This Sexy Crossover Could Be Peugeot's Last Hope

The Geneva Motor Show starts next week, and like at the Paris Motor Show in September, automakers will do their best to put on a brave face as they deal with the catastrophic state of the European auto market.

Among the most troubled players is PSA Peugeot Citroën, Europe's second-largest automaker, which posted a stunning $6.7 billion loss for 2012.

Its group sales fell 16 percent in November of last year, and its market share dropped to 10.9 percent, from 11.7 percent.

According to the Detroit Free Press, PSA makes two-thirds of cars bought in France, where new registrations hit a 15-year low last year. Things are not looking up in 2013.

The automaker has announced it will cut nearly 10,000 jobs (by not replacing workers who leave), and it will close a major factory outside Paris. In April, it sold its Paris headquarters, for $327 million, to lower its debt, Bloomberg reported.

To save itself, PSA has come up with two new strategies: Sell fewer cars for more money and capitalize on markets outside Europe.

The 2008

Peugeot's new fuel-efficient urban crossover vehicle, the 2008, is the car to watch at Geneva.

Based on on the successful 208, the 2008 is "key to this year's product lineup," International Communication Area Manager Thomas Merchant told Business Insider. "It completes Peugeot’s product offensive within the B segment and provides the Marque a new level of international dynamism."

The car also encapsulates everything Peugeot is trying to do.

Hopes At Home

PSA cannot give up on the European market, especially after receiving the first installment of $9 billion in state aid earlier this month. "Europe still remains a vital market to the brand," Thomas Merchant says.

In a January 7 press release announcing the launch of the 2008, PSA said it wants to expand its "deep manufacturing roots in France" (despite cutting jobs there) and move its products upmarket.

The upmarket bet is a long shot but not doomed, argues Mark Phelan at the Detroit Free Press. He points to one victory as a ray of hope:

Citroën created DS, a sub-brand of small premium-priced cars that use the same underpinnings as its regular cars but offer more style and features. DS has been one of the European industry's few recent successes.

While the French auto market collapsed in 2012, sales there by Audi, BMW, and Mercedes-Benz actually grew, according to the AFP. If Peugeot could produce cars at that level, it could see some of the growth.

But, as Phelan notes, "Peugeot wouldn't be in this fix if folks were inclined to pay top euro for its car."

(Better) Hopes Abroad

PSA's year over year sales outside of Europe are up. In 2009, it sold 24 percent of its vehicles outside Europe. In 2011, that number climbed to 33 percent. By 2015, PSA wants to sell half of its cars in those markets.

The release trumpeting the 2008 reinforces that desire to move abroad. The 2008 was designed to appeal to Chinese and South American buyers, will be built in China and Brazil as well as France, and "symbolizes PSA Peugeot Citroën's strategy to expand its international presence."

As a bonus, production in China and Brazil is not hampered by the level of worker protections and pay PSA must provide in France.

Competition will be tough — just about every automaker sees Asia and South America as potential cash cows — but at least people there are still buying cars. Hopefully for Peugeot, they'll want the 2008.



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