The merger of PSA and FCA to create Stellantis creates an automotive giant with opportunities to lever scale and reduce costs, but a glance at automotive history suggests success is far from assured, says GlobalData, a leading data and analytics company.

David Leggett, Automotive Analyst at GlobalData, comments: “History is peppered with examples of automotive companies attempting to combine on the promise of exploiting scale economies and efficiencies, but ultimately failing to execute.”

The merger of the two groups brings together 14 brands with annual production of over eight million vehicles and will create the fourth largest global carmaker.

Leggett continues: “Before the pandemic the two participants estimated the merged company could reap synergies and efficiencies approaching EUR4bn a year. As they recover from the pandemic, cost savings and rationalizing operations in the bigger entity are sure to be very high up on the agenda but will likely also be highly politically sensitive.”

Stellantis also faces long-term challenges such as the CASE (Connected, Autonomous, Shared, Electrified) megatrends and developing strategies for the automotive sector’s longer-term industrial transformation.

Leggett concludes: “Strong leadership and unity, with buy-in to a sense of common purpose from all parts of the company are going to be crucial. The eventual failure of the DaimlerChrysler merger formed just over twenty years ago serves as a particularly cautionary tale on what happens if internal culture develops in a way that feeds division and leads to tensions that aren’t easily resolved.

“New CEO Carlos Tavares has to hit the right notes from the beginning and carry that through in his management team.”