PSA Peugeot Citroen – From Textile Mill To Bicycle To Automobile Production

PSA Peugeot Citroen S.A. History: From Textile Mill To Bicycle To Automobile Production

It is not usual to have family businesses surviving more than a few years from the back of their house because of the unprofessional attitude that members bring to bear on the business. But this wasn’t the case with the Peugeot family, which by the 19th century was already a prominent textile miller in the Alsace region of France.

logo_psa_peugeot_citroenThe family diverted its business to steel making in the early 19th century after the bothers, Jean-Pierre and Jean-Frederic Peugeot invented the cold-roll method of manufacturing spring steel. With the bicycle craze of the 1880s, the Peugeot business, through Armand Peugeot, grandson of Jean-Pierre, entered into the wheeled vehicle industry.

From the manufacture of machine tools, which was largely successful, Armand launched Peugeot’s first passenger automobile in the later part of the 1880s. It was a three wheeled, steam-powered motoring car. Realizing that internal combustion engine, which was then an emerging technology, would become the preferred engine type for automobile production, Armand traveled to Germany in 1891 to look for the perfect twin-cylinder engine, and two months later he found and bought Daimler’s 525-cc version.

With the purchase of the engine, Peugeot went on to build cars and soon became one to reckon with in the industry, as its cars won some of the early automobile races ever held. In fifteen years after the company got into automobile production, it had established production plants across France, producing a complete range of vehicles for all uses, with emphases on sturdiness, dependability, and excellent in finishing. These were features that continued to distinguish the Peugeot brand through the decades in its history.

The company was focused on producing utilitarian models like “Le Bébé” (the Baby), the world’s first compact car (1905), and the Quadralette, which was engineered the same way as the Bébé. From the production of the Quadralette, Peugeot created the model 5 CV, which reached a record sale of 83,000 chasis.

In 1921, Peugeot made a remarkable contribution to the automotive engine market – it introduced the world’s first diesel-powered passenger automobile. The company continued to handcraft its automobiles, even though it embraced the new automotive technologies of the late 1920s.

Peugeot’s first modern automobile was the model 201, introduced in 1929. The model, which began the company’s system of naming its automobile models, brought Peugeot to the limelight as a manufacturer of reliable vehicles, selling about 142,000 units before it was phased out in September 1937.

Peugeot has always sought to innovate and continually improve on its products. By 1932, the company had refined its 201 and 301 model lines, making them more elegant and attractive. It began producing its aerodynamic series in 1935 starting with the 402 model.

The following year, it rolled out the 302 model. This was a scaled-down version of the 402, with innovative features that included synchromesh gearbox – it was also the world’s first touring car fitted with a diesel engine.

As the 1970s unfolded, Peugeot was looking into international expansion so it could compete on a global scale. To achieve this, it bought Citroen, and the new company became known as PSA Peugeot Citroen SA. Two years later, the company added Chrysler’s European operations to its holdings.

The economy recession of the early 1980s caused PSA to record net losses at the beginning of the year, however, by successfully launching a number of new products, such as the popular Citroen BX, and the luxury XM models; and by extending the Peugeot 05 range; as well as entering new markets, including the China, and the fast-developing Pacific region, the company rebounded with a profit of over FFr 8 billion at the close of the decade

The 1990s also came with its challenges. The European and the world economy were once again in recession at the early part of the decade, affecting businesses’ revenue projections. In addition to the negative impact of the recession, the European automobile manufacturers were also threatened by the entrant of Japanese carmakers into the European market.

To avoid falling behind in the fierce competition that was imminent, a number of European companies, including PSA formed strategic partnership, which included sharing the same production platforms among different makes, as well as in sales and distribution. This strategy enabled PSA to maintain its number one position in France, and among the leading automobile manufacturers in Europe.

And by launching several new generation models, such as the extended Peugeot 06 line, Citroen Xantia, and Xsara midrange sadans, PSA ended 1998 with sales climbing FFr 221.44 billion.

As the year 2000 sets in, PSA’s strategy was to increase its sales beyond Europe by twenty-five percent of its total projected sales. To achieve its growth objective and reduce cost of production, PSA Peugeot Citroën developed an industrial base of global dimensions consisting of 15 production centers and 16 powertrain and casting plants (engines, gearboxes, running gear, etc.), and a plan to continuously improve industry efficiency by standardizing parts and making assembly easier.

The company also signed strategic cooperation agreements with other manufacturers to produce vehicle platforms and components.

From these steps, PSA Peugeot Citroën has been able to cut its production costs by € 600 million a year.

And with presence in 160 countries, PSA Peugeot Citroën’s worldwide sales at the close of 2008 reached 3,260,000 units, which looked to go even higher in the years to come as the company focuses on expanding its production base close to its major priority markets – China, Latin America, and Russia.

Read PSA Peugeot Citroen S.A. Business Strategies here.

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