PSA Group Fiat Chrysler Group merges to create a new automotive giant

Fiat Chrysler Automobiles NV And the Peugeot Maker PSA Group They boosted their transatlantic merger on Saturday, creating Stellantis NV, the global auto giant that executives say will have the weight needed to compete in a rapidly changing industry.

The deal, which was first agreed in late 2019 and approved by shareholders earlier this month, comes as the global auto business is rapidly transitioning to new technologies, like electric cars, and struggling with startups trying to change everything from How to design and build cars. How to sell it.

Stellantis, derived from the Latin term meaning “to shine in the stars,” ranks as the world’s third largest automaker by sales, according to 2019 figures, the most recent available. At its close on Friday, it was worth over $ 51 billion. The newly formed car company plans to start trading under the ticker symbol STLA on the Paris and Milan stock exchanges on Monday and in New York on Tuesday.

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Stellantis will have a large presence in North America and more than a quarter of the market in Europe, selling cars through a huge range of brands, ranging from American names like Jeep and Ram to Peugeot and Citroën and Opel in Europe and Maserati and Alfa Romeo at the luxury end. .

In a turbulent year for many global manufacturers, FCA and PSA executives pushed ahead with the merger, saying the challenges posed by the Covid-19 pandemic had reinforced the need for combination. They estimate that the partnership could ultimately save $ 6 billion annually in costs, in part by combining the two companies’ engineering and parts procurement to drive economies of scale.

However, the auto sector has a choppy record with giants and many of Stellantis’ competitors, including General Motors, are moving in the opposite direction, retreating from money-losing territories and shrinking their global operations to be smarter.

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Carlos Tavares, the head of PSA who now leads Stellantis, faces many challenges in aligning these two companies together, including underperforming factories, underperforming brands and ailing Chinese businesses.

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

The 62-year-old Mr. Tavares is known in the auto circles for his success in turning ailing business. When he first arrived at Peugeot from Renault in 2013, the company was bleeding cash. Within six years, he had transformed it into one of the most profitable European car companies with PSA announcing an operating margin of 8.5% in 2019. He later revived Opel and Vauxhall, two struggling European brands that PSA previously bought from General Motors in 2017.

At PSA, the transformation was largely accomplished by rolling back sales discounts harmful to profits and prompting the company to be very careful about costs. It also reduced the workforce without closing factories, negotiating new union agreements and eliminating jobs through acquisitions.

Carlos Tavares, the head of PSA who now leads Stellantis, faces many challenges in aligning these two companies together, including underperforming factories, underperforming brands and ailing Chinese businesses. (Marilyn Awad / Bloomberg via Getty Images)

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Some analysts say it’s a formula, which he is likely to implement at Stellantis, which employs about 400,000 workers globally.

One of Mr. Tavares ‘biggest pledges will be to combine the two automobile manufacturers’ manufacturing operations, which together comprise nearly 50 plants worldwide – many of which operate at much lower capacity, according to data provided by research firm LMC Automotive. It also needs to revitalize business in China, where combined sales of the two companies now account for less than 1% of the market that sold 20 million cars last year, and overhaul Fiat Chrysler’s losing operations in Europe.

In terms of electric vehicles, Stellantis will be under pressure to keep up with the investment being pumped into technology by competitors, such as GM, which plans to spend $ 27 billion through 2025 on electric and autonomous cars.

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

The newly formed automaker, named Stellantis, will start trading Monday in Europe and Tuesday in New York. (pocket)

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Stellantis plans to divert the bulk of its projected annual savings of $ 6 billion to develop electric cars and other expensive technologies. But areas of overlap in manufacturing and vehicle configurations must first be addressed, without shutting down factories and wiping out brands as executives have promised, a task industry analysts say could prove difficult as car companies continue to face low sales during the pandemic.

Ms Paillou says that Mr. Tavares, a Portuguese-born auto fanatic who spends many weekends racing in cars, will likely take the time to evaluate the work and get to know his FCA counterparts before making any major changes.

She said, “He’s not the type of leader to give you a goal and say, ‘Go and find a way to make it happen.” “He’s much more practical than the average captain.”