PSA Banking on Lighter, More-Efficient 208 to Spark Comeback

PARIS – General Motors’ erstwhile alliance partner PSA Peugeot Citroen is counting on the Peugeot 208, which goes on sale in France March 29, to pull it out of a sea of red ink.

PSA lost €497 million ($656 million) in second-half 2011 and sold €1 billion ($1.32 billion) of assets, but the 208 could pad the company’s bottom line even as the European market shrinks violently.

It isn’t the first time PSA has relied on its B-car. In the 1980s, the auto maker experienced financial trouble but was saved by the 205, which sold more than 5 million units between 1983 and 1998.

There is a bit of irony in the current situation. Both the Peugeot and Citroen brands are trying to claw their way up market, where margins are better and exports from a French manufacturing base could be profitable. But when the B-segment 208 goes on sale, a competitive price is part of the marketing plan.

What makes that strategy viable is the design of the new 208, which is lighter, shorter and more efficient than the 207.

“The 208 on its first day of production is cheaper to manufacture than the 207 on its last day,” says Antoine Joubert, the project manager.

The B-segment in Europe, populated by cars such as the Renault Clio, Volkswagen Polo, Fiat Panda, Citroen C3 and Ford Fiesta, has been in a bloody price war for months, as European auto makers try to keep their underused factories going.

Fiat CEO Sergio Marchionne told WardsAuto at the Geneva auto show earlier this month price-cutting is so ferocious in the segment that manufacturers aren’t recovering their variable costs.

Marc Giulioli, PSA director of marketing in France, predicts early 208 buyers mainly will be taking higher-end models that provide larger margins for the auto maker. Prices range from €12,000 to €21,000 ($15,800-$27,700). Giulioli expects the €16,300 ($21,500) model, powered by a 1.4L diesel at the second of four trim levels, to be the main seller in France.

While the 207 is going out of production, the 206+ will continue to be offered, Giulioli says, because it “gives us a car to meet the market demand for low prices.”

The B-segment covers 40% of the French market, and it was down 10% last year. For the remainder of this year, Peugeot hopes to sell 91,000 units in France, which would be a 14% share of the sector. Giulioli says Peugeot expects 82% of the buyers to choose 5-door hatchbacks, and 60% to opt for a diesel engine.

If it achieves its anticipated volume, the 208 will bring several factories back to profitability. Output started in Poissy in January and will begin in Mulhouse in the fall. This summer, the Trnava, Slovakia, plant will launch production of the 208 for Eastern Europe. Production begins in South America in 2013.

Peugeot expects global output in 2013 to be 550,000 units, of which 420,000 would be in Europe. At that level, the auto maker should be feeling a certain security after a difficult 2011, in which it lost money and in its home market, forcing it to sell buildings, subsidiaries, new shares and a 7% ownership stake to General Motors.

If the 205 saved the company, the 206 did even better in terms of volume, but the 207 suffered comparatively in the market.

Some of that was caused by the economic crisis, but in any case, in 2007, Peugeot decided the 208 needed to “skip a generation,” in the words of exterior designer Sylvain Henry.

The auto maker wanted the car to regenerate the Peugeot brand, regain its position as the choice for a second car and restore its popularity with women.

In addition, in that 2007 product-strategy session, Peugeot decided the 208 should be smaller and lighter, mainly as a method of reducing fuel consumption. So the new car is 2.0 ins. (5 cm) shorter than the 207 and weighs 243 lbs. (110 kg) less.

After years of selling “more” to customers, how will Peugeot market less?

“Less (carbon-dioxide emissions), lower price,” Giulioli says. Designer Henry says, “Roads and parking places aren’t getting any bigger.”

The 208 is powered by any of three diesel engines that will emit less than 99 g/km of CO2 (equivalent to 63 mpg [3.7 L/100 km]). The 1.0L gasoline 3-cyl. engine also is rated at 99 g/km (56 mpg [4.2 L/100 km]). In France, those figures qualify for a €400 ($525) government bonus.

Henry’s approach to designing for women was to pay attention to detail. The curves in the fenders constantly change radius, the small lines in the hood continue across the roof and fall at the rear to bracket the small crevice that holds the chromed word “Peugeot.”

Women appreciate the details in jewelry and lingerie, he says, and they will like the attention he and the Style Peugeot studio spent on the car.

The part of the design that is masculine, Henry says, is the proportion. Shorter, lower and narrower than its predecessor, “it is a ball of energy.”

Peugeot expects 88% of customers to buy versions with a big central touchscreen handling navigation, entertainment, Bluetooth telephone connections and other basic infotainment functions.

In addition, says developer Hubert Tourney, the auto maker forecasts 10%-15% of screen buyers also will purchase a collection of automotive apps. The 10 apps provide services such as finding the service station with the lowest-priced fuel or a nearby restaurant or tourist site. With a touch of the screen a call can be placed or the route mapped to the location.

The apps are on a USB key the driver plugs into the car, so they can be updated, changed and added to without affecting the car’s hardware. App subscriptions will cost €350 ($460) for the first year and €150 ($200) annually for renewal.

The apps and the touchscreen are part of Peugeot’s effort to be modern and young. Given that target buyers are people of every age, the company will include a separate guide to using the screen as an aid to those who haven’t grown up with such devices. The screen has just three controls, a volume knob and two flat key tops.

“It’s safer than a console with a forest of buttons,” argues Joubert.

The other big change inside is a new cockpit. The steering wheel is small, and the instruments are arranged to be visible over the top of the steering wheel instead of through it.

Powertrains include three PSA diesels rated at 68 hp, 92 hp and 115 hp, all with microhybrid stop/start systems. All have 5-speed manual transmissions, but the 68-hp and 92-hp diesels can be ordered with an electronically controlled manual.

Five gasoline powerplants are offered, including 68-hp 1.0L and 82-hp 1.2L 3-cyl. engines and 95-hp 1.4L and 120-hp 1.6L 4-cyl. engines.

Also in the lineup is the 155-hp 1.6L 4-cyl. co-developed with BMW that emits 215 g/km of CO2 (26 mpg [9.0 L/100 km]) but accelerates from 0-63 mph (100 km/h) in 7.3 seconds. It surely will be one of the engines offered when the GTI hot-hatch version appears in a year or so.

A GTI concept was unveiled at the Geneva show, and PSA acknowledges the model is in development. It was a GTI version of the 205 that gave that car a halo that hasn’t faded among enthusiasts.

The 208 is the first application for the 3-cyl. engines, and they are expected to cannibalize 5% of sales that had gone to diesels in the 207, Joubert says. When Euro 6 exhaust standards arrive later in the decade, PSA expects another 5% encroachment, he says, because the gasoline engine is ready to meet Euro 6 rules but the diesels will need to add €500 of aftertreatment as well as more mass.

The 208 with the 68-hp 1.4L diesel that costs €16,300 ($21,500) is available with the 68-hp 1.0L 3-cyl. gasoline engine for €14,500 ($19,150).

PSA’s strategy on lightweighting began in 2007 when the product was envisioned.

While the 208 shares the platform used by the 207 – and there are 30%-35% of carryover parts, engineers followed a new strategy. The 207 platform was designed to be standard across all versions of the car: the 3- and 5- door, the coupe-cabriolet and the station wagon.

Therefore, it was beefier at both the front and back ends than it needed to be for the standard hatchbacks.

In the 208, the hatchbacks get their own structural parts. Variants to come will get more-robust platform elements as needed, and even hatchback parts will vary depending on the engine used. Peugeot lightweighted the engine bay for the 3-cyl. gasoline engine, which weighs 55 lbs. (25 kg) less than its I-4 cousins.

The changes mean manufacturing is more complicated, but weight has been optimized and cost reduced.

A spokesman calls it a “virtuous spiral.” The smaller size saves weight, the engineering strategy saves weight and the seats are lighter, so grams could be shaved off other parts such as brakes and crash beams. That then meant the original calculations for the front end, rear end and other areas could be shaved further.

The 208 with a 3-cyl. gasoline engine weighs just 2,149 lbs. (975 kg), while diesel-powered versions tip the scales at 2,315 lbs. (1,050 kg). PSA also is using recycled material for 25% of the plastic trim, including the rear bumper.