The Fiat Chrysler-PSA mega-merger may give rise to a carmaking star

FIAT CHRYSLER AUTOMOBILES (FCA), an Italian-American carmaker, and PSA Group, the French owner of Citroën and Peugeot, do not like to dwell on their shared past. When PSA acquired Chrysler Europe in 1978 for a nominal $1 it picked up some struggling British and French marques and a heap of debt. That tie-up crashed a few years later with the demise of Talbot, the brand created from these motoring scraps. On January 4th shareholders of both firms voted to give it another go, acceding to a mega-merger agreed in 2019. Hopes seem higher this time. The name of the combined firm, Stellantis, is derived from the Latin for “brightens with stars”.

Stardust is sadly lacking from an industry that, along with many others, has taken a beating in the pandemic. But the creation of the world’s fifth-largest carmaker by vehicles produced (see chart) is well set to deal with the effects of covid-19—and to navigate the other difficulties facing the automotive business.

The reticence of both Mr Tavares and Sergio Marchionne, FCA’s late boss, to rush headlong into electrification may also prove wise. Other carmakers had poured cash into electric cars that did not sell well. Now that they are becoming more popular, Stellantis’s plans, including PSA’s new architecture for electric vehicles due by 2023, have more chance of success.

The deal also affords the opportunity to reset strategy, says Jefferies, a bank. The firms are strong regionally, PSA in Europe and FCA in America, but lack global clout. Neither has much presence in China. And in an industry where complexity is now a dirty word, Stellantis will have 15 brands. Volkswagen’s 11 are seen as unwieldy.

Mr Tavares needs to make Jeep a worldwide profit machine like VW’s Audi and Porsche, and to decide what to do about underperforming premium brands. Maserati and Alfa Romeo have defied numerous relaunches to stay peripheral. DS is profitable but has little presence outside France.

Stellantis’s boss must also overcome the clashes of culture that have brought down many a car-industry merger. Marchionne made FCA work through force of personality and the width of the Atlantic, which let him keep the subsidiaries at arm’s length. Mr Tavares does not have that luxury, or Marchionne’s charisma. But his stellar track record shows he has the character to make it happen.■

This article appeared in the Business section of the print edition under the headline “A Stellantis is born”