The tie-up between Fiat Chrysler Automotive and PSA, announced Thursday, will create a Eurocentric company with a better chance of long-term survival than either enterprise separately; spell the end of the “Detroit Three” automakers, as they’ve been known for a half-century; and represent the ultimate triumph of Carlos Tavares, a legend of the global auto industry who’s little known in the United States.
Fiat Chrysler and PSA Group of France, parent of Peugeot, have announced a deal that would create a $48-billion transatlantic giant, according to the Wall Street Journal, and vault the new entity into third place among global automakers in total sales behind only Volkswagen and Toyota.
Partnerships and even consolidation among automakers across the world are picking up momentum as sales slow nearly everywhere, overcapacity remains in many places, and ensuring future relevance becomes more problematic with the demands for huge new investments in electric and autonomous vehicles. A tie-up between PSA and Fiat Chrysler will allow the companies to share such burdens, and an all-share merger of equals has emerged as one strong possibility in their discussions, the Journal said. Fiat Chrysler earlier this year explored a potential deal with PSA and subsequently offered to merge with Peugeot rival Renault, but then dropped the idea after facing resistance from the French government, a big Renault shareholder, and from Nissan.
Such a merged entity likely will focus geographically in Europe and be run by a brain trust based there, for the first time leaving General Motors and Ford as the only true American major auto companies. Since Fiat accepted the carcass of Chrysler in 2009 after the Great Recession and a U.S.-taxpayer bailout of the company, the American entity has been the tail that wagged the dog because Fiat Chrysler Automotive has relied on the robust profitability of Ram pickup trucks and Jeep SUVs while Fiat’s sedans sold in Europe have struggled over that time. Fiat Chrysler CEO Sergio Marchionne ran the company from, and in between, both continents until he died last year and the company internally promoted Michael Manley as his successor.
Tavares is Peugeot’s CEO now and, according to the Journal, will run the combined entity while Fiat Chrysler’s John Elkann serves as chairman.
Such a role represents an ultimate triumph for Tavares, who splashed onto the international scene as chief of Nissan’s presence in North and South America a decade ago and, by 2011, as chief operating officer for Renault.
Tavares famously left Renault in 2013, two weeks after publicly saying that he wanted to become CEO of an automaker. At the time, Carlos Ghosn was the firmly ensconced and highly lauded CEO of the Nissan-Renault alliance, and so Tavares soon skipped to PSA. In his time there, he has cut costs, boosted the company’s market share in China, and led the company’s acquisition of GM’s money-losing Opel division in Europe then restored it to profitability.
But there haven’t been Peugeot dealers in the United States in almost 30 years, and a tie-up with Fiat Chrysler would change that quickly.