In what will create the fourth-largest car group in the world, the proposed merger between FCA and PSA will see a new powerhouse as the next age of the automobile looms.
Peugeot and Fiat, founded in 1896 and 1899 respectively, are the lead entities of the PSA and FCA consortiums. Between them, these two groups own the brands Abarth, Alfa Romeo, Axiam, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, RAM and Vauxhall.
FCA’s parent company, Exor, also still holds a stake in Ferrari and its chairman, John Elkann, is set to become chairman of the new PSA-FCA operation.
Latest in a long line of collaborations
Mergers and acquisitions are nothing new in the automotive industry. Almost all of your favourite car brands are part of a major group or allied with other brands in some way. The Volkswagen Group (VW, Audi, Porsche, SEAT, Skoda, Bentley, Lamborghini and Bugatti) and the Renault-Nissan Alliance (which also incorporates Alpine, Dacia, Datsun, Infiniti and Mitsubishi, as well as the obvious Nissan and Renault) are just two examples of long-standing, large corporations who have joined forces to survive and prosper in an ever more difficult market.
This “super-merger” of two large consortiums in PSA and FCA shows how the industry is having to work together more than ever to face the next challenges facing the industry. In particular, zero-emissions technology like battery electric and hydrogen fuel cell systems are something both companies have been lagging behind on over this last decade.
Now, with emissions laws and the threat of colossal fines, the combined might of two 120+ year old companies is needed to catch up.
Playing to each other’s strengths
One major advantage of PSA and FCA, in particular, joining forces rather than collaborating with potential partners, is a god fit between the geographical and technological strengths of the two groups.
PSA does not currently sell any cars in North America (the world’s second largest car market), where FCA is well established through its Chrysler/Dodge/Jeep/RAM brands. A strong US infrastructure has helped FCA with the reintroduction of Fiat and Alfa Romeo to America after many years away, and can potentially do the same for Peugeot and Citroën.
Meanwhile, Fiat has been gradually falling behind the industry standard with most of its cars in Europe while PSA’s latest models have been steadily improving and are much closer to the top of the class. FCA will be able to update its line-up at not only Fiat, but also Alfa Romeo and possibly even Lancia and areas of Maserati through shared platforms with PSA models, and improved buying power for bulk materials and supplies.
Fiat also currently collaborates with the Renault-Nissan Alliance on most of its van range, which could be easily replaced with equivalent PSA models in very short order. Vauxhall is already going through this process with its van models, which were also previously shared with Renault.
PSA has the smarts to manage the merger
What gives me confidence in this merger is the people in charge of PSA at the moment. Carlos Tavares, current chairman of PSA and the CEO of the new group, has turned Peugeot around in an outstanding fashion over the past five years.
From near bankruptcy earlier this decade, PSA has managed to turn that a financial black hole into a business so profitable that it could afford to buy Opel and Vauxhall from GM in 2017. It is creating good cars in the process, and has managed a corporate turnaround with relatively few job losses.
This success has given me confidence that the financial future of the new partnership could bring Fiat and Peugeot back to the forefront of the automotive discussion.
What new cars could be in the pipeline?
Cars that are already in planning and making preparations for production, such as the next Fiat 500 and the Maserati Alfieri coupé, may not initially benefit from this partnership as most of the components, designs and infrastructure will already be in place. However, there may still be benefits from infrastructure upgrades and production improvement methodology, along with a firmer financial safety blanket if any problems occur.
When it comes to upgrading either those cars, or expanding the model line-up for any of the brands that fall under the PSA-FCA umbrella, the real benefits of this merger are likely to be seen.
How would you like to see a fast Lancia supermini? That would be more financially achievable if it was based on a Peugeot 208 GTi, whose platform will also expected to be used for the next Vauxhall Corsa and Citroën C3, plus potentially a new Fiat Punto replacement and even a new Alfa Romeo to replace the recently-deceased Mito.
The same platform and component sharing principle can be applied across the board, just as it does now for the Volkswagen Group. You want a fast, electric Peugeot 508? Oh, Maserati has a powerful new electric powertrain that could be used, saving millions in development. By spreading the cost and taking in all the rewards, you make a better business.
What about motorsport programmes?
There is one question mark, however. What will this merger mean for motorsport? Well, I’ve considered this for quite some time, and I think it will be very beneficial for PSA and FCA take a divide-and-conquer approach, akin to the Volkswagen Group has operated over the years – especially at Le Mans with Audi, Bentley and Porsche.
Just after the news of the merger, Peugeot announced it was joining the WEC’s new Hypercar class in 2022. My worry, after initially being very happy that Peugeot would be back in endurance racing, was that it would stop Ferrari and/or Maserati also joining the field in the future.
But, then I asked, why not both? The general public won’t care. Maserati, Ferrari and Peugeot fans will continue to support their favourite brands as they have done for the last 100 years.
If PSA/FCA does what Audi and Porsche do in having separate operations (but still quietly learning from each other), everyone wins. The fans get more cars from more brands to watch and support. For the overall organisation, if one outfit has a bad race then the other can take the plaudits for the entire company!
In Formula One, a spending cap is coming and Ferrari and Alfa Romeo are already there, so hopefully those programmes will be secure. In the WEC, Peugeot is coming in 2022 and Ferrari is aid to be exploring the new rules, so maybe Maserati could leverage involvement from these two brands? Formula E is already part of the overall programme with DS Automobiles.
DTM could be an excellent fit for Maserati, especially with Aston Martin now involced. NASCAR seems a perfect fit for Dodge, while Chrsler could become an engine supplier in IndyCar. The WRC would pretty much beg for Lancia to return, especially with Citroën now gone. In WTCR, Opel and Vauxhall could re-live their glory years of the 1990s, perhaps with Fiat and Alfa Romeo involved as well.
How likely is any of the above?
The question mark will always be there as to whether or not the boardroom management will allow the company to take this aggressive approach, especially since one of the key reasons for this merger is to cut costs.
We could actually see a huge reduction of PSA and FCA’s budgets outside of their core road car sector until the two companies are sufficiently integrated, which could take up most of the next decade.
There has been considerable nervousness at Vauxhall’s Ellesmere Port plant here in the UK, which could suffer from any rationalisation of the new company’s manufacturing facilities. Ellesmere Port has been almost constantly battling rumours of closure for more than a decade under both GM and PSA ownership, so employees will not welcome yet more conjecture over their fate in coming months.
But overall, if this new company wants to show itself to be up with the best of the big players then it could certainly have the brands, technology and firepower to do so – both in motorsport and on the road.
I’m very excited for the prospects of this merger. Time will tell if I’m right.