It’s a sign of how far Fiat Chrysler has come that the first question asked about its merger with Peugeot SA is not, “How will this save Chrysler?”
It’s also a warning: Chrysler’s brands, engineering design and leadership will have to pull at least their share of the weight to make the new global giant thrive.
We don’t even know yet what the new company will be called, but it’s clear much of its cash and sales growth will flow from Ram and Jeep, the main American brands based in Auburn Hills, just north of Detroit.
Paris-based PSA will contribute expertise in electric vehicles, platforms to underpin small and midsize SUVs for Jeep and perhaps Dodge.
FCA and PSA Groupe agree to a merger. (Photo: PSA)
It’s also expected to exert a ruthless focus on building a profitable business in China and whipping the Fiat brand into shape in Europe.
“There will be a lot of work on the production footprint in Europe” to eliminate slow-selling vehicles and make money, IHS Markit principal analyst Ian Fletcher said. “Some degree of restructuring is needed.”
PSA and FCA have said they’ll improve efficiency without closing any European plants. It’ll take some doing to keep that promise.
The Chrysler group — Jeep, Ram, Dodge and Chrysler — no longer needs saving, though it desperately wants the investment scale that comes from adding PSA Groupe’s 3.96 million to the 4.6 million vehicles Fiat Chrysler sold last year.
Combined, the pair expect to be the world’s fourth-largest automaker, trailing Volkswagen, Toyota and Renault-Nissan, but bigger than Motor City rivals General Motors and Ford.
Don’t expect big, obvious changes in Fiat Chrysler’s U.S. product line.
Unlike 2009 when Fiat CEO Sergio Marchionne rode to the rescue, Ram, Jeep, Dodge and Chrysler aren’t desperate for an injection of new technology and fresh vehicles. Fiat Chrysler has a frustrating habit of delaying new vehicles, but recently launched the strong new Ram and Jeep Gladiator pickups.
FCA also stands to cash in on the imminent arrival of newcomers from Jeep, including a replacement for the Grand Cherokee and the bigger and more profitable Wagoneer and Grand Wagoneer.
If anybody tells you FCA will benefit from access to platforms for small and midsize sedans, or the merger will help PSA sell Peugeot, Citroën, or other brands in the United States, stop listening and walk away carefully: A person crazy enough to believe that could do anything.
“Will Chrysler dealers want a new brand after their experience with Fiat and Alfa Romeo?” Fletcher asked. “PSA specializes in subcompact, compact and midsize vehicles Americans don’t want.”
Luxury brands need work
The new automaker must strengthen its presence in luxury markets, a goal that’s eluded Fiat Chrysler and Groupe PSA individually so far.
Maserati enjoyed a brief surge before slumping again, and FCA has received precious little return on heroic investments to develop a great architecture for the Alfa Romeo Giulia sport sedan and Stelvio SUV.
Alfa needs more vehicles to make money, but its performance may not justify the investment, a Catch-22 that threatened to doom FCA’s luxury aspirations.
PSA’s fledgling DS luxury brand is best described as a French Buick, without Buick’s 100-year heritage. DS vehicles are beautifully designed, stylish and comfortable, but lack the basic engineering — platforms and powertrains — to compete with Audi, BMW and Mercedes.
FCA-PSA needs to rethink its luxury portfolio.
On the other hand, both companies are strong in commercial vehicles, everything from pickups to small florist’s vans and bigger UPS-style trucks.
Talent duo at the top
PSA CEO Carlos Tavares will fill the same job at the new company, which will be chaired by FCA chairman John Elkann. It’s not clear what FCA CEO Mike Manley’s role will be.
Tavares had a brilliant career at Renault-Nissan before committing the mortal sin of saying he wanted to be a CEO, a position his boss Carlos Ghosn apparently thought came with lifetime tenure.
In retrospect, Renault-Nissan might have been better off with Tavares at the helm. The scandal surrounding Ghosn’s 2018 arrest on charges of tax fraud in Japan threatens to rip the companies’ alliance asunder. It also led FCA to abandon a merger with Renault-Nissan earlier this year.
Tavares demonstrated a decisive style in 2014 when the Peugeot family tapped him to lead the troubled company after his ouster from Renault-Nissan.
He navigated more tricky waters when PSA acquired General Motors’ troubled Vauxhall and Opel European operations in 2017. The prospect of new French owners arriving to fix German factories and engineering offices was fraught, but Tavares persuaded workers and executives to give PSA a chance.
“He’s put together an excellent team and continued to push,” Fletcher said. “PSA’s a company with a long-term vision, something the combined FCA-PSA will need.”
The new company would be wise to do whatever it takes to create an appealing new job for Manley, who led Jeep to phenomenal growth before stepping into the void created by Marchionne’s untimely death last year.
It’s hard to imagine Manley’s name won’t be top of the list for the next major automaker to face a crisis. FCA-PSA should recognize him for the asset he is.
If he stays Manley can play a key role as Chrysler learns the unfamiliar new role of a corporate strength, not a disaster waiting to happen.
SOURCE: Detroit Free Press