FIAT CHRYSLER, PEUGEOT TO TIE THE KNOT, BUT WHY?
There isn’t much to gain for either except bragging rights, David Booth writes.
Peugeot (PSA) and Fiat Chrysler Automobiles (FCA) are looking to tie the knot.
It’s not, shall we say, the first trip to the altar for either brand. Peugeot bought GM’s failing Opel and Vauxhall divisions as part of a 2016 expansion mandate. It also has owned Citroen since 1976 and, like so many other companies looking for rapid expansion, created a luxury division — DS — in 2009. But compared to Fiat Chrysler, Peugeot is the proverbial vestal virgin. Not only is the current iteration of the multinational conglomerate a who’s-who of the previously unloved — FCA’s current brands include Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati and Ram trucks, not to mention Ferrari which it just spun off — in recent years it has become the Elizabeth Taylor of auto companies, having wed, or been affianced to, seemingly every automaker of note.
First there was Daimler, with whom it was legally betrothed. But since that “partnership” ended in acrimonious divorce in 2007, FCA has courted General Motors, BMW, Volkswagen and, most recently, Nissan-Renault.
For any union to work, especially business unions, there has to be a tangible benefit for both parties. Beyond the always-promised “economies of scale” there doesn’t seem to be much gained other than bragging rights (the union would vault Peugeot-Fiat Chrysler to fourth largest among the world’s automakers).
One of the supposedly important benefits, the analysts claim, is FCA helping Peugeot re-establish itself in the North American market — the French automaker has been eyeing a return for about five years. (Note to Carlos Tavares, current CEO of Peugeot: Don’t you think that if FCA really had any idea how to market small European hatchbacks to Americans, it would have already done so with Fiat?)
Nor do there seem to be many synergies. Peugeot does make some darling little motors, but Fiat’s failure in North America has nothing to do with technology. Neither party has tremendous expertise in the Far East, and both are fairly non-existent in South America. As Bernstein analyst Max Warburton told the Financial Times, “It’s obvious that PSA does not offer any synergies in the U.S., and very little in LatAm. Putting PSA and FCA together in China doesn’t solve much either: two wrongs don’t make a right.” Other than Peugeot getting access to a few Jeep platforms, it’s tough to see what all the hoopla is about.
The one significant benefit that might be tangible is electric vehicles; both companies are struggling to comply with various governments’ EV mandates. But, as Mazda has just proven with its new MX-30, being a (relatively) small automaker does not preclude bringing real innovation to the EV segment. Indeed, with so much of battery and EV propulsion technology being developed by outside consultants, electric vehicles alone would not seem reason enough to be eternally wed.
Officially, the management structure is to have Carlos Tavares as the chief executive of the merged company, the position he now holds with Peugeot. Similarly, John Elkann will be the union’s board chairman, the title he currently enjoys at Fiat Chrysler.
But how long will all this kumbaya-ness last? Tavares, as you may remember, jumped ship from Renault to Peugeot not two weeks after being rebuffed in his demand to be made top dog there. And anyone who has followed the Agnelli dynasty — Elkann is the grandson of legendary Italian industrialist Gianni Agnelli — knows they are Italian royalty and always expect to be treated as such.
Why this union of management should go any better than any other — DaimlerChrysler, for instance, was a hot mess right from the get-go and the intrigue that has plagued Nissan-Renault these last 12 months has been truly disturbing — is not exactly clear. Nor is it proven that bigger is always better. DaimlerChrysler didn’t work, and General Motors is much better off since it jettisoned about half its brands.
In the end, one can’t help ask why either party felt the need to rush into marriage.
Driving.ca