Fiat Chrysler and PSA Group merge to create new automotive giant

Fiat Chrysler Automobiles NV and automaker Peugeot PSA Group cemented their transatlantic merger on Saturday, creating Stellantis NV, a global auto-manufacturing giant that executives say will have the clout to compete in a rapidly changing industry.

The deal, first reached at the end of 2019 and approved earlier this month by shareholders, comes as the global auto industry quickly moves to new technologies, such as electric vehicles, and battles against upstarts trying to turn everything upside down, the way cars are designed and built. to the way they are sold.

Stellantis, derived from the Latin term meaning ‘brighten up with stars’, ranks as the world’s third-largest automaker in terms of sales, according to 2019 figures, the latest available. At Friday’s close, it was worth over $ 51 billion. The newly formed automaker plans to start trading under the symbol STLA on the Paris and Milan stock exchanges on Monday and in New York on Tuesday.

Teleprinter	security	Latest	Change	% Change
FCAU	FIAT CHRYSLER AUTOMOBILES NV	15.23	-0.79	-4.93%
STLA	n / A	n / A	n / A	n / A

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Stellantis will have a major presence in North America and over a quarter of the market in Europe, selling vehicles across a vast collection of brands, ranging from American names like Jeep and Ram to Peugeot, Citroën and Opel in Europe and Maserati and Alfa Romeo on the luxury side.

In a turbulent year for many global manufacturers, FCA and PSA executives continued the merger, saying the challenges posed by the Covid-19 pandemic have only reinforced the need for the combination. They estimate that the combination could potentially generate annual cost savings of $ 6 billion, in part by consolidating engineering and parts procurement from both companies to generate greater economies of scale.

Yet the auto industry has a mixed record with mega-mergers, and many of Stellantis’ rivals, including General Motors Co., are moving in the opposite direction, pulling out of losing regions and scaling back their global operations to be more agile.

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Carlos Tavares, the PSA chief at the helm of Stellantis, faces many challenges in bringing the two companies together, including underperforming factories, lagging brands and a struggling Chinese company.

“The trickiest part of every merger is when you have to mix all the cultures,” said Carla Bailo, president of the Center for Automotive Research and Mr. Tavares’ former colleague at Nissan Motor Co.

Mr. Tavares, 62, is known in automotive circles for his success in turning around failing businesses. When he arrived at Peugeot from Renault in 2013, the company was bleeding money. In the space of six years, he transformed it into one of the most profitable European automakers, with PSA posting an operating margin of 8.5% in 2019. He then relaunched Opel and Vauxhall, two European brands in difficulty that PSA bought from GM in 2017.

At PSA, much of the turnaround was achieved by reducing profit-damaging sales discounts and pushing the company to be overly cost-conscious. It has also cut the workforce without closing factories, negotiating new union agreements and cutting jobs through buyouts.

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This is a formula, according to some analysts, that he will likely apply at Stellantis, which employs around 400,000 workers worldwide.

One of Mr Tavares’ biggest endeavors will be to merge the manufacturing activities of the two automakers, which together include nearly 50 factories around the world – many of which are operating at a capacity well below their capacity, according to the data provided. by the research company LMC Automotive. It also needs to revitalize business in China, where the combined sales of the two companies now represent less than 1% of a market that sold 20 million vehicles last year, and correct losing Fiat Chrysler operations in Europe.

On electric vehicles, Stellantis will be under pressure to match the investment in technology from competitors, like GM, which plans to spend $ 27 billion through 2025 on electric and self-driving cars.

As Fiat Chrysler and PSA have strived to expand plug-in offerings and secure battery supply, the market is becoming increasingly competitive, with traditional automakers and well-funded startups gearing up to launch a wave of new electric models this year.

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Stellantis plans to divert most of the $ 6 billion in projected annual savings to developing electric vehicles and other expensive technologies. But first, it must tackle areas of overlap in manufacturing and vehicle lines, without shutting down factories and eliminating brands as executives have promised – a task that industry analysts say could be tricky, as automakers continue to face depressed sales during the pandemic.

Ms Bailo says Mr Tavares, a Portuguese-born car fanatic who spends many weekends driving cars, will likely take the time to assess the company and get to know his Fiat Chrysler counterparts before he goes. make major changes.

“He’s not the kind of leader who gives you a goal and says, ‘Go find a way to achieve it,'” she said. “He is much more practical than the typical leader.”