Yahoo Finance Stellantis Says It's Sticking By Chrysler. Should It?
From the April 2021 issue of Car and Driver.
Like Mad Men's fictional merger of clumsily surnamed ad agencies, Fiat Chrysler Automobiles and Peugeot S.A. (PSA Group) have united their agglomeration of brands to produce a new corporation: Stellantis. That name would have Don Draper reaching for his Canadian Club; it's more redolent of erectile-dysfunction ads than of anything automotive. But in a world with a hard-on for mergers and shareholders, the new company—valued at $52 billion when formed—brings the same old problems. First, what to do about stragglers such as Chrysler, Dodge, Fiat, Alfa Romeo, Maserati, Lancia, Opel, DS, and Vauxhall. Some of these legacy brands, defenseless against nimbler rivals and electric disrupters, cannot survive.
In a press conference on January 19, Stellantis CEO Carlos Tavares—a former rally driver and PSA chief executive—insisted that no job or brand cuts are planned. It's unclear how long he can stick to that. Tavares admits he's looking for cost savings and "synergies" worth about $6 billion, and something's got to give: According to industry watcher LMC Automotive, the 14 brands that make up Stellantis have the factory capacity to make almost 6 million more vehicles annually. That's roughly equivalent to Ford's yearly global output. And in the Asia-Pacific region, the corporation is using just 8 percent of its factory capacity.
Tavares is walking on eggshells right now, but he almost certainly knows what happens when a single company is forced to support a large, potentially squabbling multinational family, all jostling for table space. It's reminiscent of the failed DaimlerChrysler marriage, but with more mouths to feed and potential power struggles. Tavares holds the tiebreaking vote on the 11-member board, giving PSA the advantage. FCA's John Elkann, scion of the Fiat-founding Agnelli family, has become the chairman of Stellantis, and former FCA CEO Mike Manley is heading up North American operations.
Pressure will come from all corners of the globe. No executive, union, or government wants its division or nation to bear the brunt of any downsizing. Analysts believe Fiat's plant in Kragujevac, Serbia, and the Vauxhall and Opel plant in Ellesmere Port, U.K., are especially vulnerable because they're not on Stellantis's de facto home turf in France, Italy, or the U.S.
Switching to our reliably self-interested American view: How will Manley make sure we get our fair share of development dollars, investment, models, and jobs? He needn't worry much about Ram, whose profits make it worth a half-dozen Stellantis brand laggards, or Jeep, FCA's crown jewel. If Manley has the clout, and Tavares's ear, he might start by killing some sacrificial lambs: Cut Alfa and Fiat from the U.S. Forget that Tavares had voiced hopes for their revival; he's apparently already abandoned long-held dreams of selling Peugeots and Citroëns here, with a source telling Reuters, "That plan is dead."
On Chrysler, at a press conference in February, Tavares said that he is "eager to give this brand a future" and suggested that Stellantis is looking for ways to reinvigorate Chrysler rather than cut it.
But shuttering Chrysler could eliminate a needless distraction, ideally as Stellantis trims its own redundant Euro brands. Mercy-kill the 300 and rebadge the Pacifica as a Dodge or even a Ram; no customer will care. Then use the money currently being thrown down the Fiat-Alfa-Chrysler well to revive Dodge, the brand worth saving as a third stabilizing leg alongside Jeep and Ram.
As much as enthusiasts love their Giulias and 500 Abarths, the Italian invasion led by the late Sergio Marchionne has proved a folly. Fiat's U.S. sales plummeted to just 4304 units last year, from a high of 46,999 in 2012. The Dodge Dart, an ostensible bomb, was finding more than 85,000 buyers at its peak, 20 times Fiat's U.S. sales today. Last year Alfa Romeo sold about 18,500 Giulias and Stelvios here, while Dodge found almost three times as many buyers for its profitable Challenger—and that includes the high-priced Hellcat versions, whose cultural reach and halo impact are immeasurable. On top of that, Dodge sold some 77,000 Chargers, 58,000 Durangos, 40,000 Journeys, and 39,000 Caravans.
Stellantis needs a healthy car-and-crossover brand in the U.S. In 2019, FCA achieved the worst corporate average fuel economy of any automaker, and President Biden is determined to restore stricter efficiency standards that President Trump kneecapped. What happens if the SUV-and-pickup party is deflated by regulations or a renewed interest in cars? Toyota, Hyundai, and Honda have wisely hedged their bets by continuing to offer vehicles in all sizes and shapes, including enthusiast models. Dodge can be that brand, with still viable equity and fond associations for many Americans.
At the press conference, Tavares floated the idea of introducing "sister cars" to PSA models as a cost-saving measure. Done wrong, that could mean badge engineering of the Chrysler TC by Maserati sort. Done right, modern cost-sharing platforms could help Dodge develop more-competitive cars and SUVs. Plenty of people would prefer a sporty Dodge-branded crossover to a Kia or a Toyota. Those Dodges could marry distinctly American design—Mopar muscle cars being the obvious start—with turbocharged engines and electrified high-performance versions. Ford and GM are already on that path, with the Mustang Mach-E and a reported Corvette crossover in the works. Surely, Stellantis's return on investment would be better than a quixotic bid to get mainstream shoppers to buy Italian cars.
A skeptic might say it doesn't cost Stellantis much to keep Chrysler or other hangers-on. By the same token, Salvation Army furniture doesn't cost much. The question is, Do you really need that wobbly coffee table? Hoarding is bad enough when your grandmother does it. For Stellantis, holding on to junk brands and expecting them to turn to gold could prove fatal.
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