Fiat Chrysler and PSA Group merge to create a new auto giant

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

The deal, closed for the first time in late 2019 and approved earlier this month by shareholders, comes at a time when the global automotive business is rapidly shifting to new technologies, such as electric vehicles, and battling beginners who try to change everything, from how cars are designed and built to how they are sold.

Stellantis, derived from the Latin term that means “illuminate with stars”, is classified as the third largest automaker in the world in sales, according to numbers of 2019, the most recent available. At the close of Friday, it was worth more than $ 51 billion. The newly formed carmaker plans to start trading under the STLA symbol on the Paris and Milan stock exchanges on Monday and in New York on Tuesday.

Ticker	Safety	Last	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 an important presence in North America and more than a quarter of the market in Europe, selling vehicles through a huge collection of brands, ranging from American names like Jeep and Ram to Peugeot, Citroën and Opel in Europe and Maserati and Alfa Romeo at the end of luxury.

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

Still, the automotive industry has an irregular history with megamergers and many of Stellantis’ rivals, including General Motors Co., are moving in the opposite direction, retreating from regions that lose money and slowing their global operations to be more agile.

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Carlos Tavares, the head of PSA who now leads Stellantis, faces several challenges to fit these two companies together, including underperforming factories, backward brands and a struggling China business.

“The most complicated part of any merger is when you have to mix all cultures,” said Carla Bailo, president of the Automotive Research Center and Mr. Tavares’ former co-worker at Nissan Motor Co.

Tavares, 62, is known in the automotive industry for his success in reversing faltering businesses. When he arrived at Peugeot from Renault in 2013, the company was bleeding money. In six years, he turned it into one of the most profitable European automotive companies, with PSA posting an operating margin of 8.5% in 2019. He later revived Opel and Vauxhall, two European brands that PSA bought from GM in 2017.

At PSA, the turnaround has been largely achieved by removing sales discounts detrimental to profits and putting pressure on the company to be hypervigilant in relation to costs. He also reduced the workforce without closing factories, negotiating new union agreements and eliminating jobs through acquisitions.

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

One of Tavares ‘biggest ventures will be the merger of the two automakers’ manufacturing operations, which together comprise around 50 factories worldwide – many of them operating well below capacity, according to data provided by research firm LMC Automotive. It also needs to reinvigorate 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 to repair Fiat Chrysler’s deficit operations in Europe.

In electric vehicles, Stellantis will be under pressure to match the investment being poured into technology by competitors, such as GM, which plans to spend $ 27 billion by 2025 on electric and self-driving cars.

While Fiat Chrysler and PSA worked to expand plug-in offerings and secure battery supplies, the market is becoming increasingly competitive with well-funded traditional car companies and startups preparing to launch a wave of new electric models this year.

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Stellantis plans to divert most of the $ 6 billion in annual savings projected for the development of electric vehicles and other expensive technologies. But first he must face areas of overlap in manufacturing and vehicle lines, without closing factories and eliminating brands as executives have promised, a task that industry analysts say can be complicated, as automakers continue to face low sales during the pandemic.

Bailo says that Tavares, a car fanatic born in Portugal who spends many weekends racing cars, will probably take the time to evaluate the deal and meet his Fiat Chrysler colleagues before making any major changes.

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