MILAN (AP) – While leading Nissan’s operations in North America from 2009 to 2011, Carlos Tavares had a reputation for keeping a close eye on costs, with a low tolerance for vehicles or businesses that did not make money.
Experts say this means that Tavares, currently the head of the PSA group, will follow this plan when he becomes the leader of a merged PSA and Fiat Chrysler Automobiles. The low-performance Chrysler brand could get the ax, as can cars, SUVs or trucks that have no potential.
Companies are already talking about strengthening vehicle platforms – bases and powertrains – to save billions in engineering and manufacturing costs. This could mean job losses in Italy, Germany and Michigan, as Peugeot PSA technology is integrated into North American and Italian vehicles.
“You can’t be cost-effective if you keep the full scale of both companies,” said Karl Brauer, executive analyst for iSeeCars.com. “We’ve seen this show before and we’ll see it again where these platforms save on continents, in more markets.”
The shareholders of both companies will meet on Monday to vote on the merger to form the fourth largest carmaker in the world, called Stellantis. The agreement received EU regulatory approval just before Christmas.
Tavares, which has wanted to sell PSAs in the United States for years, will not take full control of the merged companies until the end of January.
It will probably target Europe first for consolidation, because there Fiat vehicles overlap with those of PSA, said Stephanie Brinley, chief analyst at IHS Markit. Europe has lost money for the FCA, and factories in Italy 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 FIOM CGIL’s metallurgical union. “Either there is a relaunch or a slow agonizing shutdown of the industry, especially the car industry, in Italy.”
Italy’s hopes belong to the luxury brands Maserati and Alfa Romeo, but De Palma said that investments are needed to bring hybrid and electric technology to speed. Fiat’s Italian capacity amounts to 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 likely to affect white-collar workers, as Tavares is unlikely to retain engineering centers in Paris, Turin and Rodelsheim, Germany, where the Opel brand he acquired in 2017 is located, according to analysts.
FCA operations in North America, led by the popular Jeep and Ram Ram brands, are extremely profitable and will likely be left untouched for a while, Brinley said. Tavares just three years ago declared his desire to sell PSA vehicles in the United States in a decade. He said that any global carmaker must sell in the US market.
In December, companies announced that Fiat Chrysler CEO Mike Manley would lead Stellantis’ operations in America.
Larger Jeep and Ram trucks and SUVs are unique to the United States and generally do not 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 move to the PSA base, she said.
PSA has a wider range of smaller, fuel-efficient engines, and Fiat Chrysler will need them to meet government fuel and global pollution requirements. The objective of the PSA Group is to offer all its models with electrified propulsion systems until 2025, an area in which Fiat Chrysler also remained.
Analysts say the Chrysler brand could be endangered in the US, where it has only two models, the 300-year-old sedan and the Pacifica minivan. US sales of the brand fell 19% through October.
The two companies have not yet announced any decision on trademarks. Fiat Chrysler, in a statement from Michigan, said that one of Stellantis’ biggest strengths are its historic brands, including 10 from the FCA, adding that there are no plans to close any plants. But PSA said in a statement in Paris that it had not announced any plans for the brands. “We will communicate in due time on this issue, because the EGA (shareholders’ vote) is not the closing date, nor the announcement of a strategic plan,” the statement said.
Brauer said, however, American consumers will not see Peugeot vehicles. Instead, smaller vehicles will be built on French or German supports, with bodies and interiors designed in Michigan.
While the link is billed as a merger, the advantage goes to PSA, which will control 6 of the 11 council seats, and Tavares will disappear.
Fiat Chrysler brands range from the powerful Jeep to the performance brand Abarth and the historic Italian brand Lancia, which currently produces only one model, the Ypsilon, which targets female drivers. “I do not expect to reduce brands that still make volumes, even if they are focused on very specific market segments, such as Lancia,” said Francesco Zirpoli, director of the Center for Automobiles and Mobility at Ca ‘Foscari University in Venice. But Stellantis will have too many factories in Europe that produce similar vehicles. “These overlaps need to be resolved,” he said.
Stellantis will also face a major challenge in Asia, especially in China, where PSA and FCA are weak.
“The big market of the future is Asia. Asia will dominate the car business, ”said Ferdinand Dudenhoeffer of the German Center for Automotive Research. It already accounts for 45% of global sales. “It simply came to our notice then. They find synergies, OK. I’m downsizing, OK. But they are missing the most important point in the car business. ”
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Krisher reported from Detroit.