Faced with a steep drop in sales and the arrival of new Japanese luxury models, French car maker Peugeot said it will pull out of the U.S. auto market later this year.
Peugeot's pullout is the latest example of the woes that have beset European luxury car makers in the United States. The recession, the arrival of Japanese luxury models--such as Honda's Acura and Nissan's Infiniti--and the new federal luxury tax have all taken a toll on sales of expensive European car models.
But analysts did not expect other European car makers to abandon the United States. "If you look at Mercedes or BMW, these are certainly not banner years for them either. But no one is going away," said auto industry analyst Tom Dukes at J. D. Power Associates in Agoura Hills.
In a letter to franchisees, Peugeot Motors of America, the French firm's U.S. subsidiary, said it will stop making cars for U.S. customers begining in September, according to a New York Times report. Most of Peugeot's U.S. sales came from the 405 luxury sedan line.
"A sales organization cannot durably be operated with a single car line in this highly competitive market," Peugeot President Pascal Henault said in the letter. "It is impossible . . . to develop a successful U.S. business based solely upon the 405 model, particularly in light of its lukewarm market acceptance in the U.S."
Peugeot, which has sold a total of 120,000 cars in the United States, said it will continue to provide parts and service to its dealers.
Bill Yates, owner of Bill Yates Volkswagon-Porsche-Peugeot in San Juan Capistrano, said he received the letter announcing the pullout Tuesday morning. Yates was surprised.
"I'm sad to see them go," Yates said. "They've done real well for us." Like most local Peugeot dealers, Yates said he will continue to service and sell parts for the cars.
Peugeot sales fell to 4,261 cars last year from 14,336 in 1986, according to the New York Times. During the first seven months of this year, the car maker has seen sales fall 17.2% from the same period in 1990.
"Peugeot has been struggling for some time," said Chris Cedergren, an industry analyst at Auto Pacific Group in Thousand Oaks. "The most fundamental problem is all the new competition from the Japanese. They reached a point where they were selling so few cars here that it just made no sense to continue. They want to focus on the most important market for them--Europe."
Cedergren also noted that Peugeot suffered from some reliability problems and failed to equal the overall quality levels found in domestically produced cars.
Peugeot is not the only French car maker to run into trouble in the U.S. market. Renault made a major bid for the market in the early 1980s when it bought control of American Motors Corp. But poor sales forced Renault to sell its stake to Chrysler Corp. in 1987.