Stellantis is born into a new world

The world looked much different when Fiat Chrysler Automobiles and PSA Group agreed to merge in December 2019.

Although sales were expected to slow in North America and Europe in 2020, the industry couldn't have foreseen the economic damage — and resulting lifestyle changes — that a mysterious virus beginning to spread in China soon would unleash. FCA and PSA now begin combining their operations and setting priorities amid a migration from crowded cities to roomier suburbs that could have lasting impact on consumers' vehicle needs.

"It's interesting because, first, it shows how fragile we are in terms of being able to anticipate the future," Carlos Tavares, CEO of the newly combined automaker, Stellantis, told Automotive News. "Secondly, I think it also brings a new perspective to the potential of the individual freedom of mobility."

Tavares said the health crisis has "shown us that we need to be more disruptive." The merger ensures that Stellantis will be a sustainable unit with the capability to develop "versatile and affordable solutions" in the years ahead, he said, while the scale of the company "will help us be more efficient in the things we already do, and it will give us more capability to innovate in a number of areas."

The newly combined entity — now the world's fourth-largest automaker based on both parties' 2019 sales — has to plot strategies for a long list of brands as it responds to evolving consumer preferences and economic uncertainty created by the pandemic.

Tavares said the automaker, with its broad roster of utility vehicles, vans and trucks, has a presence in the most profitable areas of the industry. Stellantis is making money in the Americas and Europe and has the opportunity to "do something good in China," he said.

"We are blessed with a 14-brand, iconic portfolio," Tavares said. "Those brands will absorb our passion for freedom of mobility as we understand that freedom of mobility is becoming an even stronger expectation after everybody has experienced the lockdown situation. ... It is important that we answer that expectation in the most efficient way."

Managing such a broad portfolio could prove cumbersome. But all of the company's plants and brands around the world "will be given a chance," Tavares said in an interview with German newspaper FAZ. "Of course, that doesn't mean we don't have to change things. We have to become smarter and more efficient."

At Stellantis' introductory news conference, Tavares said executives were not planning for job cuts but hadn't entirely ruled them out, either. Conversely, cuts by FCA and PSA "would have happened had this merger not been a success," he said, calling the tie-up "a fantastic shield against social problems in the two companies."

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 will first meet with the internal teams and give them a chance to ask questions.

After those initial meetings, he'll turn his attention to getting acquainted with 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 dealers.

Tavares has charged the new company's management team with building a strategic plan from the ground up to go on the offensive. They'll need to do that without knowing how long the pandemic's effects will last.

S&P Global said automakers found success in the second half of 2020 in the U.S. as profitability recovered. Demand was bolstered, in part, by strong housing starts, the consumer shift away from public transportation and a flight to the suburbs during the pandemic, according to a report last week.

As for the shift away from urban centers, researchers such as PricewaterhouseCoopers say cities could regain their appeal in a few years. But a recent real estate report from the firm says the shift already had been occurring before COVID-19, and PwC has called accelerated suburban relocation during the pandemic "The Great American Move."

A continued rush to the suburbs wouldn't bother Tavares. These consumers, he said, will still need cars to get around.

"I think it just opens the perspective of more breakthrough-thinking about the mobility devices that we want to use in the urban areas and the cars that we must have to live in the countryside with a better quality of life," Tavares told Automotive News. "So at the end of the day, this is not creating any stress. I think it's just opening our minds to other areas for innovation, which I think is fine. We are here for that; that's the reason why we exist."