Source: Neil Mullinieux: The new Car Market in Europe; page 12
The European Automotive Industry
MARKET ACTORS
Below we shall briefly discuss the seven largest actors in the
European Automotive indu-stry. This will be done with respect to
products, background and current situation Further we will supply
a small table of key figures for each company, where such data
has been available. As mentioned, we have not been able to obtain
the annual reports of Fiat and Renault.
The sources for this chapter are the annual reports, corporate
websites and the book "Di-rectory of Multinationals" by
John M. Stopford. As mentioned in section 2.5, we have not been
able to obtain the annual reports of Renault and Fiat, and thus
we have only limited information about those companies.
The table below shows, the development of market shares for the
10 largest companies in the period from 1996 to 1991.
Table 5.1
Source: Neil Mullinieux: The new Car
Market in Europe; page 12
The VW group produce a broad range of passenger vehicles and a range of light trucks powered by air-cooled, water-cooled and diesel engines. In automobiles, VW itself produ-ces the Polo small hatchback and coupe, the Golf small/medium hatchback and saloon, the Passat medium sized saloon and estate and Sciocco and Corrado sports coupes. In addition the company produces Audis A-range, which covers the top-end of the groups models . In the future the Audi brand will be given a more separate identity through own design, manufacturing and marketing functions. The beetle is still produced in Latin America and there are a variety of minibus derivatives based on the LT van and original. The cars are produced in several locations around the world and total sales in 1997 were over 4,2 million units worldwide. In the European market VW products also include the brands of SEAT and Skoda.
Table 5.2 
Source: Neil Mullinieux, The new car
market in Europe; p. 7
The Group is also active in national and international finance
through its various leasing subsidiaries and the VAG Banks. These
provide wholesale and retail loans to customers. Further VW has
an interest in car rental through its stake in Europcar
International.
Background and Current Situation
VW originated in an association set up by a German government
agency in 1937 to ope-rate a savings scheme, through which
production of a "people's car" was to be financed.
During the War, the production facilities were used for military
purposes. Production of the famous "beetle" began in
the late 1940s. Cumulative production reached one million units
in 1955, 10 million in 1965 and 50 million in 1986. The first
foreign subsidiaries were set up in South Africa in 1946, Canada
in 1952, Brazil in 1953 and the US in 1955. In 1960 60% of the
company's capital held in trust by the government was sold to the
public, while 20% each remained with the Federal Government and
the Government of Lower Saxony. Dividends accruing to these two
parties are paid to the VW Foundation .
In the year 1983 an agreement on technical collaboration was
concluded with Nissan Motor CO in Tokyo, under which Nissan would
build VW's medium-range Santana in Japan, while 1986 saw the
emergence of Shanghai-Volkswagen Automotive Co Ltd to assemble
the same model in China. Also in 1986 VW took over the Spanish
manufacturer SEAT, which had been building VW models under a
co-operation agreement since 1983. This led to production
expansion, as a result of the globalisation, and established the
group as the fourth largest passenger automobile manufacturer in
the world.
In the West European market, the Group attains a competitive
advantage due to its custo-mer's brand loyalty, which has helped
them to become one of the market leaders.
In 1997 the Volkswagen Group spent approximately 4,4 billion DM on research and development. The Group focuses on the passive vehicle safety, the use of future oriented materials such as magnesium and improved plastics, as well as alternative drive technologies such as electric and hybrid drive systems. The number of the Group employees working in the R&D department increased by 4.2 % to 14,795 in 1996.
Table 5.3: Key figures for VW in
1997 
Source: VW annual report
For VW, the German market is very important, as it counts for
nearly half its European sales, but sales in Germany have dropped
in the last few years.
In the future, VW Group will pursue its aggressive,
customer/oriented model policy in all market segments and niches,
as well as energetically advancing its brand strategy. The Group
will also maintain their globalisation strategy in order to
increase its operations in Eastern Europe. As mentioned in
chapter 4 the VW group has an extensive collection of new models
that will be introduced within the next 5 years.
FORD MOTOR COMPANY
Products
Ford manufactures passenger cars world wide in various price
ranges and styles, from European mini-cars such as the Fiesta to
American full-sized sedans, as well as light to heavy trucks,
related parts and accessories. Automotive operations outside the
US are conducted by a number of consolidated subsidiaries, the
largest in Germany, the UK, Ca-nada, Spain, Australia, Taiwan and
Mexico. In 1990 Ford produced almost 6 million cars and trucks
worldwide .
Fords financial service group consists of First Nation-wide
Financial Corporation, United States Leasing International Inc.,
Associates First Capital Corporation, Ford Motor Credit Company
and The American Road Insurance Company .
Background and Current Situation
Henry Ford established the company in 1903. Ford is the worlds
largest producer of trucks and second largest producer of cars
and trucks combined. Ford also engages in automotive related
business, such as financing and renting vehicles and production
of automotive components and systems.
The company's two principal business segments are Automotive and
Financial Services. The activities of the automotive segment
consist of the design, manufacture, assembly and sale of cars and
trucks and related parts and accessories. Substantially all of
Fords auto-motive products are marketed through retail
dealerships, most of which are privately owned and financed. The
primary activities of the Financial Services segment consist of
financing operations, vehicle and equipment leasing and rental
operations. These activities are conducted primarily through the
company's subsidiaries, Ford Motor Credit Company and The Hertz
Corporation
Table 5.4: Key figures for Ford in
1997 
Source: Ford annual report
Europe is the largest market for the sale of Ford cars and
trucks outside the United States. Great Britain and Germany are
the most important markets within Europe, although the South
European countries are becoming increasingly significant. Any
adverse change in the British or German Market has a significant
effect on total automotive profits. Because of Ford's American
heritage, it was one of the first manufactures to treat Western
Europe as one market rather than separate countries, and has had
a presence in Europe almost as long as in North America. Ford
became the European leader by the 1980's, and in 1992 Ford had to
concede its position to GM and for one year only to Volkswagen.
The Ford share of all West European markets is remarkably even -
close to 10% in most countries. The exception is the UK market
with a market share of 20% and Greece with only 5%. Of the five
largest European markets, Ford's weakest position is in France,
and even there it has just below 8% of the market.
Having built up its market share from about 15% to over 30% at
the high point, Ford has now been losing market share steadily
for some years, as a consequence of opening the European markets
to competition. A situation in which the market leader often
suffers the largest fall.
Ford's model programs are now being developed on a global basis,
with USA specialising in large cars and the European operations
concentrating on medium and small car devel-opment. In theory
this seems to be sensible, but it may make the company less
flexible at a time when flexibility is the order of the day. Ford
already takes a long time to develop new models and it needs to
speed up this process considerably in order to respond to the
market (see section 4.3).
FIAT GROUP
Products
Passenger cars and vans are produced under the Fiat, Alfa Romeo,
Lancia-Autobianchi, Innocenti and Ferrari names. The company also
produces spare parts and accessories for cars. Recent strategy
has been to counter falling car sales worldwide by offering an
incre-ased range of high-performance and specialist cars.
In the commercial vehicles segment Fiat is represented by the
Dutch company Iveco NV, along with affiliates and licensees such
as TAM in Yugoslavia, Ashok Leyland in India and Oyotol and
Otasan in Turkey, which produce trucks, quarry and construction
vehicles, buses, fire engines, diesel engines and forklift
trucks.
Further Fiat produces farm and construction equipment as well as
metallurgical products.
Background and Current Situation
The Fiat company was set up in 1899 by a group of Turin notables
and by 1920 was alre-ady a fully integrated motor manufacturing
group. The policy of the group was to produce whatever was not
readily available in the Italian market. Between the Wars the
group ex-panded its activities to commercial vehicles, aircraft
production and rolling stock.
In the early 80's the group began to expand overseas, by
acquiring Iveco in Brazil in 1982. Home in Italy Fiat acquired
100% of Alfa Romeo in 1986. In the same year they entered a joint
venture with Ford of Britain and Iveco for the manufacture and
sale of heavy trucks in the UK. In 1987 Fiat made an agreement
for production in Poland of the groups new "micro"
vehicle .
Like most of the other actors in the industry, Fiat suffered
heavily in the early 90's. However since 1993 the Fiat Group has
recovered well, helped by two innovative new models, the Punto
and the Brave/Bravo.
At present Fiat has a market share just above 10% of the west
European market. Like the other volume car producers it produces
models in all the main market segments but it is constrained
somewhat by its two sister companies, Alfa Romeo and Lancia.
Although these two compete with Fiat, mainly in the upper market
segments, they are relatively weak outside Italy .
Fiat attempts to distinguish itself from its competitors by
offering cars that are a little bit different with a hint of
panache, but close enough to the norm to appeal to a wide market.
Italy accounts for almost half of the company's sales, while the
major EU markets Ger-many, France and the UK only accounts for
34% of Fiat's European sales. The sales in the Italian market
have been down in previous years, so Fiat is acting to reduce
this depen-dence on its home market.
The company is relatively weak in Scandinavia, but it does not
hold a strong market posi-tion in any country outside Italy apart
from Portugal and Greece. The reason for the we-akness in
northern Europe could be the company model profile, which
emphasises small cars, while in Northern Europe there is a marked
preference for larger cars.
Fiat's share of the market will decline as the Punto and the
Brave pass their model peaks. In the longer term it is vulnerable
to an opening up of the Italian market which at present is still
the most protected in Europe. The most urgent priority for Fiat
is to establish a rea-listic marketing strategy and to develop
sales outside Italy, especially in Northern Europe.
PSA (PEUGEOT SA)
Products
Automobiles Peugeot manufactures a wide range of cars from the
106 minicar to the executive-class 605, including saloons,
hatchbacks and estate cars, both two- and four-wheel drive, with
petrol, diesel and turbo-diesel engines, as well as commercial
vehicles powered by petrol, diesel and electricity. It has plants
in France, Spain and the UK. The group also includes Automobiles
Citroën, with models ranging from the small AX hatchback to the
executive-class XM, as well as commercial vehicles. Citroën
manufactures in France, Spain and Portugal. Unit sales for the
PSA Group totalled approximately 1,5 million passenger cars 1996.
The PSA group also includes its Mechani-cal engineering service
and financial services.
Table 5.6: PSA Europe 
Source: Neil Mullinieux, The new car
market in Europe; p. 7
Background and Current situation
The present company was formed in 1976 to merge two
long-established French car pro-ducers. Peugeot dates back to the
Peugeot family business in Montbeliard where bicycle and tricycle
production was followed by automobile production in the early
1890's. In the1920's the company began producing its first
complete model range, the 01 series, followed by the 02 in the
1930's and the 03 in the late 1940's. The 04 in the 1960's and
the 05 in the 1977 and the 106 launched in 1991.
After World War II Peugeot began expanding abroad. The largest
production facility was set up in Argentina, while a large number
of assembly operations started in Africa, Southeast Asia,
Australia, New Zealand, Spain and Portugal.
Citroën also originated as a family business. The company was
initiated by Andre Citroën in 1924 and grew to be the third
largest car producer in France. The largest subsidiary was set up
in Spain as well as important operations in Argentina, Belgium
and Eastern Europe.
In 1974 Peugeot and Citroën decided to co-operate at the
instigation of the French government, which was intent on
rationalising the French automobile industry. This led to Peugeot
taking over Citroën in 1975 .
In 1988 Peugeot, Suzuki of Japan and Austin Rover formed Peugeot
cars in Japan. PSA became the world's leading manufacturer of
diesel engines in 1988 and launched a wide range of new
diesel-engine versions of Peugeot 405 and Citroën BX.
In 1990 PSA teamed up with RZB Austria to establish an Austrian
bank to offer finance to dealers and customers, and a dealer
network of over 230 outlets for Peugeot and Ci-troën combined
was built in East Germany. Citroën Japan was set up in
partnership with Mazda and Seibu to build sales in Japan, and
Automobiles Peugeot increased it stake in Peugeot Japan to 67%.
In December of the same year Citroën signed a joint venture with
China's Second Automobile Works for production of the ZX model in
China .
Peugeot shares design and engineering resources with Citroën but
keeps its sales and mar-keting operations distinct. The Peugeot
product is aimed more at mass market than Ci-troën. The
engineering is more conservative and the design is aimed at the
average moto-rist. Despite this clear differentiation between the
two companies, the group as a whole has gradually lost market
share in recent years, particularly Peugeot. Citroën, although
the smaller of the companies, has managed to retain its market
share. One of the reasons for this is that both companies are
heavily dependent on their home market.
Today PSA is Europe's third largest car manufacturer, and
Europe's leading manufacturer of light commercial vehicles. In
addition to its two core car manufacturers, Automobiles Peugeot
and Automobiles Citroën, PSA also active in a number of
businesses strategically related to the automobile industry.
In 1996, PSA intensified its three-pronged strategy of, 1)
updating and enhancing two comprehensive lines of products and
services that respond to customer expectations. 2) accelerating
cost-reduction programs, and 3) pursuing international expansion
while maintaining margin integrity. As part of this strategy,
several new models will be introdu-ced during the next years .
Table 5.7: Key figures for PSA in
1996 
Source: PSA annual report
Today PSA is Europe's third largest car manufacturer, and
Europe's leading manufacturer of light commercial vehicles. In
addition to its two core car manufacturers, Automobiles Peugeot
and Automobiles Citroën, PSA also active in a number of
businesses strategically related to the automobile industry.
In 1996, PSA intensified its three-pronged strategy of, 1)
updating and enhancing two comprehensive lines of products and
services that respond to customer expectations. 2) accelerating
cost-reduction programs, and 3) pursuing international expansion
while maintaining margin integrity. As part of this strategy,
several new models will be introdu-ced during the next years .
GENERAL MOTORS CORPORATION (GM)
Products
GM's automotive department consist of the manufacture, assembly
and sale of automobi-les, trucks, buses and related parts and
accessories. In 1990 GM held just over 35% of both the US car and
light truck market, with worldwide sales of 7,451,000 units.
Product lines include Saturn, Chevrolet, Pontiac, Oldsmobile,
Buick, Cadillac and GMC Trucks in the domestic market, Opel in
continental Europe and Vauxhall in the UK.
Further GM has a number of finance and insurance activities.
These activities are carried on by GMAC (General Motors
Acceptance Corporation) and its subsidiaries, as well as by other
subsidiaries of General Motors .
Background and current situation
William C. Durant formed general Motors in 1908, to
take over the assets of the failing Buick Motor Company,
Oldsmobile as well as the Oakland and Cadillac companies. From
the beginning the company's strategy was three-pronged: 1) to
produce a variety of cars to suit a variety of tastes and
purchasing powers 2) to diversify as widely as possible in
automotive engineering 3) and to integrate backwards into the
manufacture of compo-nents .
In 1983 GM entered an agreement with Toyota for the production of
a small Chevrolet. GM Fanuc Robotics Corp, a joint venture
between GM and its subsidiary GM Hughes Electronics, set up in
1982, is the largest manufacturer of robots in the US. GM also
has joint ventures with Daewoo and Isuzu.
In mid-1986 the company began a programme of cost-cutting, staff
reduction and capacity maximisation in an effort to enhance
competitiveness in the face of increasingly sophisti-cated
Japanese imports . One aim was for fewer and better model lines.
1987 and 1988 marked a period when a large number of new models
was introduced, again to try to im-prove GM's competitive
position.
As the world's largest carmaker General Motors had long resented
its secondary position in the European market, and it finally
achieved market leadership in 1992 and then con-solidated its
position. GM has been present in Europe since early this century,
and as an American manufacturer it has not concentrated on a
single domestic market, but has de-veloped a good spread across
the continent. However, it does have a particular sales
con-centration in Germany and UK, which accounts for over 55% of
the company's European Sales. The other large markets, France,
Italy and Spain, also play a significant part in total sales. GM
is also the market leader in Netherlands and Switzerland. The
weakest market is Sweden where it commands only 6.7% of the
market.
Table5.8: Key figures for GM in 1996
Source: GM annual report
GM's design policy is flexible, as it does not centralise its
model designs worldwide. Each region will take responsibility for
its major models, though there are far more collaborati-on than
earlier, in order to make use of common parts .
BMW (BAYERISCHE MOTOREN WERKE) GROUP
Products
The BMW range of cars consists of the 3 Series medium-sized and
two-and four-door saloons and estate cars, the 7 Series luxury
saloons and long-wheelbase saloons, the 8 Series coupes and the
Z1 sports car. Cars are also produced under the Rover name. The
division also includes the BMW Motoren GmbH engine plant in
Austria that, together with BMW Austria GmbH, makes BMW one of
the 10 largest industrial companies in Austria. BMW Motorsport
GmbH is involved in motor sport with cars based on existing
models, as well as developing and producing the high-performance
cars and engines of the M series. BMW Technik GmbH is an
independent subsidiary developing system solu-tions in all fields
of automotive engineering, including component and prototype
devel-opment . Further the BMW Group produces motorcycle
products.
BMW was founded in 1916 as Bayerische Flugzeugwerke AG to make
aircraft engines. The company begun producing motorcycles in 1923
and became a leader in this field by the 1930's. In the late
1920's, BMW acquired a license for air-cooled aircraft engines
from Pratt & Whitney, and a car factory in Eisenach. In the
early 1950's, BMW started car production, making the first
eight-cylinder car and mini-cars. Car production developed
steadily to eclipse motor bikes and aircraft engines, which it
stopped making in 1965. In 1967, BMW took over Hans Glas GmbH, a
maker of mini-cars. Since then, the company has steadily
increased the size of its cars and now all its models are in the
medium and full-size range. Export is highly important for the
company, as 63% of sales are outside Europe. Thus subsidiary
companies are established in 14 of the most important foreign
markets
Table 5.9: Key figures for BMW in 1996 
Source: PSA annual report
BMW is one of the few western car producers to have realised
profits consistently over the past two decades. In spite of this
long period of success in car and motorcycle manu-facture, BMW
entered a period of development in 1990. After 26 years out of
the aircraft engine business, BMW and Rolls Royce set up BMW
Rolls Royce GmbH, a 50.5/49.5 joint venture, in July 1990 .
Today BMW has evolved into one of the most admired companies in
the Industry. While Mercedes-Benz is perceived as a provider of
prestige transport for chairmen and ambas-sadors, BMW has carved
out a reputation for slightly smaller but more interesting
ve-hicles. Cars for the up-and-coming executive, rather than for
the one that has already arri-ved .
BMW sells many of its cars in the German Market, but it has a
good sales distribution over all European markets. In terms of
size, the UK is the second largest market, followed by France and
Italy. In terms of Market share BMW is strongest in Germany with
6.5% of the market, followed by Luxembourg, Belgium and
Switzerland. It is weak in some of the Nordic countries, but it
has least a 1 percent share in every European Mar-ket.
RENAULT
The French State has owned Renault for many years, and although
it is now privatised, it is still expected by some to act as an
arm of the state. Renault is a larger manufacturer than Peugeot
or Citroën individually and it has shown innovative flair over
the years by producing vehicle concepts and it has led model
trends within the industry.
The company controls a 10% share of the European market, which is
a decline in recent years but the same as in 1990. However, in
1996 its sales only grew by 3.5%, much lower than the market
growth. As the French market, where Renault is the market leader,
grew by 10%, this was a very disappointing performance. France
accounts for 45% of Re-nault's sales in Europe.
The company has a substantial presence in Germany, as it is its
next largest market. In both Italy and the UK, Renault has a 6%
market share.
The company has attempted to shift towards larger, higher margin
cars. Despite of this, Renault faces a number of difficulties in
the next decade, particularly its reliance on the French market
and its high cost base. As the influence of the French government
wanes it will become much more its own master, and it will
probably explore ways of co-operating with other manufacturers.
It has already had discussions with Skoda, Chrysler and Volvo, so
it is making no secret of its desire for alliances .
If it cannot find a partner, its best strategy would be to build
on its design strengths and introduce niche models derived from
its mainstream products.
SECTION SUMMARY
In this chapter we have briefly described the seven largest
actors in the European market, with respect to products, history
and current situation. The market actors will be used again in
the next section, when discussing strategic groups and
segmentation.