Is 13 really a lucky number for PSA and FCA?

The announced merger last week between PSA (Peugeot/Citroen) and FCA (Fiat Chrysler Automobiles) has created the world's fourth largest car company. On the surface, this looks like a match made in heaven. FCA will get access to current platforms, including hybrid technology to compliment its profitable North American operation. PSA will gain access to the North American market through FCA's existing network. This alliance has resulted in 13 brands all under the same operation. Yes, you read that right 13! With the ink still drying on the paperwork, PSA's CEO Carlos Tavares announced that there are no plans to kill/sell/abandon any of these individual brands moving forward. But not all brands are created equal and some can't be simply grown by adding an SUV here and hybrid there. Even the mighty Volkswagen group has its weaker brands that have never prospered despite the vast resources at hand. Yes SEAT, I am looking at you and I can see PSA/FCA having similar issues.

The breakdown of all 13 brands is itself slightly confusing. PSA consists of Peugeot and Citroen and the premium "DS" brand  along with Opel/Vauxhall. Peugeot and Citroen are well established French car brands that have good market share in the small and family sized car sectors and SUVs have been a major growth component in recent years. DS is a premium sub-brand linked to Citroen. Opel/Vauxhall is the most recent member of the company, being acquired two years ago from GM. PSA has achieved the almost impossible task of returning the company to profitability in record time as well as developing the new Corsa supermini on the Peugeot 208 platform in under 48 months. Surely a record in the car industry. All of these brands are strong. The French companies complement each other nicely, by offering adventurously styled cars and radical SUVs that have continued to lead the market. Opel/Vauxhall are a more conservative company and their cars are reliable, if a little dull.

Fiat Chrysler Automobiles brings more brands to the table, with some being stronger than others. FCA's American brands have been highly profitable. They consist of Chrysler, Dodge, Ram and Jeep. These brands sell ranges of SUVs, trucks and 4X4 models that are popular in North America. The remaining European brands consist of Alfa Romeo, Fiat, Lancia and Maserati. All four companies are closely linked historically and have endured periods of success and near crisis many times. These are the brands that I believe will face the biggest challenges moving forward.

(Note: Abarth and SRT are sporting sub-brands of Fiat and Dodge respectively).

Let's start with Fiat. On the surface, they have a lot to gain from this merger. They will suddenly have access to platforms they desperately need to break away from their dependence on cheap, small city cars like the Panda and 500. The logical thing would be for Fiat to revive the Punto supermini on a PSA platform in record time. In theory, the Punto could be positioned as a cheaper variant to the Peugeot 208/Corsa which is the position it historically occupied. The risk I see for Fiat is the forced move away from the city car segment. They are masters at this type of car, and it is one that is facing extinction. That Fiat "flavour" could be lost and more importantly, it runs the risk of being shoe-horned into a "budget brand" position with little to differentiate its cars from the rest of the competition apart from price. I realize that Skoda has occupied that position in the VW group and has been a huge success. However Skoda's reputation is something Fiat lacks, and Skoda itself is now facing the prospect of being moved down market as their cars are so good they are potentially stealing sales from Volkswagen itself.

Lancia and Abarth are much smaller sub-brands linked closely to Fiat. Lancia is limited mainly to Italy. This brand has historically offered "premium" versions of Fiat's range of cars. It could serve as the Italian version of Citroen's DS brand but market appeal is weak outside of Italy and it has limited potential in my eyes. Abarth has enjoyed a resurgence over the last decade, mainly due to the Fiat 500. An Abarth version of the cute city car was created to compete with MINI. This could be expanded into more mainstream Fiats such as the Punto and Tipo and sell them as competitors to Volkswagen's "GTI" models.

Alfa Romeo and Maserati both have the most to gain from this merger, while potentially presenting the biggest challenges.

Maserati has suffered in the last decade. It has lost some of its brand appeal as its recent cars are not as pretty as the ones that went before them and they are engineered to a price. The rumour is that Maserati will soon "go electric". To my mind, this is the wrong move. Maserati builds powerful grand touring cars. I think they should benchmark Bentley rather than Tesla. Build large, premium cars with hybrid powertrains; nothing larger than a V8 or smaller than a V6 paired to an electric motor. I would move the brand further upmarket, while keeping the current range of vehicles, limited to one large saloon, SUV and Grand Tourer. They could all be based on one modular platform designed for hybridization from the start. The key will really be to getting the quality issues under control and keeping the brand exclusive by focusing on the "Italian" styling and playing into its heritage.

Alfa Romeo is a brand with a coveted racing history and a reputation for disappointing customers. Their cars are often beautiful and flawed. The current Giulia sports saloon and Stelvio SUV are the best cars the company has ever produced but they are expensive and quality is lacking compared to the competition. There is talk of a smaller SUV model because SUVs sell but Alfa has moved down market before and that damaged the brand. I could see them reducing their range of vehicles. Already the 4C and GTV have been axed and this makes sense. Alfa needs to build its brand in the eyes of the public. Replace the Giulia and Stelvio with second-generation models. Keep the sporting character and improve quality, specifically with fit and finish and infotainment. Then launch a halo model, something along the lines of the Porsche 911 or Aston Martin Vantage. Limit the range to remain exclusive (like Maserati) and focus on the hardcore sporting character. These cars will not be for everyone but they will be unique, offering something Jaguar and BMW does not. By resisting the temptation to go down market to chase sales and short-term profits are vital for Alfa Romeo's credibility and survival.

Time will tell if 13 brands are too many for one company to manage. I am sceptical and suspect that some hard decisions will need to be made and this will no doubt cost people their jobs. I think FCA will face the hardest choices regarding their Italian brands in the coming months and years. PSA and FCA are not alone. More and more car companies are being forced to merge in order to survive and only the strongest brands will make it through the next few decades intact.

 

Blog images sourced from: www.autocar.co.uk