MILAN (AP) – While driving 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 that Tavares, currently the head of the PSA Group, is likely to follow that plan when he becomes the leader of a merger between PSA and Fiat Chrysler Automobiles. Chrysler’s underperforming brand can carry the ax, as can cars, SUVs or slow-selling trucks that have no potential.
Companies are already talking about consolidating vehicle platforms – the bases and power packs – to save billions in engineering and manufacturing costs. This could mean job losses in Italy, Germany and Michigan, as PSA Peugeot technology is integrated with North American and Italian vehicles.
“You can’t be cost-effective if you maintain the full scale of both companies,” said Karl Brauer, executive analyst at automotive website iSeeCars.com. “We have seen this show before and we will see it again, where they save these platforms on several continents, in several markets.”
The shareholders of both companies will meet on Monday to vote on the merger to form the fourth largest automaker in the world, to be called Stellantis. The deal received EU regulatory approval shortly before Christmas.
Tavares, who has wanted to sell PSA vehicles in the United States for years, will not take full control of the merged companies before the end of January.
It will likely target Europe for consolidation first, because that’s where Fiat vehicles largely overlap with PSAs, said Stephanie Brinley, chief automotive analyst at IHS Markit. Europe has been losing money to the FCA, and factories in Italy are operating below capacity – a concern for unions, given Fiat’s role as the largest private sector employer in the country.
“We are at a crossroads,” said Michele De Palma, of the metalworkers union FIOM CGIL. “Either there is a relaunch or there is a slow and agonizing closure of the industry, in particular the auto industry, in Italy.”
Italy’s hopes are for the luxury Maserati and sports brands Alfa Romeo, but De Palma said investments are needed to bring hybrid and electric technology to speed. Fiat’s Italian capacity is 1.5 million vehicles, but only a few hundred thousand are produced each year. Most factories were rolling out short-term layoffs due to lack of demand, even before the pandemic.
The merger should also reach white collars, as Tavares should not maintain engineering centers in Paris, Torino and Rodelsheim, Germany, where the Opel brand he acquired in 2017 is located, according to analysts.
North American FCA operations, led by the popular Jeep brand and Ram pickup, are extremely profitable and are likely to remain untouched for a while, Brinley said. Tavares just three years ago declared his desire to sell PSA vehicles in the United States within a decade. He said that any global automaker has to sell on the American market.
In December, companies announced that Fiat Chrysler CEO Mike Manley would head Stellantis’ operations in the Americas.
The larger Jeep and Ram trucks and SUVs are exclusive to the U.S. and generally don’t sell well in Europe, so Brinley expects them to be designed by Fiat Chrysler in Auburn Hills, Michigan, north of Detroit. Eventually, some cars and some smaller SUVs, however, will be moved to PSA bases, she said.
PSA has a wider range of smaller engines with low fuel consumption, and Fiat Chrysler will need them to meet the government’s fuel consumption and pollution requirements worldwide. The PSA Group’s goal is to offer all its models with electrified engines by 2025, an area where Fiat Chrysler has also been left behind.
Analysts say the Chrysler brand may be at risk in the United States, where it has only two models, the old 300 sedan and the Pacifica minivan. The brand’s sales in the United States fell 19% until October.
The two companies have yet to announce a decision on the brands. Fiat Chrysler, in a statement from Michigan, said that one of Stellantis’ greatest strengths is its historic brands, including 10 from FCA, adding that there are no plans to close any plants. But PSA said in a Paris statement that it had not announced any plans for the brands. “We will communicate in due course on this matter, as the EGA (shareholder vote) is not the closing date, nor the announcement of a strategic plan,” said the statement.
Brauer said American consumers are unlikely to see Peugeot vehicles. Instead, smaller vehicles will be built on French or German bases with Michigan-designed bodies and interiors.
While the union is billed as a merger, the advantage goes to PSA, which will control 6 of the 11 council seats, with Tavares as the tiebreaker.
Fiat Chrysler brands range from the powerful Jeep to the Abarth performance tent and the historic Italian brand Lancia, which currently produces only one model, the Ypsilon, aimed at women. “I do not expect to cut brands that still produce large volumes, even if they are focused on very specific market segments, such as Lancia,” said Francesco Zirpoli, director of the Automotive and Mobility Center at Ca ‘Foscari University in Venice. But Stellantis will have many factories in Europe making similar vehicles. “These overlaps need to be resolved,” he said.
Stellantis will also face a major challenge in Asia, in particular in China, where PSA and FCA are weak.
“The great market for the future is Asia. Asia is going to dominate the auto business, ”said Ferdinand Dudenhoeffer, from Germany’s Automotive Research Center. It is already 45% of global sales. “They merge together, OK. They find synergies, OK. They reduce the number of employees, OK. But they are missing the most important point in the auto business. ”
____
Krisher reported from Detroit.