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MILAN (AP) – While leading Nissan’s North American operations from 2009 to 2011, Carlos Tavares had a reputation for closely monitoring costs with little tolerance for vehicles or businesses that did not make money .
Experts say this means Tavares, currently the head of the PSA group, will likely follow that plan when he becomes the head of a PSA and Fiat Chrysler Automobiles merger. The underperforming Chrysler brand might have the ax, just like cars, SUVs or trucks that lack potential.
Companies are already talking about consolidating vehicle platforms – the foundations and powertrains – to save billions of dollars in engineering and manufacturing costs. This could lead to job losses in Italy, Germany and Michigan, as PSA Peugeot technology is integrated into North American and Italian vehicles.
“You can’t be profitable if you keep the full scale of both companies,” said Karl Brauer, executive analyst for automotive website iSeeCars.com. “We’ve seen this show before, and we’ll be seeing it again where they save these platforms across continents, in multiple markets.”
Shareholders of the two companies are due to meet on Monday to vote on the merger to form the world’s fourth-largest automaker, called Stellantis. The deal received regulatory approval from the EU just before Christmas.
Tavares, which has been keen to sell PSA vehicles in the United States for years, will not take full control of the merged companies until the end of January at the earliest.
It will likely target Europe first for consolidation, as this is where Fiat vehicles largely overlap with those from PSA, said Stephanie Brinley, senior automotive analyst at IHS Markit. Europe has lost money to FCA, and Italian factories are operating well below capacity – a concern for unions, given Fiat’s role as the country’s largest private sector employer.
“We are at a crossroads,” said Michele De Palma of the FIOM CGIL metalworkers’ union. “Either there is a revival or there is an agonizing slow shutdown of the industry, especially the automotive industry, in Italy.”
Italy’s hopes rest on luxury brands Maserati and sports brands Alfa Romeo, but De Palma said investments were needed to upgrade hybrid and electric technology. Fiat’s Italian capacity is 1.5 million vehicles, but only a few hundred thousand are produced each year. Most factories were laid off in the short term due to lack of demand, even before the pandemic.
The merger is also expected to hit white-collar workers, as Tavares is unlikely to retain engineering centers in Paris, Turin and Rodelsheim, Germany, where the Opel brand it acquired in 2017 is located, analysts said.
FCA’s North American operations, led by the famous Jeep and Ram brand, are extremely profitable and will likely be left untouched for some time, Brinley said. Just three years ago, Tavares declared his desire to sell PSA vehicles in the United States within a decade. He said that every global automaker must sell in the US market.
In December, the companies announced that Fiat Chrysler CEO Mike Manley would lead Stellantis’ operations in the Americas.
The larger Jeep and Ram trucks and SUVs are unique to the United States and generally don’t sell well in Europe, so Brinley expects these to be designed by Fiat Chrysler in Auburn Hills, Michigan, north of Detroit. Eventually, some cars and some smaller SUVs will shift to the basics of PSA, she said.
PSA offers a wider range of small, fuel efficient engines, and Fiat Chrysler will need them to meet government fuel consumption and pollution requirements around the world. Groupe PSA’s objective is to offer all its models with electrified powertrains by 2025, an area in which Fiat Chrysler has also fallen behind.
Analysts say the Chrysler brand could be at risk in the United States, where it only has two models, the aging 300 sedan and the Pacifica minivan. US sales of the brand fell 19% through October.
The two companies have yet to announce branding decisions. Fiat Chrysler, in a statement from Michigan, said one of Stellantis’ greatest strengths were its historic brands, including 10 from FCA, adding that there were no plans to close factories. But PSA said in a statement from Paris that it had not announced any plans for the brands. “We will communicate in due time on this subject, because the EGA (shareholder vote) is not the closing date, nor the announcement of a strategic plan,” the statement said.
Brauer said American consumers would likely not see Peugeot vehicles. Instead, smaller vehicles will be built on French or German foundations with bodies and interiors designed in Michigan.
While the tie is presented as a merger, the advantage goes to PSA, who will control 6 of the 11 board seats with Tavares the tiebreaker.
Fiat Chrysler’s brands range from the mighty Jeep to the performance marquee Abarth and the historic Italian marque Lancia, which currently only produces one model, the Ypsilon, aimed at women. “I don’t expect cutting brands that still generate volumes, even if they focus on very specific market segments, like 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 must be resolved,” he said.
Stellantis will also face a major challenge in Asia, particularly China, where PSA and FCA are weak.
“The big market of the future is Asia. Asia will dominate the automotive sector, ”said Ferdinand Dudenhoeffer, of the Automotive Research Center in Germany. That’s already 45% of global sales. “They merge, OK. They find synergies, OK. They’re downsizing, OK. But they miss the most important point of the automotive industry. ”
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Krisher reported from Detroit.
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