MILAN (AP) – During Nissan’s North American operations from 2009 to 2011, Carlos Tavares had a reputation for keeping a close eye on costs with little tolerance for vehicles or businesses that were not making money.
Experts say this means that Tavares, currently the head of PSA Group, will likely follow that blueprint as he becomes the leader of a merged PSA and Fiat Chrysler Automobiles. The underperforming Chrysler brand could get the ax, as well as slow-selling cars, SUVs or trucks that have no potential.
The companies are already talking about consolidating vehicle platforms – the underpinning and powertrains – to save billions in engineering and manufacturing costs. That could mean job losses in Italy, Germany and Michigan as PSA Peugeot technology is integrated into North American and Italian vehicles.
“You can’t be cost-effective if you keep the full scale of both companies,” said Karl Brauer, executive analyst for the iSeeCars.com automotive website. “We’ve seen this show before, and we’ll see it again, where they cut back on these platforms across different continents, across multiple markets.”
Shareholders of both companies will meet on Monday to vote on the merger to form the world’s fourth-largest automaker, named Stellantis. The deal received approval from EU regulators just before Christmas.
Tavares, who has been wanting to sell PSA vehicles in the US for years, will take full control of the merged companies by the end of January at the earliest.
He will likely focus on Europe for consolidation first, as that’s where Fiat vehicles overlap extensively with PSAs, said IHS Markit Principal Auto Analyst Stephanie Brinley. Europe has been a money loser for FCA, and factories in Italy are operating well below capacity – a concern for the unions given Fiat’s role as the country’s largest private sector employer.
“We are at a crossroads”, says Michele De Palma of the metalworkers union FIOM CGIL. “Either there is a relaunch or there is a slow, painful shutdown of industry, particularly the automotive industry, in Italy.”
Italy’s hopes lie with the luxury Maserati and sporty Alfa Romeo brands, but De Palma said investments are needed to kick-start hybrid and electric technology. Fiat’s Italian capacity is 1.5 million vehicles, but only a few hundred thousand are produced every year. Most of the factories had been laid off at short notice due to a lack of demand even before the pandemic.
The merger is also likely to affect white collar workers, as Tavares is unlikely to retain technical centers in Paris, Turin and Rodelsheim, Germany, where the Opel brand it acquired in 2017 is located, according to analysts.
FCA’s North American operations, led by the popular Jeep and Ram pickup truck brand, are hugely profitable and will likely remain untouched for a while, Brinley said. Only three years ago, Tavares stated his desire to sell PSA vehicles in the US within ten years. He said any global automaker should sell in the US market.
In December, the companies announced that Mike Manley, CEO of Fiat Chrysler, would lead Stellantis’ operations in America.
Larger Jeep and Ram trucks and SUVs are unique to the US and generally don’t sell well in Europe, so Brinley expects those to be designed by Fiat Chrysler in Auburn Hills, Michigan, north of Detroit. However, eventually, some cars and some smaller SUVs will move to PSA underpinnings, she said.
PSA has a wider range of fuel-efficient smaller engines, and Fiat Chrysler will need them to meet the government’s fuel economy and pollution requirements worldwide. The PSA Group’s goal is to offer all models with electrified powertrains by 2025, an area where Fiat Chrysler is also lagging behind.
Analysts say the Chrysler brand could be compromised in the US, where it only has two models, the obsolete 300 sedan and the Pacifica minivan. Sales of the brand in the US were down 19% through October.
The two companies have not yet disclosed any decisions about brands. Fiat Chrysler said in a statement from Michigan that one of Stellantis’ greatest strengths is its historic brands, including 10 from FCA, adding that there are no plans to close factories. But PSA said in a statement from Paris that it has not announced any plans for the brands. “We will communicate on this in a timely manner as the EGA (shareholder vote) is neither the closing date nor the announcement of a strategic plan,” the statement said.
Brauer said American consumers are unlikely to see Peugeot vehicles. Instead, smaller vehicles will be built on French or German underpinnings with Michigan-designed bodies and interiors.
While the tie-up will be billed as a merger, the benefit will go to PSA, who will check 6 of the 11 board seats with Tavares the tie-breaker.
Fiat Chrysler brands range from the powerhouse Jeep to the performance-oriented Abarth marquee and the historic Italian brand Lancia, which currently produces only one model, the Ypsilon, aimed at female drivers. “I don’t expect shrink brands that are still making volumes, even though they target very specific market segments, such as Lancia,” said Francesco Zirpoli, director of the Center for Automotive and Mobility at Ca ‘Foscari University in Venice. But Stellantis will have too many factories in Europe making similar vehicles. “These overlaps need to be resolved,” he said.
Stellantis also faces a major challenge in Asia, particularly China, where both PSA and FCA are weak.
“The big market of the future is Asia. Asia will dominate the automotive industry, ”says Ferdinand Dudenhoeffer of the Center for Automotive Research in Germany. It’s already 45% of global sales. ‘They merge, okay. They find synergies, okay. They’re reducing the workforce, okay. But they miss the most important point in the automotive industry. ”
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Krisher reported from Detroit.