On Monday, January 4th, 2021, shareholders of both Peugeot and Fiat Chrysler voted to merge by overwhelming margins. This merger will create the 4th largest automaker in the world, Stellantis. The merger comes after Fiat Chrysler had previously been rejected by both General Motors and Volkswagen over the past decade. The merger is expected to generate billions of dollars in savings for the companies combined. The new company will focus on the development of autonomous and electric vehicles as demand in the automobile industry is expected to see a significant shift towards these types of products.
Despite the positive outlook of the new company and the expected potential, there are many obstacles ahead of Stellantis. One of the largest challenges is the significant decrease in sales that resulted from the coronavirus pandemic. COVID-19 resulted in record unemployment numbers, causing people around the world to start saving their money and cut out unnecessary expenditures. These changes harmed sales in various different industries, including the automotive industry. Due to this, Stellantis could experience pressure from shareholders to drop some of their lower-performing brands such as Fiat and Chrysler.
According to Philippe Houchois, an analyst for Jefferies, “Stellantis will be a sort of conglomerate of brands, some great and some not so good and most very regional.” Aside from Fiat Chrysler and Peugeot, the brands included in the conglomerate are Maserati, Alfa-Romeo, Dodge, Jeep, and Ram. Houchois also believes this merger will be a good opportunity for a reset for the companies.
The late Sergio Marchionne had initiated the decade-long search for a merger before Fiat had merged with Chrysler. Despite his repeated efforts, however, the CEO was repeatedly rejected in his quest for a merger. After Marchionne’s unexpected death in 2018, Mike Manley, his successor, eventually lined up France’s Renault for a possible marriage. Unfortunately, this deal fell through late in the process.
Soon after, Manley announced another potential merger with a long-term rival of Renault, Peugeot. Industry analysts had seen potential synergies between the companies for decades as each company had gaps in their offerings that the other could fill. This was also true from a geographic sales perspective, as each company was in markets the other had been trying to enter for years.
Despite the positive outlook for Stellantis, analysts estimate that it could take several years for their sales levels to reach pre-pandemic levels. Other challenges the company could face include catching up to other electric vehicle manufacturers, especially on the battery-car side. Will Stellantis be able to catch up to their new-found rivals such as Tesla and other electric vehicle manufacturers? Or will they fall behind in the race to create the perfect, bio-friendly vehicle?