New star in the car sky: is Stellantis teaching the competition to fear?

Sunday 31st January 2021

New star in the car sky
Does Stellantis teach the competition to fear?

From Helmut Becker

The car marriage between Daimler and Chrysler once collapsed. Now Fiat Chrysler and PSA are trying. At first glance, Stellantis is a new giant in the car firmament. But is the marriage permanent this time? Do competitors like VW have to tremble now?

The automotive year 2021 began with a bang: a new star has been shining in the automotive firmament since mid-January. His name: Stellantis. Admittedly, that doesn't sound very car-loving, more like a spread for ISS astronauts. Behind hides the birth of a new car giant, the mega merger of the French car manufacturer Peugeot S.A. (PSA) with the Italian-American automaker Fiat Chrysler Automobiles (FCA).

The new holding company is based in Amsterdam; PSA has six and FCA five members on the supervisory board. President and Chairman of the Board of Directors of Stellantis is John Elkann, grandson of the legendary Fiat patriarch Giovanni Agnelli. Carlos Tavares, current CEO of PSA and "master mind" behind the merger, he also takes over the management of Stellantis as CEO. According to "Le Parisien", the Fiat Agnelli family will be represented in the new group with around 14.4 percent. Other larger blocks of shares are held by the Peugeot family and the French state.

Young star as an industry heavyweight

With Stellantis A new auto giant is emerging, which overnight with 14 car brands, 410,000 employees and sales of 7.76 million vehicles in 2019 will become the fourth largest automobile manufacturer in the world, after Volkswagen with 10.71 million, Toyota with 10.55 Million and the Renault / Nissan alliance with 10.17 million. In terms of sales, the young star is even in third place with 183 billion euros, ahead of rival Renault. The market value is 45 billion euros, just under a tenth of the value of Tesla.

For the competition on the global automotive market, the cards are being reshuffled with Stellantis: two car families are getting married. Competitors will become siblings, in the future, for example, Fiat 500 and Opel Corsa will come from the same company. The brand names: Abarth, Alfa Romeo, Citroën, Dodge, DSAutomobiles, Fiat Lancia, Maserati, Opel, Peugeot, Vauxhall, RAM, Jeep – all with a long tradition – are and remain an asset in corporate culture and valuation in Europe and the USA naturally received. For now. There won't be a car called Stellantis. For now.

But does the rest of the industry have to fear now? Is the family wedding of these "sheet metal elephants" really so Stellantis (lit by the stars), as the name suggests? Does Stellantis have what it takes to become a new guiding star or does the network face the fate of a supernova , where a rapid, bright flash is followed by destruction by a huge explosion? Memories of the "wedding in heaven" between Daimler and Chrysler and its painful end for Daimler shareholders are awakened. Can that go well? There are three questions to be answered: Is the corporate culture right between the partners? What strengths does the merger bring to the bride and groom? Does the competition have to tremble now and fear Stellantis?

Corporate culture

The most common reason for a failure of a merger between automotive companies was and is too large a discrepancy in corporate cultures – a pure leadership problem. It was like that at BMW / Rover, it was like that at Daimler / Chrysler. Both mergers went blatantly wrong with the merger leader losing billions.

This danger is low at Stellantis: On the one hand, FCA was already "Europeanized" and restructured by the Italian Canadian Sergio Marchionne after the merger. On the other hand, PSA boss Carlos Tavares has proven with the takeover of the traditional company Opel, which has been continuously owned and run down by the US company General Motors since 1929, how one can also renovate permanent US construction sites in a short time and in can lead to profitability.

Strengthen

Both companies are in principle economically sound. Serious "cultural clashs" are not to be feared. Not too many years ago, insiders had a reputation for being the abbreviation for "F.ix it again Toni " to be due to any quality defects. And the brand symbol of Peugeot, the lion, proved the sharpness of its teeth, especially in the grinders of pepper and salt mills, but was otherwise considered old-fashioned and toothless in the car market.

Those times are over, quality deficiencies have been eliminated, Tavares has trimmed PSA for efficiency and effectiveness, Fiat has been heavily restructured under the FCA leadership and has significantly improved its quality.

Important: Cannibalism due to overlaps in the respective product ranges as a result of the merger does not take place because both companies have known each other very well as competitors in their main market, Europe, and are each established. Stellantis Although it has strong pillars in Europe and the USA, it also has major weaknesses in its presence in the growth region of Asia, especially in China. The bride and groom also have major technological weaknesses and a lot of catching up to do with the electrification of their model ranges. Catch-up processes can be managed more easily together in terms of costs in saturated markets.

Because the fusion music plays with the costs. In design and development as well as in production, entire plants will be merged and the number of employees will be reduced. The future and previous CEO of PSA, Carlos Tavares, is known in the scene as a tough restructuring engineer. As synergy effects from the merger, he has promised annual savings of 5 billion euros. Now he has to deliver.

competition

Does competition have to fear Stellantis? Clear answer: yes! Chinese automakers have to fear every western manufacturer as a competitor, Stellantis as an automobile power even more so. Manufacturers such as VW, Hyundai, Toyota or Renault and others who are directly in competition with Stellantis must of course react to cost and price advantages as a result of the economies of scale from the merger, if only because of the shareholders.

And Renault has already reacted: New boss at Renault De Meo has immediately after the announcement of the Stellantis Fusion proclaimed "Renaulution" at the French carmaker: more class than quantity; more returns, fewer sales records. De Meo wants to cut costs by 3 billion euros by 2025, cut capacities by 23 percent to 3.1 million vehicles and cut 15,000 jobs worldwide.

Even if the German luxury car manufacturers such as Audi, BMW and Daimler are not directly affected by this merger, but are more concerned with internal technology and personnel problems and Tesla, Stellantis leaves them completely unaffected neither does she. Because many years of experience teach us: In the automotive industry there is "chain competition". When someone like Tavares and Elkann throw stones into the car pond, the waves hit the bank everywhere.