A huge merger in the automotive industry took effect just days ago when Peugeot Citroen merged with Fiat Chrysler to create Stellantis.
The merger has seen the creation of the world’s fourth largest car company and a car maker that employs around 400,000 people and has 14 automotive marques.
They include Peugeot,Citroen, DS, Vauxhall, Opel, Fiat, Abarth, Alfa Romeo, Lancia, Maserati, Chrysler, Dodge. Jeep and RAM.
It’s been a case of so far so good, with stock markets welcoming the move and the opening share price rising.
Consolidation is seen as a good thing as the automotive sector attempts to recover from the effects of the coronavirus pandemic and moves towards electrification.
There are some interesting questions locally too.
PSA Group (Peugeot Citroen ) has its UK headquarters in Coventry, while Fiat Chrysler Automobiles has a UK base in Slough.
Could everything be centralised in Coventry or go to Slough? Only time will tell.
In the meantime CoventryLive caught up with Warwickshire automotive expert Dr Charles Tennant and asked him what the future might hold for Stellantis.
Formerly Land Rover’s chief engineer, Mr Tennant also sat on the board of Tata Technologies and held a senior role at WMG at the University of Warwick.
What does this deal involve?
Charles Tennant (CT):“This merger between Fiat Chrysler and PSA Group (Peugeot Citroen and Vauxhall Opel owner ) is one of the biggest and boldest in recent times – valued at €42 billion – but it is not the first and more likely will not be the last in these existential times.
“This deal has all the makings of a truly transformative opportunity as the new company is the fourth largest (after VW, Toyota and Renault-Nissan) with sales of 8.7 million cars per year generating revenues of €170 billion and profits of around €11 billion. And the stock market seems to agree with this as the share price immediately surged in Paris, New York and Milan by 8% this week giving traction to the new entity.
“With 14 car brands made by 400,000 employees in 30 countries it will be interesting to see whether there will be winners and losers as this newly formed behemoth aims to deliver anticipated cost savings of €5 billion just for starters.”
How valuable are Stellantis’s brands?
CT: “What a brand portfolio it is including illustrious global nameplates in some cases going back 125 years including from Italy (Fiat, Abarth, Alfa Romeo, Lancia and Maserati); France (Peugeot, Citroen and DS Automobiles); USA (Chrysler, Dodge, Jeep and RAM); Germany (Opel); and UK (Vauxhall).
“But when first seeking a merger back in 2019 the first port-of-call made by Fiat Chrysler was Renault, but a provisional agreement was blocked by the French government.
“At the same time the PSA Group was investigating its own opportunities with talk of a Jaguar Land Rover takeover which also came to nothing.
“So now we have Stellantis and the new name has had some polarising reactions on social media from “sounds like what your dad would think is a cool name for a car company” to “it’s a long name with a beautiful meaning”.
“So, what does it mean then? Well, the word Stellantis derives from the Latin verb ’stello’ meaning ‘to brighten with stars’ and therefore aims to represent the two companies’ rich history while capturing the true spirit of the merger project.”
Peugeot Citroen boss Carlos Tavares will be at the helm. Who is he?
CT: “The CEO of the new company is Carlos Tavares – a 62-year-old Portuguese national – known as the change-master of Peugeot Citroen where as CEO since 2014 he created a remarkable turnaround. His streamlining and cost-cutting whilst also taking over Vauxhall and Opel from General Motors delivered record profits of 3.2 billion euros in 2019 from sales of 74.7 billion euros.
“He will now lead Stellantis into the electrification age with 39 such vehicles to be launched in 2021.”
What is likely to happen in the wake of the merger?
CT: “It is too early to speculate on factory closures right now but with the new sprawling global empire it is tempting to say that there will be casualties in the pursuit of higher productivity.
“Being parochial it will be interesting to see which headquarters operation here in the UK will survive – PSA Group in Coventry or Fiat Chrysler in Slough?
“Either way the UK footprint is now much smaller than its heyday from when the Roots Group was formed in 1913 and eventually bought out by the American company Chrysler in 1967.
“Then Peugeot Citroen took it off Chrysler’s hands for a symbolic $1 bill in 1978 and rebadged the UK built cars as Talbot.
“The Peugeot name was introduced in 1985 with the launch of the 309 model built at the Ryton factory near Coventry which although known for high productivity and quality was eventually closed in 2007 as the spectre of Slovakia’s lower costs beckoned – where production was moved to.”
What form might rationalisation take?
CT: “The top management team at Stellantis will no doubt be carrying out a strategic review of all brands in the near term and it is easy to see where some casualties of rationalisation may occur.
“Let us start with Chrysler which only has three vehicles – the 300 large saloon along with the Pacifica and Voyager multi-purpose people carriers – and has already been withdrawn from European markets and saw sales contract by 13% in the US.
“Then there is Lancia which has just one vehicle – the Fiat 500-based Ypsilon hatchback, which is only sold in Italy and sales are already down 36% since its launch in 2016.
“Another brand which could be vulnerable is the French DS Automobiles which sells in low volumes and has limited market coverage outside of France.
“The American Dodge high-performance vehicles could also be put under scrutiny, being powered as they are by gas guzzling V8 petrol engines that could be hampered by stricter CAFÉ emission standards expected from the new Biden presidential administration.
“However, the benefits of this merger are clear from the perspectives of scale, market coverage and technology sharing.
“Stellantis already has full market coverage from luxury, premium to mainstream and pickup trucks to SUVs and light commercial vehicles. And now a well-established presence in three regions – Europe, North America and South America.
“Fiat Chrysler will benefit from vehicle platform sharing with PSA whilst the latter will increase its sales in the US. Pushing forward into the Chinese market will also be a top priority.
“And of course, the brands will now share the enormous costs of developing electric vehicles and autonomous technology.”
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