Grappling with tectonic shifts in automotive technology and a rapid transition to electric vehicles, Fiat Chrysler and PSA will merge to form Stellantis.
The deal has been in the making for more than a year, but along with technological forces, business difficulties associated with the pandemic have added greater urgency. Executives from Fiat Chrysler and PSA are pinning their hopes of survival on the merger, which shareholders voted on this month. “We are living through a profound era of change in our industry,” said John Elkann, Chairman of Fiat Chrysler. “We believe the coming decade will redefine mobility as we know it.”
Fiat Chrysler, an Italian-American multinational, and French car maker PSA expect to gain the scale needed to adapt and better compete at a time when both companies’ sales are in the doldrums. In the first 11 months of 2020, PSA saw its sales slide by 30%. Fiat Chrysler’s sales had already fallen 30% by the end of September. Carlos Tavares, Chief Executive of PSA, said the merger will allow the two firms to share the cost of developing electric vehicles and also give PSA access to the American market and lessen its dependence on Europe.
The new company created by the merger, Stellantis, will be the world’s fourth-largest car maker, behind Toyota, Volkswagen and the Renault-Nissan-Mitsubishi alliance, based on vehicle sales through September 2020. Fiat Chrysler and PSA are currently the eighth- and ninth-largest, respectively. Stellantis will employ 400,000 people and include the Jeep, Ram Trucks, Alfa Romeo and Maserati brands, The New York Times reports. Based in the Netherlands, it will have major operations in France, Italy and the United States. PSA Chief Executive Carlos Tavares will hold the same title at Stellantis, and Mike Manley, Chief Executive of Fiat Chrysler, will manage the American operations. Elkann is expected to take the role of Chairman.
Certain challenges faced by Fiat Chrysler and PSA will remain after the merger, however. Both companies have lagged competitors in the development of electric vehicles. Neither has established much of a presence in China, the world’s biggest automotive market. Peter Wells, a professor at Cardiff Business School in Wales, points out that the companies’ could also have trouble keeping their promises to unions and the French government, should they move to close factories where assembly lines are underused. The latter is a major shareholder.
On the positive side, Fiat Chrysler and PSA, best known for Peugeot, Citroën and Opel cars, have some enduringly popular brands, notably Jeep and Ram. They are also doing brisk business in vans, fuelled by the massive uptick in online sales in Europe. The merger, which is expected to close by the end of January, should enable them to build on these successes as they work to catch up with the technological advances and electrification of the global automotive industry at large.