Despite aims of achieving about $6 billion in synergies through the merger of Fiat Chrysler Automobiles and France’s Group PSA, there are no plans to drop brands or eliminate jobs, Carlos Tavares, the CEO of newly formed Stellantis, declared Tuesday.
If anything, the company expects to see opportunities to enhance the performance of its 14 brands and gain traction in markets and market segments where it is weak, Tavares said during a nearly two-hour media briefing. But the Portugese-born executive did warn that “headwinds” could force Stellantis to pull back in some places, notably Latin America, if it can’t maintain a profitable business strategy.
“Our commitment on this merger is that we will not shut down plants as a consequence of the merger,’’ Tavares said, later adding that there are no plans to eliminate any brands, either, though a formal strategy for rebuilding some of the weaker marques, such as U.S.-based Chrysler and Italy’s Fiat and Alfa Romeo, is still in the works.
(Stellantis enjoys warm welcome from European investors.)
The merger was formally announced in December 2019 but took more than a year to pull together as FCA and PSA not only negotiated terms but also had to deal with unions and regulators around the world. The final details fell in place last month and shareholders from the two companies each voted in favor of completing the deal by margins of more than 99%.
The merger created what is now the world’s fourth-largest automotive manufacturer, behind Toyota, Volkswagen and the Renault-Nissan-Mitsubishi Alliance. And its size, diverse brand, product and market portfolios will serve as “a shield” said Tavares. That “helps keep affordability, helps keep the customer base and helps prevent bad things from happening.”
Tuesday’s lengthy media session was aimed at providing a sense of the direction Tavares sees for Stellantis while also addressing some of the many questions that have popped up during the last 13 months.
There has been widespread speculation that brands such as Fiat and Chrysler could be eliminated considering the challenges of maintaining a portfolio of 14 separate marques. But Tavares insisted Stellantis is up to the job, pointing to how it has handled its acquisition of Opel/Vauxhall from General Motors. Prior to that deal, the German-based unit had run up nearly two decades of losses. But it was profitable within a year of the purchase, Tavares noted.
One of the keys to the merger will be taking advantage of scale, the CEO said. That will allow more efficiency in product development and purchasing – which should yield 80% of the 5 billion euros in “synergies” Tavares has promised.
For one thing, weaker brands will benefit by being able to share product platforms and components developed for the broader enterprise – though Tavares stressed that it will be essential to make sure buyers can clearly differentiate between what he described as “sister cars,” say, Dodge, Fiat and Peugeot models that share the same underpinnings.
“The importance is scale and the opportunity to purchase more effectively,” said Stephanie Brinley, principal analyst with IHS Markit, adding that Stellantis “also will benefit from having more cash that can be used to develop systems for more vehicles than (FCA and PSA) each could have done alone.”
(Chrysler is no more as Stellantis comes to life.)
That should prove particularly important when it comes to developing the electrified and autonomous vehicles that are expected to radically transform the globally transportation industry over the coming decade. While it’s unclear how soon self-driving technology will be ready for market, EVs are expected to gain significant traction over the next several years, Tavares expecting that they “will represent more than one-third of vehicle sales, possibly more in Europe,” by the end of the decade.
“Our company will have to be carbon neutral,” Tavares said, adding that he expects the new Biden administration will push for further reductions in carbon dioxide emissions. “This is going to be at the core of our long-term strategic plan.”
At the time of the merger – officially completed last weekend – Stellantis had 29 electrified vehicles, ranging from hybrids to plug-ins to pure battery-electric vehicles. Just by the end of 2021, Tavares revealed, that will grow to 39 models. And, by 2025, he said, “There will be electrified versions of all new models.”
How many of those will be BEVs, however, he did not reveal, raising his concerns about the higher cost of producing all-electric vehicles and how that could price some traditional buyers out of the new vehicle market.
The reality is that many key strategic decisions have yet to be formalized, Tavares indicated during the Tuesday briefing. That includes how to prop up weaker brands and improve the presence of Stellantis in weaker markets. That notably includes China, where neither FCA nor PSA were strong players. Latin America is another challenging region — as was underscored by Ford’s announcement last week that it will end manufacturing operations in Brazil.
While analyst Brinley said she believes Stellantis can largely hold to its early goals, especially finding ways to maintain its current brand portfolio, she said the company ultimately might wind up cutting some jobs. But she doesn’t think factory workers are the ones who should be concerned.
(Fiat Chrysler and PSA not exactly a “merger of equals.”)
“There will be some areas where there will be job redundancies,” though not in plants, said Brinley. More likely this could occur in places like marketing and purchasing, and even some in engineering, “operational areas where they just won’t need as many employees” as they did when FCA and PSA operated independently.
