Carlos Tavares will lead the Stellantis auto company

Carlos Tavares

For the manager only his own performance counts.

(Foto: Bloomberg)

Paris Since the weekend there has been a new group in the top league of the auto industry: Stellantis. The artificial name stands for the merger of Peugeot SA (PSA) and Fiat-Chrysler (FCA). In terms of the number of vehicles sold, Stellantis will be number four in the world. But can that work – French, Italian and American united in one company? The hope of great success depends on one man: Carlos Tavares.

The previous boss of the French manufacturer with the brands Peugeot, Citroën, DS and Opel will manage the new group with its 14 brands. John Elkann is Chairman of the Board of Directors. Because the Franco-Portuguese Tavares Peugeot SA has taken from the brink of ruin to a profitability of over eight percent in just a few years – as only available from premium manufacturers – they trust him to now manage this merger.

But there are enough problems: Both PSA and FCA are profitable. On the part of FCA, however, this is mainly due to the US and Latin American business – and the high profits that are made with “fuel-guzzling pick-ups”. Fiat, on the other hand, has an “outdated model range and factories with high overcapacity”, as the analyst Michaël Foundoukidis from Oddo BHF notes.

Fiat is losing money in Europe. “Tavares has a lot of work to do,” says François Dugas from BNP Paribas. FCA only fulfills the European requirements for CO2 emissions because it has emission rights of several billion euros Tesla bought. These expire at the end of 2022, until then Stellantis has to comply with the requirements on its own – or pay high fines.

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On Tuesday, Tavares, 62, will appear in front of the media for the first time as the new Stellantis boss. As a precaution, his press spokesman pointed out that no statements about future strategy should be expected. But one can assume that Tavares already knows exactly how to proceed. At PSA and after the takeover of Opel, he has already shown that he knows how to reduce costs at breakneck speed. Without any sentimentality: previous Opel models were simply put on PSA platforms or abolished.

Cultural differences

“We live in a world in which we have to act Darwinist in order to remain agile” is his often repeated credo. A choice of words that arouses unpleasant associations, but does not cause him any problems. Tavares likes to demonstrate toughness. He wants to convince through performance. Nothing else matters. He would like to thank his managers for “taking on the challenge of being constantly challenged by me”.

The French trade unions stuck to him despite the downsizing because the factories are working to capacity again today. And PSA’s high profitability gives hope that jobs will be safe in the future. With the employee representatives in Germany, however, he had problems from the start. After taking over Opel, Tavares flattered that he “drove an Opel Manta” in his youth. But he could not or would not understand that trade unions in Germany insist on being privy to the plans of management.

With some cultural differences, however, the successful CEO seems to have reached a limit. In France he was recognized as an exemplary manager, and rightly so. But he’s not a child prodigy. So far, he has made little of the Opel brand. It should actually pull the entire PSA group up – “made in Germany”. But Opel no longer has any recognizable independent character, and in 2020 sales have again slumped massively.

Tavares’ second weak point is the China business. Peugeot was the first European to be represented in what is now the largest car market in the world. The French have long since gambled away this advantage. During the competitor Volkswagen PSA achieves around 40 percent of its sales there, is barely noticeable in China: six years ago, PSA sold 740,000 units there; in 2020 it was just 45,000. Tavares has been promising improvement for years, but has not yet delivered. FCA will not solve the problem: China is also a weak point for Fiat and Chrysler.

Tavares has always refused to concentrate on more sales: “Just because you’re bigger doesn’t make you more efficient, agile or smarter,” he said in an interview with Handelsblatt in 2015. Thanks to Stellantis, PPE is now getting bigger. To prove that the new unit remains at least as agile as the old Peugeot SA, that is now the greatest challenge for Tavares.

More: France’s auto industry wants to gain importance with a new strategy.

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