Tavares: FCA, PSA are better off meeting challenges together

The world's newest automaker, Stellantis, is building a strategic plan from the ground up as it looks to go on the offensive and show that innovation isn't limited to startups, its CEO says.

Carlos Tavares, in an exclusive interview with Automotive News, said he worked for "many months" to assemble the company's leadership team announced Tuesday. The merger between Fiat Chrysler Automobiles and PSA Group closed Saturday, and the combined entity now must mesh its disparate cultures and the operations of 14 brands on either side of the Atlantic Ocean in the midst of the ongoing pandemic.

"There is an ongoing COVID crisis, but the two companies are not in crisis," Tavares said. They "have a robust financial position, they have been operating properly and they are creating value, so there is no crisis on this merger. It's all about two teams that understand after they turn around their own companies, at one point in time, that we are better off to be facing the future challenges together than in the standard opposition, which demonstrates a high level of maturity."

Tavares, who had been PSA's CEO since 2014, said the two companies understood "they could continue to be on a standalone basis, but they remember what happened when they had to turn around their [businesses] in the last few years, and they understand how difficult it was and they see the challenges coming."

The Stellantis executive team, Tavares said, will be a balanced group "between the two families." The merger was not a defensive play, he insisted.

"This is not only about protecting ourselves against the challenges that we already see, this is also about being offensive in making things which are innovative, which are different from what you are used to seeing from carmakers and that hopefully will positively surprise you," Tavares said. "And giving you the sense that we can also be very breakthrough-driven, but very innovative and you don't have to wait only for the startups."

The companies were on solid footing coming in, Tavares said, which gives Stellantis time to do the "deep management work" to set up a long-term strategic plan.

Tavares aims to establish a cohesive, "bottom-up" dynamic that takes into account the input from the younger generation of workers on the company's "strategic task teams," he said. He wants this group to be "deeply involved in the different task teams that are going to work on the different breakthroughs that we are going to submit to them."

"That means bringing all of those younger people in those teams as crew members of those teams, and giving them the time and the ability to work on those breakthroughs and then come back to us with some proposals," Tavares said. "Then we will adapt to the top-down directions and try to figure out what is the best final conclusion. That needs time, and we'll give them time. As we are not in a crisis mode, we are lucky to have the time to do so."

With the merger completed, Tavares says he plans to visit the company's major operational centers in Italy and the U.S. in the next few weeks. He'll first meet with the internal teams and give them a chance to ask him questions. After those initial meetings, he'll turn his attention to getting acquainted with his U.S. dealers on another trip.

Tavares will consult with former FCA CEO Mike Manley, who now heads Stellantis' Americas operations, on the best way to interact with the dealer body.

Jeep is the "most global brand" of Stellantis, Tavares said, because of its presence in Europe and China as well as North America. Its global push will continue under Stellantis, he said.

The SUV brand is pushing into new markets and higher-priced segments, adding new capability to storied nameplates and stepping into the world of electrification. The premium Wagoneer and Grand Wagoneer utility vehicles are on the way later this year, while a redesigned Grand Cherokee soon will offer a third row for the first time.

"The direction is already set. Jeep is not a brand that has any problem of vision or direction," Tavares said. "It is a brand that needs just to be supported to keep on moving profitably as it has been so far. I think there is a sentence in the U.S. that is something like, 'If it's not broken, don't try to fix it.' I think that applies very well to Jeep."

The company's projected cost savings have risen from $4.5 billion (all figures in USD) when the merger was proposed in 2019 to about $6 billion. That's because "the people from the cross-company teams have so many bottom-up ideas," Tavares said.

"I did not ask for a better number. I just said, 'Guys, let's get the job done and let's execute before we start jumping on the numbers,' " Tavares recalled. "But they came back to me and say, 'Well, we have a problem. The people are working so well together that they are coming with tons of ideas, and we cannot just tell them no because the ideas are very good.' "

Around 80 per cent of the total synergy amount, he said, will come from how Stellantis leverages the "volume-scale effect in the way we procure parts" and uses common platforms and parts.

"The smarter we are in using common components," Tavares said, "the better conditions we create for procurement to do a good job in terms of cost negotiation."

Looking ahead, Tavares said he will rely on North America executives to deliver plans for rolling out more electrification in the U.S., an area in which FCA has lagged its competitors.

Tavares said Stellantis could "contribute a lot" in this area and that "we are here to support and we are here to be part of this quality-of-life improvement of the U.S. society."

"If they want to get to a decision that is related to a significant resource allocation, it will come to the executive committee, we'll discuss it and we'll decide what we need to decide," Tavares said. "But the guys who are going to propose it are the guys who know the market."