Sergio Marchionne, the late Italian-Canadian boss of Fiat Chrysler Automobiles, would have approved. The €50-billion merger of FCA and France’s PSA Group, owner of Peugeot and Citroën, is exactly the sort of deal he envisioned – big, global and equipped with a lot of moving pieces to play with.
What the new company, Stellantis, (STLA-N) is missing is a superstar boss, as Mr. Marchionne and his counterpart at Nissan-Renault, Carlos Ghosn, were.
But that may not be a bad thing. Portuguese-born Carlos Tavares, 62, Stellantis’s first CEO and a former CEO of PSA, is no celebrity and never relied on sheer force of personality to keep his operations together. He is admired as a genuine car guy who knows how to turn around struggling brands, as he did at PSA, without being showy about it.
Stellantis, two years in the making, made its debut this week on the Milan, Paris and New York exchanges. The company is valued at €43-billion, putting it ahead of Ford but behind General Motors and way less than Tesla, whose unstoppable rally has propelled its market value to US$800-billion. The goal of every car company is to pick up some of the stardust that made Tesla worth as much as all its rivals combined.
Italy’s billionaire Agnelli family made Mr. Marchionne CEO of Fiat in 2004. He spared the company from probable bankruptcy and, in 2009, engineered the takeover of Chrysler, owner of the Jeep, Ram and Dodge nameplates. He saved it, too, from oblivion, partly by turning Jeep into a global brand with beefy profit margins.
He didn’t want to stop there. His mantra was that only the biggest automakers would survive as governments clamped down on emissions, pushing the industry toward electric vehicles. He deplored the waste of capital that saw competing companies blow their brains out on new cars that were essentially identical to those of their competitors. Why not share platforms and technology and save billions?
He predicted that only six big automakers would survive and spent years pursuing deals with Opel (GM’s European division), GM itself, Volkswagen, China’s Geely, Renault and PSA – none of which gained traction. After his death in 2018, FCA came close to merging with Renault, a deal that would have put FCA in the same family as Nissan and Mitsubishi. The effort fell apart after Mr. Ghosn’s arrest for alleged financial shenanigans in Japan later that year, throwing Renault and Nissan into turmoil.
Mr. Tavares is Mr. Marchionne’s worthy successor and is running the auto empire that Mr. Marchionne would have coveted. While not as outspoken and magnetic, he has a fine reputation for fixing what’s broken.
An amateur race-car driver, he spent much of his career at Renault and Nissan and landed at PSA in 2014, when he realized that Mr. Ghosn’s hammerlock on the top positions at Renault would stall his rise to the top. PSA was a mess at the time. He recapitalized the company, killed some models, introduced flashier ones and returned the group to profit in three years. He then bought Opel and sister company Vauxhall and ended their horrendous losses by cutting employment and development costs.
What might he do at Stellantis?
The group is in decent shape and has some great assets, such as a strong range of SUVs and trucks in North America through Jeep and Ram, as well as vast dealer networks there and in Europe. Stellantis has some powerful brands on both sides of the Atlantic. But a few of them, notably Fiat and DS – a premium marque, formerly part of Citroën – will require major tuneups to make them competitive (Fiat’s Lancia brand seems too far gone to be revived).
Mr. Tavares does not appear to be keen on killing brands. An analyst note from IHS Markit said the expected €5-billion in annual cost savings gleaned from putting FCA and PSA together may free up cash “for some brands to see expanded product portfolios.”
Mr. Tavares loves high-performance cars and will almost certainly ramp up two faded, but still powerful, Italian brands – Alfa Romeo and Maserati. Maserati is already making intriguing moves. Last year, it hired a Nike brand manager as its chief operating officer and will soon launch a supercar that will compete with Ferrari. The revival of Alfa and Maserati would help overcome Stellantis’s weakness in luxury cars. The automaker’s other glaring soft spot is its poor showing in China, India and Africa – each of them high-growth markets.
His electric strategy will be the one to watch and may give Stellantis enough horsepower to add a lot of value and attract investors who want to redeploy their Tesla profits after the shares’ 630-per-cent rise in the past year.
He does not appear to be betting the ranch entirely on battery technology but has already turned PSA from a laggard to a leader in hybrids and all-electric cars, with 29 models in showrooms and another 10 coming this year. He has vowed to make the best electric vehicles in the world and knows that Jeeps, with their ample bodies, will be fine platforms for typically heavy hybrid and battery-only powertrains.
Stellantis is the automaker to watch. It has all the right components to make a splash in the global auto market – and a boss who cares about results, not personal profile.