Psa Peugeot Citroen S.A. Business Information, Profile, and History

History of Psa Peugeot Citroen S.A.

PSA Peugeot Citroen S.A. is one of the big six European automotive manufacturers, producing passenger cars and light commercial and utility vehicles under the famous Peugeot and Citroen brand names, as well as motorbikes and scooters, and vehicles for military use. PSA, through subsidiaries Peugeot Citroen Motors, also produces car parts, and as such is one of Europe's largest suppliers of parts and motors to the automotive industry. PSA also develops and manufactures light machinery, high-tech equipment, and operates its own financial, freight, and distribution subsidiaries. In 1998 PSA reported sales of FFr 221.4 billion, or approximately US$41 billion. The company's automobile unit is the dominant player on the French market, just ahead of rival Renault. In France, Peugeot owns more than 30 percent of the market. Together with Ford Europe, Fiat, BMW, Daimler-Chrysler, and Renault, Peugeot is among the principal European automotive manufacturers, where it holds an 11.3 percent market share, and, among utility vehicles, the leading share of 17.4 percent.

PSA employs some 158,000 people, through operations in more than 100 countries. Fully 70 percent of the company's manufacturing is done outside of France. Nevertheless, Europe, and especially France, remain the company's chief focus. Almost all of PSA's sales are in Europe. France alone represents approximately 30 percent of Peugeot's car sales; total Europe sales account for some 90 percent of Peugeot's totals. However, the company has been making inroads in the Asian and Latin American markets, and has set targets to achieve 25 percent of annual sales outside of Europe at the turn of the century. More than 100 years after the founding of the original Peugeot motor company, the Peugeot family remains integral to the company's operations, with family members sitting on the company's board of directors and with the family's shareholding accounting for around 25 percent of the company's stock. Yet day-to-day operations have been led by chairman and CEO Jean-Martin Folz, who replaced longtime company leader Jacques Calvet in 1997.

Founding the French Automobile Industry in the 1890s

The Peugeot and Citroen names held a prominent position in the emerging French automotive industry of the 19th century. The Peugeot family was already among the country's prominent manufacturers, operating a textile mill in France's Alsace region. In the early part of the 19th century, the family turned to steel production, after Jean-Pierre and Jean-Frederic Peugeot invented the cold-roll method of manufacturing spring steel. The bicycle craze of the 1880s brought the family into wheeled vehicle production, as Armand Peugeot, grandson of Jean-Pierre and a cyclist himself, joined the family business. It was Armand Peugeot who would turn the Peugeot name into one of the most respected automotive manufacturers in the world.

Peugeot's 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. Production of the first Peugeot passenger vehicle--a three wheeled, steam-powered motoring car--was launched at the end of the 1880s. However, Peugeot quickly recognized the potential of the newly emerging internal combustion engine. In 1891 Peugeot traveled to Germany in search of the perfect twin-cylinder engine, resolved that he would not come back emptyhanded. 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."

Peugeot's motor car would quickly make its mark, winning some of the world's first automobile races and establishing the Peugeot name among the top of the profession. Peugeot soon introduced a new type of automobile, the station wagon, before the turn of the century. Armand Peugeot was also credited with producing the world's first compact car, dubbed "Le Bébé" (the Baby), in 1905. Within 15 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 three 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 began producing a complete range of vehicles for all uses with one salient feature which would continue to distinguish its product line--its cars were sturdy and dependable vehicles with an excellent finish. Peugeot specialized mainly in the production of utilitarian models like the Bébé. The Quadralette engineered along the same lines as the Bébé 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.

By then, a new name had appeared on the French automotive scene. André Citroen's father, a Dutch diamond merchant, had moved to Paris in the 19th century. André Citroen graduated from the Ecole Polytechnique, France's most prestigious university, in 1900 and turned to manufacturing. In 1913 Citroen established the company's precursor, the Citroen Gear Company, in 1913. In order to work smoothly, the teeth on the gears had the form of chevrons, the shape that became the emblem of the Citroen name. André Citroen soon began importing modern industrial working methods to France--during World War I, Citroen's introduction of mass production methods enabled the country to supply its war machine; Citroen himself turned production to munitions. These same production methods, inspired by Citroen hero Henry Ford, would later allow Citroen to produce economical cars in large quantities, and transform the automobile from an elite possession to a common consumer good in Europe. In 1916 M. Citroen began preparations to convert his Paris munitions factory on the Quai de Javel into a car factory. By the end of 1919, the factory was producing 30 cars a day.

The factory produced the Type A, appearing in June 1919, the first European car to be mass produced and the first low-cost car to be sold fully equipped (with, among other things, electric starter and lighting, hood, spare wheel, and tire). It was also the first car designed with the intention of reaching the popular market.

In 1920 Citroen's fame took off at rapid speed after the company won the fuel economy grand prix at Le Mans. As a result, the company greatly increased its rate of production; from a total of 2,810 cars built in 1919, the company had a production total of 12,244 in 1920.

The following year, Peugeot would make its own contribution to the automotive engine market, introducing the first diesel-powered passenger automobile. Peugeot continued to hand craft its automobiles, as Citroen moved its postwar production in two directions.

In 1921 production began on three types of "half-trucks," bearing the Citroen name and incorporating the B2 engine. The new truck type would accomplish the first vehicle crossing of the Sahara. This mission, led by Haardt and Audouin Dubreuil, left Algiers in December 1922 and arrived successfully in Timbuktu in February 1923. In the ensuing decades, Citroen gained world renown by participating in motor expeditions, rallies, and mass treks across desert landscapes in both Asia and Africa.

On the consumer site, Citroen was also innovating. In 1922 the company began offering credit sales, with repayments spread over 12 or 18 months. These arrangements helped to jump-start the popularization of the automobile throughout France. Also in 1922, the company presented the 5CV Type C, a model that contributed to the "democratization" of the automobile because it was economical and easy to drive--so easy, in fact, that it was dubbed the first "ladies' car." The model was mostly painted yellow; hence, its popular nickname was "petite citron," or little lemon.

Citroen first became known in foreign markets in 1921, when it exported a total of approximately 3,000 cars. This move sent the company on a long trek of expansion through numerous international territories throughout the century. André Citroen established the basis of a network of subsidiaries in Brussels, Amsterdam, Cologne, Milan, Geneva, and Copenhagen in 1924; the company exported a total of 17,000 vehicles during that year.

The year 1924 marked the official beginning of Automobiles Citroen. André Citroen founded the Société Anonyme Automobiles Citroen with a capital of FF 100 million. In the same year, the company presented the B10, the first automobile to have an all-steel body instead of the conventional mixed wood and steel construction. Made of cold-pressed panels welded together, the new body offered much better resistance to impact. Production increased in 1924 to 300 vehicles per day, for a total output that year of 55,387 automobiles.

In 1925 the company also shaped and welded its dealer network in France; the number of dealers increased from 200 in 1919 to 5,000 in 1925. The fame of Citroen continued to spread as Haardt and Audouin Dubreuil led their second mission, the Croisiere Noire, between October 1924 and July 1925. The Citroen Central African Expedition consisted of 16 men and eight half-trucks traveling a total of 20,000 kilometers from Colomb-Bechar (Algeria) to Antananarivo (Madagascar).

By 1928 Citroen's factories employed 30,000 workers and maintained a total production capacity of 1,000 vehicles per day; the company had 14 distributors in France and North Africa, ten subsidiary companies, and four factories in foreign countries. Overseas sales represented 45 percent of all French motor industry exports.

Peugeot would turn to the new automotive technologies in the late 1920s, yet remained committed to its tradition of handcraftsmanship. The first "modern" Peugeot automobile, the 201, was introduced at the 1929 Paris Motor Show. This completely new car, which was originally fitted with an 1122-cc engine, earned Peugeot its reputation as a manufacturer of reliable vehicles. The 201 also inaugurated the company's system of model names, that would continue through the century, reaching the "x06" line in the late 1990s. 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 formed the core of the company's 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.

After the crash of the New York Stock Exchange in 1929, Citroen, along with the rest of the world, entered an era of economic crisis. The company's yearly production fell in 1932 to 41,348 vehicles. Yet Citroen, like Peugeot, continued to introduce new automobile models and innovations. Milestones in the 1930s, nevertheless, included Citroen's first bus, a 22-passenger vehicle with all-steel bodywork and a six-cylinder engine, built at the Levallois factory in 1931. In 1932 the company announced the C4G and C6G, containing the first engines carried on soft mountings to eliminate vibration; a swan in flight between the double chevrons of the Citroen badge symbolized the advance.

Even as the Depression continued to dampen the high spirits of the French motor industry, André Citroen clung to his original thinking: the greater the number of products, the cheaper production becomes. In 1933 he set two goals: production of 1,000 vehicles per day, and the introduction of the new front-driven model developed by Citroen designer André Lefebvre. The company announced the 7A in April 1934, the first of a line of Traction Avant models that were produced until 1957. The model had bold specifications: aerodynamic bodywork, unitary steel body with no chassis or running boards, all independent suspension, and hydraulic brakes.

M. Citroen's plans came to a standstill, however, when the company's financial difficulties led to an inability to pay its debts. In 1934 the French government asked the Michelin company, Citroen's principal creditor, to take financial control and refloat the company. Under the direction of Michelin, 8,000 layoffs took place. The company's production plummeted from 51,546 in 1934 to 29,101 in 1935. By that time, André Citroen was already ill; he died in 1935 of stomach cancer. Yet Citroen's legacy would remain that of a pioneer of the European motor industry--and the man most responsible for creating the automobile as a mass-consumer item in Europe.

Rebuilding in the Postwar Era

The loss of the company's independence, and the death of its founder, did not end Citroen's record of innovation. In 1936 Citroen conceived one of its all-time classics, the legendary 2CV (or "deux chevaux"). The idea was for a low-priced car with a very small engine, described by the design department as "four wheels under an umbrella." In 1939 the declaration of war prevented the company from announcing the 2CV. In May of that year, the company destroyed all of its 250 prototypes except one to maintain secrecy. In 1940 the Quai de Javel factory was bombed and Citroen's Belgian factory was partly destroyed. The company's production gradually fell to zero in 1943, partly due to management's refusal to comply with the demands of the Vichy government.

Peugeot, too, was crippled by the outbreak of the war. 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 were built. With a unitary body and a 1300-cc 45 hp engine, this vehicle remained in production for almost 12 years without any major modifications.

On the Citroen side, production rebuilt slowly from 1,600 in 1945 to 12,600 in 1946. In 1948 the 2CV appeared at the Paris Motor Show. From October 1949 to the end of 1984, the company built over three million examples of the immensely popular and inexpensive vehicle. A cult developed around the 2CV, for it became something of a national symbol for the proletariat. Manifestations of popular enthusiasm for the 2CV included odes, sculptures, and water races (contestants removed the car's tires and floated the chassis on oil drums). As the company entered the 1950s, the demand for the 2CV stretched the delivery delay to six years.

In 1953 Citroen began decentralizing its production organization with the opening of the Rennes-la Barre Thomas factory in Brittany. It was not until the end of the 1970s, however, that the company achieved a balance between the Paris region and the provinces.

Citroen's design and development department pioneered a technical breakthrough in 1954: constant height hydropneumatic rear suspension. The system combined the actions of a gas and a liquid to achieve greatly improved road handling. In 1955 the company announced the DS19, with no front grille and a completely smooth nose. This model was revolutionary not only because of its aerodynamic shape, but also because of its technical features, including the newly developed hydropneumatic suspension. All major systems (gear change, clutch, steering, and brakes) were power operated. The model was an instant success: Citroen received 12,000 orders by the end of the first day.

In 1958 the factory of the Société Citroen Hispania at Vigo (Spain) began to produce 2CV vans for the Spanish market and for export. This gave the company representation in a market where imports were strictly limited by quotas. Also in 1958, the company announced the four-wheel drive 2CV Sahara, especially useful for oil exploration and mining teams in desert areas; the vehicle was capable of climbing a sandy, 40 percent slope fully laden. In 1959 a Citroen ID19 driven by Coltelloni, Alexandre, and Desrosiers won the Monte Carlo Rally; this led the company to its decision to participate in motor sports events in the years to come.

In April 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. A total of 2.45 million of these models were built.

As Citroen entered the 1960s, the company expanded by establishing subsidiaries and signing joint ventures in foreign locations. In 1960, it reached an agreement with the Yugoslav Tomos concern for the assembly of the 2CV in Yugoslavia. In 1962 Citroen established sales companies in Montreal and Vienna. In 1963 the company set up a subsidiary in Chile for assembly and sales; it also reached an agreement with the Sedica company for the assembly of the 2CV and 3CV in Madagascar. In 1964 the Mangualde factory in Portugal came into operation to manufacture the 2CV; this move again allowed Citroen access to a market with severe restrictions on the import of fully assembled cars.

New Citroen models in the 1960s included the Ami 6, a model categorized as top-of-the-range, and the Dyane, a model categorized between the 2CV and Ami 6. In 1965 Citroen acquired the Panhard factory at Reims (France), a facility specializing in the manufacture of mechanical components for commercial vehicles. In 1967 after signing an industrial collaboration agreement for the production of common designs, Citroen took a majority shareholding in the company Berliet, the European Economic Community's largest producer of commercial vehicles.

Citroen underwent major reorganization the following year. Citroen SA, a holding company, was created to oversee the activities of Citroen, Berliet, and Panhard. Citroen SA gathered within its structure more than 20 subsidiary companies, including the Societe Anonyme Automobiles Citroen (handling production) and the Societe Commerciale Citroen (handling sales).

Citroen signed a technical and commercial agreement in 1968 with the Italian sports car company Maserati. It also signed an agreement with Fiat to set up a holding company, Pardevi, which would hold the majority of Citroen shares, and in which Fiat would have a 49 percent shareholding and Michelin, 51 percent. Under the terms of the agreement, Autobianchi models were to be sold through Citroen dealerships in France, Belgium, Switzerland, and Portugal; Citroens were to be sold through the Autobianchi dealerships in Italy.

Joining Forces in the 1970s

The Arab Oil Embargo of the 1970s and the resulting worldwide recession prompted Michelin to sell its Citroen holding to Peugeot. Peugeot was then eyeing international expansion to enable it to compete on a global scale. Two years later, the newly named PSA Peugeot Citroen SA purchased Chrysler's struggling European operations, including the Simca brand name. That name would soon be transformed to Talbot. The acquisition proved a disappointment, however, and the Talbot name disappeared in the 1980s.

Peugeot and Citroen, meantime, continued to be operated independently, with their own factories and distribution networks. The merging of the two companies took place over the following decades, especially under the leadership of Jacques Calvet, who took over as head of PSA in 1984. By 1998, Peugeot and Citroen, while retaining their brand identities, had nevertheless been streamlined into a more efficient organization, exemplified by the Citroen Xsara, a sedan featuring Citroen styling and Peugeot parts.

A new recession in the early 1980s propelled PSA into net losses; the company was also crippled by a weeks-long strike in its Parisian facilities. Yet the successful launch of a number of new models, including the popular Citroen BX and the luxury XM models, and the extension of the Peugeot 05 range, enabled a restructured PSA to emerge with profits of more than FFr 8 billion by the end of the decade. During the 1980s, also, PSA entered a number of new markets, including the fast-developing Pacific region, and particularly the Chinese market.

The European and world economies would contract yet again in the early 1990s. By then, the European auto market, facing the looming entry of Japanese carmakers, began taking on a new shape, as companies formed strategic partnerships, not only for sales and distribution, but for production as well, with many models sharing the same platforms among different makes. These moves helped PSA maintain its leading position in France, despite intense competition from French government-owned rival Renault, and kept PSA among the top automotive manufacturers in Europe.

PSA's balance sheet was further enhanced by the successful launches of new generation models, including the extended Peugeot 06 line and the highly successful Citroen Xantia and Xsara midrange sedans. In 1998 PSA put the finishing touches on the merging of the Citroen and Peugeot organizations, retaining the separate brand identities while merging production to a single operation. Closing out the year, PSA recorded sales of FFr 221.44 billion. A bustling European economy promised further sales expansion, even as PSA set its sights on increasing its international presence--the company's strategy for the year 2000 called for expanding its sales beyond Europe to 25 percent of total company sales.

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 Crédit à l'Industrie Automobile-Socia; Société Financière de Banque-Sofib; Compagnie Générale de Crédit aux Particuliers-Credipar; PSA Wholesale Ltd.; Anglo French Finance Co., Ltd.; Peugeot Finance International NV; PSA Finance Holding; Societe Mecanique Automobile de l'Est (75%); Société de Construction d'Equipements, de Mecanisation et de Machines (SCEMM); Société Commerciale Citroen; Citroen Deutschland AG (Germany); Citroen Commerce AG (Germany); Citroen Hispania S.A. (Spain; 93%); Citroen Italia SpA (Italy; 96%); Comercial Citroen S.A. (Spain); Citroen (U.K.) Ltd.