Of Peugeots and Jeeps: Will a Fiat Chrysler, Peugeot Citroen Merger Matter Here?

0 0 Editorial Team October 31, 2019 Edit this post

By Todd Lassa, Automobile

Don’t expect an onslaught of new marques or products to come to the U.S.

After I wrote about the "impending" Fiat Chrysler-Renault merger last May, the deal fizzled early, and Renault instead ran back to Nissan in an effort to try and patch things up. Now it's apparently a done deal instead between Fiat Chrysler Automobiles (FCA) and Groupe PSA, aka Peugeot Citroen (PSA), that will result in an old General Motors/new Volkswagen Group-like grouping of (deep breath) Fiat, Alfa Romeo, Lancia, Maserati, Chrysler, Dodge, Ram, Jeep, Peugeot, Citroen, DS, Opel, and Vauxhall—with a Ferrari spin-off thrown in for good measure. Perhaps the late FCA CEO Sergio Marchionne was really after Opel and Vauxhall when he called up GM CEO Mary Barra to propose a merger?

Marchionne knew that even large automakers just outside the world's biggest conglomerates would struggle to survive the quickly changing nature of personal transportation. In the U.S. and especially China—the world's largest auto market—too many automakers are pitching weary consumers too many brands, as new cars and trucks get more expensive, urban and suburban traffic and parking gets too congested, and carbon dioxide emissions continue to wreak havoc on air quality and the climate.

As if the U.S. didn't already have enough brands for a market that will continue to fall from its 17.5-million unit per-year peak of the last three years, at least a few Chinese brands, including Geely's Lynk & Co, Zoyte, and GAC appear ready to enter the market. Add new all-EV brands like Rivian and Workhorse, the fledgling company that may take over GM's Lordstown, Ohio factory, and U.S. auto production overcapacity, currently estimated by the Center for Automotive Research at 3 million vehicles per year, will only grow.

The Wall Street Journal reported late Wednesday afternoon that both automakers had reached an agreement to merge, after FCA and PSA acknowledged they were in "early stages" of negotiations. A formal announcement was to be forthcoming by Thursday, The Journal says.

According to its reporting, Fiat Chrysler chairman, John Elkann, descendant of Fiat founder Gianni Agnelli, will be the new automaker's chairman, while PSA CEO Carlos Tavares will retain his role. That leaves open the question of what happens to present FCA CEO Michael Manley, the British-born executive widely credited with growing Jeep's equity as a global brand under Marchionne's tutelage.

PSA will have six members on the new company's board, while FCA will have five. The French government owns a substantial share of Groupe PSA, just as it does in Renault, and just as they did with the stillborn Fiat Chrysler-Renault deal, French politicians will have a substantial say in how it all plays out.

The board structure, as reported by The Wall Street Journal and other news outlets, seems to place dominance on PSA, which reminds me of Marchionne's deal to take Chrysler off the U.S. government hands following the U.S. automaker's 2009 bankruptcy. Fiat and Marchionne saved Chrysler, but as the U.S. economy quickly began to improve early in the 2010s, it was the outsized profit margins from Chrysler's Jeep and Ram brands that were keeping Fiat solvent.

The problem is that by the time Fiat Chrysler re-introduced Fiat and Alfa Romeo to the U.S., the two Italian marques already had become "regional" brands, not terribly successful outside Italy and former Soviet satellites, as VW, BMW and Mercedes-Benz continued to dominate the bigger European Union markets such as Germany and the U.K.

The new company—let's call it Peugeot Citroen Fiat Chrysler, or PSFCA for now—will be top-heavy with such regional brands; Opel in and around Germany, Vauxhall in a possibly Brexited U.K., Fiat in Italy, surrounding countries and points east, Alfa, Peugeot, and Citroen in Western Europe.

If the deal is fully consummated, Peugeot Citroen Fiat Chrysler will be the world's fourth-largest automaker, behind VW Group, Toyota, and GM. This will lead to big savings in parts and supplies. In North America, for now, the brands will include Jeep, Ram, Dodge, a two-model Chrysler, Alfa Romeo and soon, Peugeot. Fiat may remain in our market, though there has been talk of a limited future here, considering the brand's low volumes and even lower profit margins.

Peugeot's re-entry is expected before 2026, though probably in just a couple of dozen states. As I write this, I have a call into the company's U.S. office to try and find out how the impending merger, and Fiat Chrysler's experience with Fiat and Alfa, might influence Peugeot's plans. (Its Free2Move car/scooter/bike-sharing brand already operates in two U.S. cities and the District of Columbia.)

I suspect that after this merger is completed, there will be no more models from Peugeot Citroen beside the ones Peugeot already plans coming to the U.S. than Renault sent us after its alliance with Nissan two decades ago. Rather, we'll be able to buy Citroen, DS, Opel and Vauxhall platforms with Jeep, Ram, Dodge, and Chrysler bodies and badges.

This merger will have much more to do with sharing vehicle electrification and autonomous system development costs, sharing vehicle architectures, and saving money on parts and supplies than to bring obscure or forgotten (for most consumers) European brands to a saturated U.S. auto market. This merger is about keeping "local" brands local, while reducing cost structures to be competitive with the big global automakers. Of all the marques in this new company, only Jeep, Alfa Romeo, and Maserati are global.