ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day.
Pick up one of those big picture books about design (you often find them on coffee tables in office receptions) and flick to the chapter on the 1960s. What you could not fail to notice is some famous French cars from Citroën, which produced the wonderful 2CV, a peasant farmer's runabout which then became the vehicle of choice for the hippie lifestyle. Also, the astonishing Citroën DS with its hydraulic suspension. Generally seen in shiny black with plush red seats, the Deesse or goddess, was the favoured limo for French politicians and captains of industry.
Today, the French government probably wishes Citroën would quietly disappear along with its sister brand, Peugeot. PSA Peugeot Citroën, the company which owns both marques, made an operating loss of €1.5-billion ($2-billion) in 2012 and including writedowns, the deficit rose to a record €5-billion. Peugeot Citroën is a big part of the bad news that is engulfing France, where statistics today revealed the economy is once again shrinking and the jobless rate is at a 15-year high. The car company is laying off 11,200 workers and shutting a factory near Paris in response to a sales decline of 13 per cent last year.
Europeans are not buying many cars. The European Automobile Manufacturers' Association records an overall 8-per-cent decline in 2012, but this is really a tale of two parts and Peugeot-Citroen is sadly in the wrong part. Look for the bored chauffeur outside a big corporate HQ in Paris and he is likely to be sitting at the wheel of a German car. If French motor brands were cool in the 1960s, 70s and 80s, they have lost their allure, even at home. The widening gap between the success of Germany's car companies, BMW, Daimler-Benz and Volkswagen, compared with the accelerating decline of the Mediterranean rivals, Peugeot Citroën, Renault and Italy's Fiat, is becoming embarrassing. "A two-tiered industry is emerging among European auto makers" crowed Der Spiegel, the German news magazine, pointing to the rising sales volumes at Mercedes, Volkswagen and Porsche.
The weak economies of the Club Med states are part of the problem; Peugeot Citroën sells two-thirds of its cars in Europe and half in the Latin states where most consumers can only dream of a new vehicle. Spanish car registrations were down 13 per cent last year while in Italy the decline was a precipitous 19 per cent.
But there is more to this than pure economics. This is a story about brands and the failure of Fiat, Renault and Peugeot Citroën to tell a consistent story about their brands to consumers. The oddity of the company, owning two French brands competing at similar price points in a small market, has finally been recognized by Philippe Varin, the company's CEO. The recovery strategy will better distinguish the rather staid Peugeot by moving it upmarket from its more wacky sister, Citroën.
Unfortunately, this is easier said than done. Germany's motor dominance is built on a relentless promotion of their brands as quality products targeted at specific market segments. Everyone everywhere knows that if Mercedes means the boss, BMW is the car of choice for a middle manager, utterly dull but credible and reliable. Can anyone fathom what Citroën stands for today?
There was a time when it stood for flair or le style and it's clear that deep within the fabric of Peugeot Citroën, there are designers who would like to rebuild Citroën's cachet, but it's a huge task to market an offbeat idea to a competitive world that wants certainty and is counting its pennies. It is make or break time for these French brands and it would be a big bet to say that all will survive.
Carl Mortished is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights.
Carl Mortished