MILAN (AP) – While managing Nissan’s operations in North America from 2009 to 2011, Carlos Tavares has a reputation for keeping a close eye on costs with little tolerance for non-monetary vehicles or businesses.
According to experts, this means that Tavares, currently the head of PSA Group, is likely to follow the plan when he becomes leader of a composite PSA and Fiat Chrysler Automobiles. The poorly performing Chrysler brand can get the ax, as well as cars, sports utility vehicles or trucks with a lack of potential.
The companies are already talking about consolidating vehicle platforms – the substructure and propulsion – to save billions in engineering and manufacturing costs. This could mean job losses in Italy, Germany and Michigan, as PSA Peugeot technology is integrated into North American and Italian vehicles.
“You can not be cost-effective if you maintain the overall scale of both companies,” said Karl Brauer, executive analyst at the iSeeCars.com car website. “We’ve seen this show before, and we’re going to see it again where they’re saving these platforms across the continents and in different markets.”
Shareholders of both companies are meeting Monday to vote on the merger to form the world’s fourth largest carmaker, called Stellantis. The agreement was approved by the EU just before Christmas.
Tavares, which has wanted to sell PSA vehicles in the US for years, will only take full control of the merged companies in early January.
He will probably first target Europe for consolidation, as this is where Fiat vehicles overlap a lot with PSAs, said Stephanie Brinley, chief analyst at IHS Markit. Europe was a money-loser for FCA, and factories in Italy operate far 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 FIOM CGIL Metal Union. “There is a relocation, or there is a slow painful closure of the industry, especially the car industry, in Italy.”
Italy’s hopes lie with the luxury brands Maserati and sporty Alfa Romeo, but De Palma said investments are needed to accelerate hybrid and electric technology. Fiat’s Italian capacity stands at 1.5 million vehicles, but only a few hundred thousand are produced annually. Most factories were experiencing short-term layoffs due to a lack of demand, even before the pandemic.
The merger is also likely to hit white-collar workers, as Tavares is unlikely to hold engineering centers in Paris, Turin and Rodelsheim, Germany, where the Opel brand it acquired in 2017 is, according to analysts.
FCA’s North American operations, led by the popular Jeep brand and Ram pickup, are very lucrative and are likely to be left untouched for a while, Brinley said. Tavares said just three years ago that he wanted to sell PSA vehicles in the US within ten years. He said any global carmaker should sell in the US market.
In December, the companies announced that Mike Manley, CEO of Fiat Chrysler, would manage Stellantis’ operations in the United States.
Larger Jeep and Aram trucks and SUVs are unique to the US and usually do not sell well in Europe, and Brinley expects the vehicles to be designed by Fiat Chrysler in Auburn Hills, Michigan, north of Detroit. Eventually, however, some cars and a few smaller SUVs will move to PSA substructure, she said.
PSA has a wider range of fuel-efficient smaller engines, and Fiat Chrysler will need those to meet the government’s fuel mileage and pollution requirements worldwide. The PSA Group’s goal is to present all of its models with electrified drives by 2025, an area where Fiat Chrysler has also lagged behind.
Analysts believe the Chrysler brand may be in jeopardy in the US, where it has only two models, the older 300-sedan and the Pacifica minibus. U.S. brand sales declined 19% through October.
The two companies have yet to announce brand decisions. Fiat Chrysler, in a statement from Michigan, said one of Stellantis’ biggest strengths is its historic brands, including 10 from FCA, adding that there are no plans to close any plants. However, PSA said in a statement from Paris that it had not announced any plans for the brands. “We are expected to communicate on this matter, as the EGA (shareholder vote) is not the closing date, nor is it the announcement of a strategic plan,” the statement said.
However, Brauer said that American consumers are unlikely to see Peugeot vehicles. Instead, smaller vehicles will be built on French or German substructures with pickups and interiors designed in Michigan.
Although the merger is billed as a merger, the benefit is PSA, which will control 6 of the 11 board seats, with Tavares, the breakeven.
Fiat Chrysler brands range from Jeep to the performance Abarth tent and the historic Italian brand Lancia, which currently produces only one model, the Ypsilon, which is aimed at female drivers. “I do not expect brands that still deliver volumes to cut even though they are focused on very specific market segments, such as Lancia,” said Francesco Zirpoli, director of the Center for Automotive and Mobility, at Ca ‘Foscari University in Venice said. But Stellantis will have too many factories in Europe that manufacture similar vehicles. “These overlaps need to be resolved,” he said.
Stellantis will also face a major challenge in Asia, especially China, where PSA and FCA are weak.
‘The big market of the future is Asia. Asia will dominate the car business, ”says Ferdinand Dudenhoeffer, of the Center for Car Research in Germany. This is already 45% of global sales. ‘They merge, OK. They find synergies, OK. It reduces the number of people, OK. But they miss the most important point in the automotive industry. ”
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Krisher reports from Detroit.