Stellantis CEO says PSA-FCA merger is a 'shield' for auto jobs, but doesn't rule out cuts

Breana Noble
The Detroit News

Stellantis NV CEO Carlos Tavares on Tuesday did not rule out job cuts at the newly created transatlantic automaker, but said the results will be better than if its predecessors failed to merge.

"The merger of PSA and FCA is a fantastic shield against social problems in the two companies," Tavares said during his first news conference for the combined corporation held virtually. Job cuts "would have happened had this merger not been a success."

New Stellantis signage was put up early  Tuesday morning, January 19, 2021 at the former Fiat Chrysler Automobiles North American headquarters in Auburn Hills.

The combination between Fiat Chrysler Automobiles NV and French rival Groupe PSA, maker of Peugeot and Citroën vehicles, creates the world's fourth-largest automaker by volume with roughly 400,000 employees. That scale across its 14 brands is needed for costs to be spread out more widely so the company can produce clean and safe transportation in a way that makes it affordable for customers, too, Tavares said.

Investors met the new company warmly, sending shares up 11.56% to $16.99 for the first day of trading in New York, one day after STLA shares debuted on exchanges in Paris and Milan.

But plants formerly owned by Fiat Chrysler are operating on average at 55% capacity in Europe, according to LMC Automotive Ltd., and some analysts predict it could fall below 50% this year in Italy. Previous PSA plants run at 68%, and Fiat Chrysler's factories in North America run at a healthy 75%.

New York Stock Exchange Vice Chairman John Tuttle, left, Stellantis CEO Carlos Taveras, center, and Chairman John Elkann, right, virtually ring the NYSE opening bell, Tuesday, Jan. 19. 2021. Stellantis shares start trading in New York in the new auto giant created by the merger of Fiat Chrysler and PSA Peugeot.

Meanwhile, Stellantis has four design and engineering centers in Auburn Hills, Paris, Italy and Germany — too many, analysts say, for a company that will consolidate the number of its platforms.

Stellantis' estimated $5.9 billion in annual cost savings, however, will help to protect from job cuts by creating a company with shared platforms and components to benefit from the scale it will have, Tavares said. He reiterated Stellantis' commitment to not close any plants as a result of the merger.

Value added by auto jobs are part of just 10% of the costs to manufacture a vehicle, Tavares said. There are other areas in which the industry can improve its efficiencies, though he declined to elaborate on what those will be, citing competitive reasons.

"That is a competitive skill of Stellantis," Tavares said. "There are many more things to do than just cutting jobs. Eventually, there are moments you cannot avoid it, but there are many more things to do."

Separately, he noted, government regulations and trade barriers could lead to job losses. For example, the company is examining how to proceed with its plants in Britain following a Brexit deal reached between the United Kingdom and the European Union from which it has separated.

"There is a limit for the headwinds," Tavares said, nodding to Ford Motor Co.'s decision last week to end production in Brazil. "There is a limit where if one region or one country is putting so many arrears that there is no room to find something that creates value, then we have to conclude that."

As for the industry-leading number of brands in the Stellantis portfolios, Tavares said each are assets to the automaker, and the work moving forward will be to clarify their position in the marketplace, their audience and their vision in where they are going. Condensing platforms and other systems to create "sister cars" will help to create increasing profitability.

Tavares in the past has abandoned unprofitable products, Stephanie Brinley and Ian Fletcher, IHS Markit Ltd. principal analysts, said in an outlook note Tuesday.

"However, the expected cost-cutting targets enabled by the larger scale and improved purchasing power of the combination may ultimately mean that answer may not always simply be to drop troubled brands or products," they wrote. "Instead there may be opportunity for some brands to see expanded product portfolios compared with today as a result of improved purchasing opportunities and scale effect."

Most Stellantis brand leaders will stay in place, according to a list of global management released Tuesday. PSA's head of Peugeot, Jean-Philippe Imparato, however, will take over the troubled Alfa Romeo. Former Citroën CEO Linda Jackson will succeed Imparato at Peugeot. Tim Kuniskis, FCA's former global head of Alfa Romeo, will continue leading Dodge as well as Chrysler in the interim.

Stellantis also, for now, will keep Peugeot where it is. PSA had plans to bring the high-end mainstream brand to the United States by 2026 to give the French carmaker a retail footprint it currently does not have.

"At this stage," Tavares said of the brands already in the United States such as Ram, Jeep, Chrysler, Dodge and Fiat, "it is possibly more important to be focused on the profitable growth of those brands rather than bringing a new brand on top of what already exists, but we'll see in the future. Nothing is final on this matter."

Also not final is how Stellantis plans to move forward in China, the world's largest auto market. Neither of its predecessors have performed well there in recent years. Tavares expects to have a better strategy in a few months after a team has examined the opportunities there, including FCA's proposed joint venture with Foxconn Technology Group to build electric vehicles for China.

Stellantis currently has 29 electrified models and expects to add 10 more before the end of the year. All of its vehicles will have an electrified version somewhere globally by 2025, Tavares said. That will ensure compliance with government emissions requirements for the next three to five years, even after an agreement to pool credits with Tesla Inc. expires, he said.

The company will be integrated vertically with the manufacturing of electric motors, transmissions, battery packs and battery cells done in-house or with a joint venture, he said. Meanwhile, Stellantis has a continuing agreement Fiat Chrysler formed with Google parent Alphabet Inc.'s Waymo LLC to use its technology for fully autonomous vehicles in the future.

"It is no coincidence that Stellantis is born precisely when our world requires a new kind of automotive company that will champion clean and intelligent solutions to provide freedom of movement for all," Stellantis Chairman John Elkann said in a statement. "Our global scale and reach provide us with the resources to invest in state-of-the-art technologies, distinctive excellence and unmatched choice for our customers."

Twitter: @BreanaCNoble