The long farewell: Peugeot' departure from the U.S. market

Business Horizons, May-June, 1995 by Jean-Loup Archawski, Francis W. Wolek

AN ATTRACTIVE PRODUCT: REQUISITE FOR THE EMERGENCE OF STRATEGY

The emergence of a successful strategy from actual experience required Peugeot to offer attractive cars to American consumers. A respectable product would be the base for adaptations with features important to Americans.

Quality of Peugeot's Cars

America's reaction to Peugeot cars is reflected in its automotive press. In 1971, the model 304 placed second in Motor Trend magazine's "Car of the Year" competition. Peugeot's model 604 also received rave reviews in the mid-1970s. Road and Track subtitled its review: "C'est confortable, c'est formidable, c'est magnifique." Motor Trend compared the 604 with a Mercedes:

The German car, as typified by Mercedes, is ferociously devoted to efficiency .... The French car, especially typified by Peugeot, reflects the Frenchman's concern with comfort, pleasure and utility... Where the German car sometimes imparts a feeling of coldness, the French car always gives at least an initial feeling of warmth... that your body is being reverently treated, even coddled.

Favorable reviews of Peugeot cars continued well into the 1980s with the introduction of what became the company's flagship model in the United States, the 505. For example, Car and Driver magazine noted in 1980:

The U.S., it seems, has been put on the low priority list; Peugeot wanted to strengthen its home country [position], branch out to the common market, and go after Africa, where its famed durability and reliability made it the unofficial car of third world countries. Now it's our turn, and for us Peugeot has built the 505 . . . [a] potent new offensive weapon.

The Consumer's Response

The American market is driven by consumers who are free to choose any car they wish and on whatever grounds they wish. Competitive cars (those recognized by Peugeot were the Maxima MB, Audi 5000, and Volvo SW) had led consumers to expect certain features in a quality automobile. Peugeots fulfilled these expectations in many areas: stylish design, positive press notices, sumptuous interior, and European engineering, However, though billed as "Total Luxury Cars," early Peugeots did not include other features standard to its class: air conditioning, power windows and seats, a sunroof, and familiar controls (Peugeot's controls were located per European custom).

The consumer's experience with reliability is a critical criterion of quality. On this point, a frequent reaction was expressed by a current owner as follows:

The cars are well engineered. The things that go wrong are usually minor but too frequent and a nuisance in that they don't stay fixed. The 505 is a great car, but flawed by minor problems that are so aggravating that I believe Peugeot's public image is one of unreliability.

The minutes of the Eastern Dealer's Council of November 14, 1979 note that, "PMA [Peugeot Motors of America] expressed grave concern that owner complaints about dealer service were presently running about 20 percent. An acceptable level was deemed to be 5 percent in urban areas, 2 percent in rural areas." Chronic, if relatively minor, problems characterized Peugeots in seals, cold-engine stalling, radios, temperature controls, and rust (in areas hit by hard winters).