and attractive, creating a distinctive style very much in keeping with the current trends of the time. In 1934 the first aerodynamic tests were conducted on the 301 model and Peugeot introduced the 401 model and the six-cylinder 601, but no other model could match the 201. Before the 201 finally went out of production in September 1937, 142,000 units had been produced. The aerodynamic series began in 1935 with the 402 prototype model, which had its headlights set behind the grill. It was with this model that the numbering system which Peugeot still uses today to identify its cars began. Peugeot launched the 302 model at the 1936 Paris Motor Show; this was a new and scaled down version of the 402. Its most significant innovation was the use of the synchromesh gearbox, and it was also the first touring car fitted with a diesel engine.

Production slowed during World War II and almost ground to a halt as a result of the damage incurred by Allied bombing. It picked up again immediately after the war with the 202 model which had originally been introduced in 1938. This was replaced towards the end of 1947 by the 203 model, of which over 685,000 vehicles were built. With a unitary body and a 1300-cc 45 hp engine, this remained in production for almost 12 years without any major modifications.

It was only after World War II that the overwhelming difference in scale between Peugeot and the massive American companies like General Motors became clear. Armand Peugeots successor, Roland Peugeot, found himself asking the question: should the small French family business go public in order to enlarge its operations? Many members of the board of directors believed that the additional capital which would be derived from such a share offering was necessary if the company was to compete in the same markets with Detroit. Furthermore, such a move was bound to create many new jobs.

Ultimately, what was at stake was the image of the company itself. On the one side, there were men like Roland Peugeot who believed that the careful and elaborate approach to the production of a small number of cars was the key to the companys survival. On the other side, there were the board of directors who were largely convinced that the company would be more successful producing several million cars per year. The debate was finally settled by Roland Peugeot when he convinced the board of directors in 1954 that manufacturing a small number of sturdy and reliable cars was more profitable than developing larger numbers of more glamorous vehicles which the Europeans perceived Detroit to be making already. Quality and reliability had been the focal points of a successful marketing strategy for a long time, and the company made a firm decision to concentrate on selling to that part of the public which viewed the car as a basic utility rather than a status symbol. In this type of market a premium would be placed on a high quality car which could be depended upon to have a long and reliable performance.

In April of 1955 Peugeot began its association with the bus company Pininfarina. Since then, their cars have been produced with the marque of the Lion Rampant, first used on the modern 403. This car was given an 1800-cc 48 hp diesel engine in 1959. A more modern version of the 403 was launched in May 1960 and designated the 404. This car model was available with a 1485 or 1618 cc carburetor petrol engine (the fuel injection model was brought out later) or a diesel engine of almost 2 liters. An important feature of the 404 model was its versatility; it was available as a family car, a coupe, or an all purpose van. A total of 2,450,000 of these models were built.

Meanwhile, in the commercial sector, the front wheel drive J7 van which featured a large carrying capacity, was introduced. It was one of the few vans in its category in which a man could stand upright and it was available with the same petrol or diesel engines as the 403 model. In April of 1965 front wheel drive was introduced in the small, new 204 model car, which had a 1130-cc 58 hp petrol engine. The 04 series expanded over the years to include the 304 car (a more powerful 204 model with a different body) and the 504 car which was the flagship of the company until the arrival of the 604 model.

By the mid-1960s Peugeot was already making headway in popularizing its brand of cars abroad. Production levels of its handmade vehicles were increasing at a steady pace and, by the time of the oil crisis in 1973, the company had gained a significant share of the automotive market in America. As the European economic recession grew worse in 1973, many of the international automobile companies began experiencing depressed markets, but Peugeot was largely unaffected. Its 1973 output was 14.1% higher than the previous year, a better performance than the average 10% gain of the previous five year period.

Turnover for the year was 18.4% higher than 1972. Profits, however, were less substantial, partly as a result of the energy crisis. And sales to leading export markets, such as West Germany and Switzerland, decreased during the closing months of 1973.

While Peugeot was by no means immune to the conditions that influenced the international motor car industry, the economic situation did not convince management to abandon all thought of growth during 1974. Francis Rouge, the new president of Peugeot, was encouraged by the companys strong market position in the developing countries of Africa and Latin America. Company management was to learn that the automotive markets in Third World countries were useful in offsetting the declining demand in industrial countries.

In recent years the company has experienced severe financial losses. Many industry analysts believe that company management made a mistake by first acquiring Citroen, and then a division of Chrysler. The current president of the company, Jacques Cal vet, is said to favor stringent modernization programs to return to profitability. When Calvet was appointed in 1984, many analysts speculated that he would be an Iacocca type of manager. By this they meant that he would be willing to be the architect of controversial cuts in employment. Fortunately, such a move has been obviated by recent successes, most notably the modernization program which has led to the production of the 205 car.

The future of Peugeot, at least during the next decade, will depend in part upon the continued success of cars like the 205, with carburetor and fuel-injected petrol engines, as well as Turbo-charged diesels. Under the direction of Calvets modernization strategy, it is likely that the companys continuous attempts to improve the automobile will result in some advantageous developments for the automobile industry.

Principal Subsidiaries

Automobiles Peugeot; Automobiles Citroen; Aciers et Outillage Peugeot; Cycles Peugeot; Engrenages et Reducteurs; Société de Constructions Mécaniques Panhard et Levassor; Gefco; Société de Credit a Industrie Automobile-Socia; Société Financiére de Banque-Sofib; Compagnie Genérale de Credit aux Particuliers-Credipar; PSA Wholesale Ltd.; Anglo French Finance Co., Ltd.; Peugeot Finance International NV; PSA Finance Holding. The company also has subsidiaries in Belgium, Italy, The Netherlands, Spain, Switzerland, and West Germany.

Further Reading

In First Gear: The French Automobile Industry to 1914 by James M. Laux, Liverpool, Liverpool University Press, 1976; The Automobile Revolution: The Impact of an Industry by Jean-Pierre Bardou, Chapel Hill, University of North Carolina Press, 1982; The New France by Pierre Lefebre, London, Penguin, 1984.