Peugeot retracts its claws

Peugeot's announcement that it has withdrawn from sports car racing (including Le Mans) is a blow to the sport, but is not entirely unexpected. The parent company, PSA, which owns both Peugeot and Citroen, did not have a good year in 2011 and is looking for savings in every part of its business. The 2011 financial results are expected to show an overall loss, with the second half of 2011 accounting for a deficit of around £300 million.

Peugeot has two strategic problems that it needs to solve. Firstly, some of its products are lacklustre. The 207, which thankfully is replaced in 2012, is well off the pace and needs big discounts to lure buyers. Compared to the seminal 205, the 207 has been a big disappointment both to drivers and to Peugeot accountants. With the Koreans taking more of the market for mainstream cars, and premium brands coming downmarket with products like the Audi A1, the space for Peugeot in the middle has been getting smaller and smaller.