A business case for building and selling more vehicle brands in Canada would likely take some time to develop in the wake of the Fiat Chrysler Automobiles-Groupe PSA (FCA-PSA) merger announced in October.
“There’s not a lot of room to have yet another brand over here,” according to Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions LLC.
And with European-based leadership, vehicle production in Canada will be a low priority, said Kristin Dziczek, vice-president of industry, labour and economics at the Michigan-based Center for Automotive Research.
The merger would create the world’s fourth-largest automaker, but industry analysts and insiders expect little immediate impact on Canada’s automotive industry.
No one should expect FCA’s Ontario assembly plants to suddenly start cranking out new Peugeot models or for DS crossovers (DS is Groupe PSA’s premium brand) to hit the North American market anytime soon, Fiorani said.
“FCA already supports six brands over here, so adding another brand or two would be difficult. If you brought over the DS, you’d be competing with the same segments as Jeep,” he said. “There’s not a lot of room for more cars to be added in North America, and if you’re adding crossovers or trucks, you’re already playing into FCA’s strong point.”
OVERSEAS DECISION MAKING
Groupe PSA CEO Carlos Tavares would be the chief executive of the combined company. Having a CEO make decisions about production from Europe instead of in Michigan could complicate things for Canadian plants in the long run, Dziczek said.
“The [FCA] CEO is Mike Manley now, but the [PSA-FCA] CEO will not be Mike Manley, and the decisions will be made in Europe and not North America,” she said. “But, it’s going to take a long time, and the North American footprint is probably the lowest priority at the moment.”
Fiat Chrysler Automobiles and Groupe PSA agreed in October to a merger to create an automaker valued at about $65.9 billion (US $50 billion). The new, combined company would have sold about 8.7 million annual vehicle sales in 201 placing it behind just Volkswagen, Toyota and th Renault-Nissan alliance globally.
Should the merger go through, the automaker would sell 13 brands globally.
The two automakers see the merger as a way to pool resources in an increasingly costly era marked by investments in new platforms, electrification and autonomous-vehicle development, a well as tightening emissions standards and grow ing trade uncertainty.
STRENGTH IN NUMBERS
“What we’re seeing here is a reflection of wha it’s going to take to participate in the future of vehicle manufacturing and the transportation industry,” said Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, which represents the Detroit Three automakers in Canada.
FCA in particular has long been seen as behind many of its competitors on electric-vehicle development. For years, it has sought a competitor to merge with, coming up short in attempts to woo General Motors and Renault.
“There’s only so much money,” Nantais said. “So, companies have to look for partnerships where they can best position themselves in the marketplace for the future.”
PSA and FCA said the merged company could achieve cost reductions and efficiencies without having to close any plants globally. Despite that promise, some analysts have voiced skepticism that it would avoid closures at low-volume plants in Europe, and unions there are worried about joint losses.
COMPLEMENTARY PORTFOLIOS
In Canada, however, there appeared to be no such fear. Unifor President Jerry Dias contrasted the PSA-FCA merger with the 1998 DaimlerChrysler union. Unlike the latter, Dias said the vehicle portfolios of FCA and PSA complement each other so, it makes sense from cost-sharing and research-and-development perspectives.
“What Peugeot builds is for the European market, and what we make is for the North American market,” Dias said.
Unifor represents more than 10,000 hourly workers at FCA’s Brampton, Ont., and Windsor, Ont., assembly plants.
Vic Fedeli, Ontario minister of economic development, job creation and trade, said he and Premier Doug Ford have talked with FCA executives since the merger was announced and said they would remain in touch with FCA as things progress.
QUESTIONS OF SCALE
“We have been informed that Ontario should remain largely unaffected by [the merger],” Fedeli said. “The message I got was that this is all about scale. As we see companies worldwide shifting, it will be all about scale.”
Requests for comment from the office of Navdeep Bains, the federal minister of innovation, science and economic development, were not returned.
It was not clear at press time how the merger would impact the Peugeot brand’s plans to return to North America by 2026. PSA has said it would ship vehicles to North America from Europe or China.
With files from Rob Bostelaar
