THE move for PSA to merge with Fiat Chrysler Automobiles, which has at its core a return for Peugeot to North America, is an object lesson on the downside to protecting a car market with quantitative restrictions.

Had France and Italy in the 1970s not enforced almost outright bans on the importation of Japanese cars, then the struggle experienced by all French and Italian brands in North America, and Australia for that matter, could have been averted.

The problem was that the French and Italians panicked in the face of growing Japanese car production in the mid-1960s as well as exploding export volumes in the 1970s during which exports (mainly to the US) increase 200-fold to about 1.8 million units.

By the early 1980s Japan was making more cars than the US and more than half of them were exported.

France responded with typical Gallic flair and introduced what was colloquially known and the ‘Marseille bottleneck’.

Reluctant to introduce a tariff for political reasons, France declared that the only port in the nation where Japanese cars could be processed was Marseille.

Lancia Beta

It was common knowledge in the industry at the time that the processing of the paperwork for type approval and import permission was handled by one man.

So the number of cars processed between him sucking on his first Gitane of the morning, coffee, preparing lunch, eating lunch, a couple of glasses of wine, siesta, pitstops, more coffee and the last Gitane of the afternoon, was precious few.

Italy, which was making hundreds of thousands of terrible quality cars, but with great pizzazz, had no qualms about putting an effective ban of importing Japanese cars. It introduced a quota of 1500 cars on Japanese cars – not 1500 per car company, 1500 Japanese cars in total.

It seemed like a good idea at the time but it was a mistake.

Initially it protected the French and Italian markets from the onslaught of Japanese cars because you literally could not find one to buy. But it also had the effect of preventing French and Italian car-makers from facing the full force of true market competition and therefore they just went on building more of the same. The same poor durability, the same poor quality, the same lack of standard equipment, the same level of rust. You get the picture.

In the 1970s we all thought Lancias, Alfas and Fiats, Peugeots, Renaults and Citroens were the ants pants. The Europeans, especially the Italians, were certainly fun to drive but it was not long before the Japanese were even outdoing the Europeans in that department as well. Think Datsun 1600 which is still used here by privateers in rallying.

So having averted direct competition at home, it became instructive to see what happened to the French and the Italians in the one market, the US, where both the Japanese and the Franco-Italia cars were competing on exactly the same terms. Same import duties, same import procedures, same everything.

They were wiped out because they had eliminated the rigour of competition in their home markets.

Citroen was first, bowing out of the US in 1974.

Lancia was sent to the US starting in 1975 but, its owner, Fiat pulled out the brand in 1982.

In 1983 Fiat* pulled out of the US and the last of those cars will have long since rusted away.

Renault is a little more complex because it bought American Motors but that all ended in tears when the company was sold to Chrysler in 1987, by which time the Renault brand had run its race in the US.

Peugeot pulled out in 1991 because it was unable to match the Japanese on price and product.

Alfa Romeo did the best, starting off in the US in 1961 but it, too, had run its race by 1995. It barely sold more than 8000 cars a year (compared with Mercedes-Benz which was selling 90,000-plus a year). It returned to the US market in 2017 with the Giulia under the FCA arrangement.

Germany, which allowed Japanese cars a freer hand in its market, saw its cars thrive wherever they met Japanese cars on equal competitive terms. VW these days vies with Toyota for world market leadership and Mercedes-Benz and BMW are money trees.

In Australia something similar happened. Alfa Romeo, Lancia, Fiat, Renault and Peugeot in the mid-1970s were highly desired as prestige (sort of) purchases. Owning an Italian or French car was a rite of passage in many social circles.

Again, as in the US, where these French and Italian cars faced the full force of Japanese competition on reliability, durability and features, they wilted.

Lancia, which sold under the halo of World Rally Championship successes, disappeared from Down Under by the end of the 1970s. Rust was a particular problem and in the UK the authorities forced Lancia to buy back all Lancias from the British public because their cars were literally disappearing before their eyes.

Fiat left the Australian market in 1989 and Alfa Romeo hung in until 1992. (Alfa returned five years later and Fiat in 2001, both revived under independent importer Ateco.)

Renault Australia assembled cars (with Peugeot) from 1966 in Heidelberg, Melbourne, but closed the plant and pulled out in 1981. (It returned under the Renault-Nissan Alliance in 2001.)

Peugeot and Citroen languished on and off under various importers but they did live on miraculously from an inventive purchasing program based in France for Australian tourists to purchase their car, drive around Europe and bring the car home. But the numbers were low.

Even in Australia today, imported cars from France accounted for just 7000 units last year and from Italy 5000 units. Imports from Japan totalled 350,000 last year not counting the Japanese vehicles assembled in Thailand. More expensive German cars accounted for 90,000 units last year.

So, when the blowtorch of level competition was applied to French and Italian cars outside their cosseted home markets, they were found truly wanting. An expensive lesson.

* While Fiat returned to the US under its merger with FCA, it remains a struggle to get the brand airborne again and the company has just pulled its brand icon, the Fiat 500, from the market in the face of rapidly falling sales.

Comment by John Mellor