Axon’s Automotive Anorak: Will the merger of FCA and PSA work?

Six of the now combined FCA/PSA marques fall into my personal favoured new car brands: Alfa Romeo, Citroën, Abarth, Lancia, Maserati and Fiat. As an avid car enthusiast it’s a bit of a concern for the longer-term future of some of them.

By way of a quick reminder, the PSA Group brings Citroën, DS Automobiles, Peugeot and Opel/Vauxhall to the party, with FCA’s nine brands consisting of Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati, RAM, plus a remaining (now minority) stake in Ferrari.

The benefits that PSA is set to gain from this merger make clear sense. The French Group will be getting a vital foot-hold in the North American new car markets (where it is currently absent), plus importantly, adding Jeep and RAM to its portfolio, where it has lacked experienced 4x4 SUV and large pick-up truck brands. The inclusion of the prestigious Alfa Romeo and Maserati badges in vehicle segments where PSA has failed to make an impact will also be hugely appealing to the large French vehicle group.

Quite what the FCA Group will gain from this new merger though is less obvious to identify though. Granted, PSA has a stronger foot hold in the all-important (but over-capacity) Chinese new car market than FCA, and the French group is (very) marginally further down the electric vehicle route than the Italian-US combo, but beyond that, I struggle to see what benefits the (larger) FCA Group will gain from the new partnership with the (smaller) PSA Groupe.

Away from the USA, the main sales volume strength of both Groups lies in the mass-volume ‘mainstream’ markets, the A, B and C segments. These are currently occupied by the A sector-best-selling Fiat Panda/500/Lancia Ypsilon trio, plus PSA’s Citroën C1/Peugeot 108, with the crowded B segment already seeing in-fighting from the Group’s Peugeot 208, Citroën C3 and Opel/Vauxhall Corsa. The same applies to the Astra, Tipo, Peugeot 308 and so on, a bunch of so-so models all competing in the same sectors for the same hard-fought customers, most of whom seem to want to buy Volkswagen Golfs!

In those now far off halcyon days of brand loyalty, this would have been less of an issue, with Fiat fans, Peugeot supporters and so on sticking to their favourite badge. In today’s cut throat new car market though, where brand loyalty now counts for little, and with most gullible buyers more easily seduced by a German or Japanese badge, fighting between itself within the same segments for the sale of a new similarly-sized Fiat, Citroën, Opel or Peugeot, for example, makes little-to-no sense.

Sure, in terms of the synergies and cost savings benefits of sharing platform, lower labour cost production facilities and components, the FCA-PSA merger makes some sense. Longer-term, however, I don’t see a bright future for the assured survival of some of those 13 separate vehicle brands that now make-up this new alliance.

Take DS Automobiles as an example. Realising that the French marques cannot longer convincingly tackle the might of the premium ‘big three’ German name plates (Audi, BMW and Mercedes-Benz) PSA chose a more expressive, Gallic solution to stand-out within the prestige car sector with its ‘invented’ DS brand. So far the gamble hasn’t really worked, especially in the key Chinese market where a number of larger, unique DS models have attempted to wow executive car buyers but so far largely failed.

Quite what the future for DS now holds with the more evocative and desirable Alfa Romeo within the same stable remains to be seen. For Alfa Romeo itself, despite some current models finally being the equal or better than the German premium ‘establishment’, Alfa’s sales still continue to disappoint, both in Europe and the USA, as do those of the more prestigious Maserati marque.   

In a lower sector, how will Fiat stand out against its new ‘internal’ Citroën, Opel/Vauxhall and Peugeot ‘rivals’ as well? Once Europe’s largest and most influential car maker less than 50 years ago, Fiat is now effectively reduced to a one model range seller in its domestic Italy (the Panda dominated the home market), with its retro and cute 500 being its only strong seller in all exports markets.

With profit margins in the European A segment that the Panda/500 combo currently dominates declining, and larger Fiat models (500X, 500L, Tipo, etc.) struggling to sell, Fiat runs the real risk of being backed into a small corner from which it may never escape. I sincerely hope I’m wrong here, but at present, this once great marque’s future doesn’t look too rosy. The same tragically applies to the previously ingenious Lancia as well.

For FCA’s North American brands, Jeep and RAM seem set for a bright future, but Dodge is unlikely to ever become a significant force beyond American shores. As for Chrysler itself, this historic marque looks set to potentially wither on the vine unless some much-needed new models and revised strategies are released soon, with little or no global relevance and appeal, the fate that the failed Chrysler Europe endured in the 1970s.

Back in Europe, PSA’s ex-General Motors brands (Opel and Vauxhall) continue to enjoy some success (more so Vauxhall here in the UK than Opel in Continental Europe, where its previous dominance in markets such as Switzerland and the Benelux has been eroded by Volkswagen, the Japanese and South Korean marques in recent years). But both Citroën and Peugeot look set to battle on convincingly in the mainstream new car sectors (in Europe at least, although China is a struggle and the USA so far non-existent), helped by greater diversification with crossovers and EVs, plus a strong dose of French pride.

Whether all of the current brands within the new FCA-PSA family survive the Corporate axe within the next few years we do not know, but certainly the long history of both automotive groups suggests that mergers and acquisitions do not always bode well.

The historical links between today’s FCA and PSA groups have been many and various over the years, the most obvious being Peugeot’s previous dealings with Chrysler. PSA took over the ailing American Group’s European operations in 1978 to create the revived (but very short-lived) Talbot brand. Talbot combined the former Chrysler Europe brands (Simca, plus the ex-Rootes Group’s Hillman, Humber, Singer, Sunbeam, Commer and Karrier) under one new corporate umbrella, with Talbot models ultimately sharing showroom space with Peugeots, but failing to capture the European public’s imagination and hearts.

On the FCA side, in North America Chrysler swallowed its former rival AMC (ex-Nash, Rambler) marque in the mid-1980s, cherry-picked Jeep from within AMC’s portfolio for further development, and quickly shut the rest down. It did briefly create the Eagle brand to appease former AMC dealers and marque loyalists, but this didn’t last long either.

In Europe, Fiat acquired Autobianchi, Innocenti, Zastava (Yugo), FSM, plus OM on the commercial vehicle side, closing each of these down over time, merging the latter with Iveco.   

Since 1974 Fiat has collaborated with Citroën (initially) on the joint C35/Fiat 242 light commercial vehicle range, with further badge-engineered Fiat/Citroën/Peugeot ‘Eurovans’ (Ducato/Dispatch/Expert), light vans (Fiat Fiorino/Citroën Nemo/Peugeot Bipper) and MPVs (Ulysse/Evasion/806/Lancia Zeta) following. Fiat also briefly worked with Opel/Vauxhall during their General Motors ownership on shared platforms (Fiat Punto/Opel Corsa; Alfa Romeo 159/Opel Insignia/Saab 9-3, etc.) and light vans (Fiat Doblo/Opel Combo).

It should also be remembered that Citroën once owned Maserati, which it took over in 1968 to develop the V6 engine for the seminal 1970 Citroën SM luxury GT, before Citroën went bust itself in 1975 and was bought out by Peugeot to create the embryonic PSA Group.

With a combined annual production in excess of 9.5million vehicles, the FCA-PSA partnership will catapult this new Group into fourth position in the global ranking of vehicle makers, placed behind third-placed Toyota, with the Volkswagen Group currently occupying second position and the (rocky) Renault-Nissan Alliance just sneaking ahead in pole position, although with Nissan’s present troubles, it may not hold into this prime slot for too much longer.

Whether the new FCA-PSA combine can claw its way higher up this leader board and still retain each of its current marques (or at least introduce some significant brand distinctions to effectively separate a Fiat from a Citroën from an Opel and so on…) only time and some very clever and careful management can tell. I sincerely hope I’m right and none of my favoured marques fall by the wayside.