MILAN (AP) – While leading Nissan’s U.S. operations from 2009 to 2011, Carlos Tavares had a reputation for closely monitoring costs with little tolerance for vehicles or companies that did not make money.
Experts say that means Tavares, currently the head of the PSA group, is likely to follow that plan when he becomes the leader of a combination of PSA and Fiat Chrysler Automobiles. The low-performance Chrysler brand could get the ax, as could cars, SUVs, or trucks that didn’t have slow-selling potential.
Companies are already talking about consolidating vehicle platforms (bases and engines) 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 American and Italian vehicles.
“You can’t be profitable if you keep the full scale of both companies,” said Karl Brauer, executive analyst at automotive website iSeeCars.com. “We’ve already seen this program and we’ll see it again where these platforms save on all continents and in various markets.”
Shareholders of both companies will meet on Monday to vote on the merger to form the world’s fourth-largest carmaker, to be called Stellantis. The agreement received approval of EU regulations just before Christmas.
Tavares, which has for years wanted to sell PSA vehicles in the United States, will not take full control of the merged companies until at least the end of January.
It will probably go first to Europe to consolidate, because that’s where Fiat vehicles overlap broadly with those of PSA, said Stephanie Brinley, chief analyst at IHS Markit. Europe has lost money to FCA and factories in Italy operate 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 metalworkers’ union. “Either there is a relaunch, or there is a slow and agonizing shutdown of the industry, particularly the automobile industry, in Italy.”
Italy’s hopes are the luxury sportswear brands Maserati and Alfa Romeo, but De Palma said investments are needed to accelerate electric and hybrid technology. Fiat’s Italian capacity is 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 also likely to affect white workers, as Tavares is unlikely to maintain engineering centers in Paris, Turin and Rodelsheim, Germany, where the Opel brand he acquired in 2017 is located, according to analysts.
FCA’s U.S. operations, led by the popular Jeep brand and Ram pickup, are hugely profitable and will likely remain intact for a while, Brinley said. Tavares just three years ago expressed his desire to sell PSA vehicles in the United States in a decade. He said any global car manufacturer should sell in the U.S. market.
In December, companies announced that Fiat Chrysler CEO Mike Manley would lead Stellantis ’operations in the Americas.
Larger Jeep and Ram trucks and SUVs are exclusive 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 will be moved to PSA bases, he said.
PSA has a wider range of smaller engines that consume low fuel consumption and Fiat Chrysler will need them to meet government fuel mileage and pollution requirements worldwide. The goal of the PSA group is to offer all its models with electrified propulsion systems by 2025, an area in which Fiat Chrysler has also lagged behind.
Analysts say the Chrysler brand could be in jeopardy in the United States, where it has only two models, the aged 300 sedan and the Pacifica minivan. U.S. brand sales fell 19% through October.
The two companies have not yet announced any decision on brands. Fiat Chrysler, in a statement from Michigan, said one of Stellantis ’strengths is its historic brands, including 10 FCAs, and added that it is not planned to close any plants. But PSA said in a statement in Paris that it has not announced any plans for the brands. “We will communicate properly on this issue, as the EGA (shareholder vote) is not the closing date, nor is the announcement of a strategic plan,” the statement said.
Brauer said U.S. consumers are unlikely to see Peugeot vehicles. Instead, smaller vehicles will be built on French or German foundations with bodies and interiors designed in Michigan.
Although the tie is billed as a merger, the advantage is for PSA, which will control 6 of the 11 board seats with Tavares, the tiebreaker.
Fiat Chrysler brands range from the powerful Jeep to the Abarth marquee and the historic Italian brand Lancia, which currently only produces one model, the Ypsilon, aimed at female drivers. “I don’t expect to cut brands that continue to generate volumes, even if they focus 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. But Stellantis will have too many factories in Europe manufacturing similar vehicles. “These overlaps need to be resolved,” he said.
Stellantis will also face a major challenge in Asia, particularly 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 Automotive Research Center. It already accounts for 45% of global sales.” They merge, okay. They find synergies, it’s good. “They’re reducing cash, okay. But they’re missing the most important point in the car business.”
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Krisher reported from Detroit.