The Chrysler Pacifica is one of only two models that the American brand currently produces.
The Chrysler Pacifica is one of only two models that the American brand currently produces.

Chrysler and Lancia brands could face axe as FCA-PSA merger nears finish line

By Staff Reporter Time of article published Jan 7, 2021

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PARIS - Fiat Chrysler and Peugeot parent company PSA will complete their marriage later this month after shareholders recently signed off on a deal that endured two years of extraordinary drama.

The merged company, called Stellantis, will become the world's fourth-largest carmaker when everything becomes official on January 16.

However, a few historic brands could face the axe as the merged companies attempt to enhance efficiency and scale, and according to some analysts, US brand Chrysler and Italy’s Lancia could be in the firing line.

The Chrysler brand has in recent years become a shadow of its former self and currently it only sells the Pacifica minivan and the dated 300 premium sedan.

According to the Associated Press, some experts believe that the Chrysler brand will inevitably face the axe, along with other slower-selling cars and SUVs in the American line-up.

“You can’t be cost efficient if you keep the entire scale of both companies,” executive analyst Karl Brauer told AP. “We’ve seen this show before, and we’re going to see it again where they economise these platforms across continents, across multiple markets.”

Feeling lonely in the Lancia showrooms, the Ypsilon hatchback.

According to Australian publication Car Advice, Lancia could also face the axe. The Italian marque is known for legendary race-bred products like the Delta Integrale of the 1980s and the mid-engined Stratos of the 1970s, but today all it produces is a compact hatchback based on the Fiat 500, and sales were down 36 percent in 2020.

Clearly, then, Lancia is also a shadow of its former self.

Merger overcomes obstacles, but many challenges ahead

The hurdles that FCA and PSA faced to finish their tie-up well ahead of their target for the end of this quarter were plentiful and prodigious, with Fiat even managing to patch things up after a short-lived attempt to join forces with PSA's arch-rival Renault.

Fiat Chrysler and PSA executives reckon they'll boost returns with scale more closely resembling Volkswagen and Toyota, and have greater resources to compete with electric-car upstarts and tech-industry interlopers. But plenty of challenges await once the deal is done. Stellantis will be an amalgam of model lines with enviable positions in certain segments, but neither company has much of a foothold in the luxury-car business or China's vast car market.

"Stellantis will be a sort of conglomerate of brands, some great and some not so good and most very regional," said Jefferies analyst Philippe Houchois. "The merger will be a good opportunity for a reset."

The combined company will boast an impressive presence in North America's lucrative truck and SUV segments, thanks to Fiat Chrysler's Ram and Jeep divisions. PSA's revitalised Peugeot and Citroen brands have meanwhile excelled in Europe and are the envy of its turnaround-minded French foe, Renault.

But both also have their weaknesses. The merger of Fiat with Chrysler did little to improve the fortunes of the Alfa Romeo and Maserati luxury lines, while PSA's purchase of Opel only made the company more reliant on Europe's crowded and shrinking market.

Performance psychopath to lead the way

The job of shaking up Stellantis' portfolio will fall to PSA Chief Executive Officer Carlos Tavares, an ultra-competitive amateur rally driver who calls himself a "performance psychopath." He takes a Darwinian view on the industry, arguing that only the strong carmakers will survive the pivot to electric drivetrains and pursuit of autonomous driving.

"We are ready for this merger," Tavares told PSA shareholders, adding that the companies are also prepared to announce a date for completion of the deal.

Tavares will have to navigate the political crosscurrents in France, Italy and the US, where the carmakers have deep national roots. He has tackled tough jobs before, leading the French carmaker back from the brink after taking over as CEO in 2014 and reviving Opel after acquiring it from General Motors in 2017.

"We are living through a profound era of change in our industry, the speed and intensity of which can only be compared to what took place at its origins in the late nineteenth century," Fiat Chrysler Chairman John Elkann said during the company's shareholder meeting. Stellantis will have "the scale, the resources, the diversity and the know-how to successfully capture the opportunities of a new era."

As with other executives across the industry, Tavares and Elkann are responding to growing pressure to pool resources plugged into product development, manufacturing and purchasing to free up money for big bets on electric cars and self-driving systems.

But being bigger isn't necessarily reaping rewards. Tesla is now far more richly valued than VW, which is staging the biggest effort among the incumbents to electrify its vast fleet. GM has retrenched from many markets to focus on North America and China, while Renault and its alliance partner Nissan are restructuring after racking up huge losses.

"The auto industry has been chasing size and consolidation for years, but it's been slower in coming than many would like to see," Houchois said. "The question is whether GM, Toyota and Renault-Nissan have provided evidence that there may be limits to this strategy."

IOL & Reuters

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