Peugeot, tuning up after expansion, sniffs profits

By , Business editor of The Christian Science Monitor

There was at least one automobile maker that was happy with its sales in the United States last year - Peugeot. The company sold 17,000 cars in the US, up 30 percent from 1980.

That number is, of course, tiny compared with the sales of General Motors, Ford, or even Chrysler. Nonetheless, Peugeot's sales manager here, Victor Dial - an American with a top job in a decidedly French company - was happy.

''By and large,'' he says, ''we have the correct sales strategy.''

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Peugeot hired Mr. Dial a year ago from Ford, for which he had worked for 20 years in France, England, and Belgium. Peugeot had grown from what Dial called ''a small, obscure manufacturer of cars'' with sales of around 7 billion francs in 1970 to the third- or fourth-largest automaker in the world, and by 1980 sales of some 75 billion francs (more than $11 billion at today's exchange rates). By buying out Citroen in 1975 and Chrysler's European operation in 1978, it acquired a host of plants scattered about Europe, new auto lines - and financial losses.

''I don't think it is surprising that Peugeot turned to outside help,'' Mr. Dial says.

Last year the Peugeot auto group posted a consolidated loss of more than 2 billion francs, or some $300 million. That loss was partly due to the costs of closing down plants. Among others, Peugeot has shut down a Chrysler plant in Linwood, Scotland, a Citroen factory in Belgium, and its manufacturing operations in Argentina. Another factor was high financing costs.

In an interview, Mr. Dial said 1982 will be ''much better'' for Peugeot than 1981. The company should be ''fairly close'' to profitability on an operating basis. However, he added, the family-controlled company is ''not out of the woods yet'' in its absorption of the Chrysler plants.

''We have the French operation pretty well turned around,'' Dial said. ''We are looking for big improvements over the next few years.''

Peugeot's sales have picked up 13 percent in France this year, he said, and are also somewhat higher in Italy and Britain, but are down a bit in West Germany. Plants are working overtime to meet orders.

In the US, Peugeot sales have been hit by the drop in gasoline prices and rise in diesel fuel prices. Mr. Dial admitted there is less financial justification now for buying a diesel-engine Peugeot than before. About half of Peugeot's sales last year were diesels.

''I will be happy if we do as well (in the US) this year as we did last year, '' he said. His target is the sale of 20,000 cars.

Peugeot's sales strategy in the US has been to aim at the luxury price range. Its Peugeot 505, 504 (a station wagon), and 604 sell in the $11,000-to-$22,000 range, with an average sticker price of $15,000 to $16,000. That's about half the cost of a Mercedes, but closer to the price of BMW or Volvo cars.

It would be ''ruinous,'' Mr. Dial said, for Peugeot to try to slug it out in the bottom of the US market with Volkswagen or Japanese imports. A high price and high quality, he argued, make more money for Peugeot and its 330 American dealers.

Dial is critical of the ''American way'' of selling cars, with rebate after rebate, now followed by warranty competition. He contends that Europeans, with their smaller, well-made cars, can today teach Americans something about selling automobiles.

Peugeot got its start in the 19th century as a maker of steel corset stays. By the turn of the century, its products pervaded French middle-class life. The company history at that time said: ''At every hour of the day, Peugeot is present. Madame gets up, puts on her corset (Peugeot stays), turns on her gramophone (Peugeot spring), opens her umbrella (Peugeot frame), does odd jobs about the house (Peugeot hammer and saw), tidies up the garden (Peugeot pitchfork), and takens a turn around town (Peugeot bicycle).

Nowadays Peugeot is known mostly for its cars.

The goal of Peugeot's acquisitions of Citroen and Chrysler Europe (renamed Talbot) was to reduce basic component costs through bigger production runs. ''It's going to produce economies down the road,'' Mr. Dial says. For instance, the company will start producing an engine for the Talbot Horizon in July which later will go under the hood of Peugeots.

''You have to be a certain size to be a factor in Europe,'' Dial notes. About 10 million cars are sold per year in Western Europe, about the same as in the US in a normal year. Six companies, Renault, Fiat, VW, Ford, GM, and Peugeot , each sell more than 1 million cars annually, with such producers as BMW, Mercedes, Alfa Romeo, and Volvo selling smaller numbers.

Thus, despite the difficulties of merging English-oriented Chrysler Europe with French-speaking Peugeot, the combination makes ''a good deal of sense,'' Dial claims.

One aspect of the merger has been a surplus of dealers. In Italy, for instance, the company has some 200 Talbot dealers and some 200 Peugeot dealers. Dial admit that sometimes the dealers fight each other for sales.

A goal of the company is to reduce the number of ''families'' of cars from some 10 now to five or six over the next four to six years. This, says Dial, will be done in an evolutionary rather than revolutionary manner. The number of engines might be trimmed from about 14 to half that number, with four of these gasoline-fueled and three diesels.

Mr. Dial has just put into effect a new computer-based system that ties production of individual cars to sales. If the customers are ordering Peugeot 505s with automatic shifts and painted green, the assembly line will make them promptly. Before, the plants had to guess on what models and extras customers would order. ''We never could get the right car to the customer,'' Dial says.

For Peugeot's sake, Mr. Dial's ''modern marketing and selling techniques'' had better work. If the company's finances remain in bad shape and it needs government assistance, the French Socialist government would probably seek at least 35 percent of the capital, providing effective state control.

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