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There is a company that is facing the crisis that has hit the automotive sector hard since the start of the pandemic better than the others: it is Stellantis, which was only born in January 2021 from the merger of PSA, the most well-known French company such as Peugeot Citroën, and FCA, the Italian-American society born as well from the fusion of FIAT and Chrysler.
Since 2020, the automotive sector has been going through a deep crisis, both due to a significant drop in sales and the many difficulties encountered by companies in producing the vehicles themselves, due to the lack of chips and the increase in prices of materials and energy. . Many market analysts believe that Stellantis has been able to adapt better to this difficult situation as the merger and new management have made production more efficient and reduced costs considerably, even if it has led to a reduction in the workforce. in its various production plants. , with a consequent social cost.
Stellantis has only been around for two years but has a long history, being made up of historic automakers such as Italian FIAT, French Peugeot and American Chrysler. Its resilience is now considered by many to be a surprising result, especially since only twenty years ago, in the early 2000s, FIAT was going through its most difficult moment and was losing around 5 million euros a day. . Since then, it has transformed from an inefficient, state-subsidized company into a strong, more profitable and international market player, first as FCA (born from the merger of FIAT and Chrysler) and then as as a member of the Stellantis group.
Today it is the world’s fourth-largest automaker, with 400,000 employees and more than 50 factories around the world. It is considered one of the most profitable companies in the industry, although the companies that initially formed it, PSA and FCA, were not so profitable. The company recorded in 2021, that is to say its first year of life, a net profit of 13.4 billion euros, triple what the two companies achieved separately in 2020, against a total revenue from sales of 152 billion euros, 14% more than the previous one. year. The 2022 accounts will be published at the end of February.
Although it is now a multinational, Stellantis still has considerable economic value for Italy: it has huge factories like those in Mirafiori, Melfi and Pomigliano, and it is estimated that the impact of the company on the Italian economy is between 1 and 3% of GDP. According to Istat, the car manufacturing sector in Italy employs 160,000 people; if spin-offs are also considered, the majority depends on Stellantis.
The crisis in the sector todaySince the start of the pandemic, the automotive sector (which includes both cars and commercial vehicles) has entered a very serious crisis. According to data from OICA, the international organization that collects and processes information on the production and sale of motor vehicles, after a 5% drop already recorded in 2019, global production in the automotive sector suffered in 2020, due to the impact of lockdowns and restrictions, a decrease of 16%, thus returning to 2010 levels. Sales were down 12%.
In 2021, things did not improve and other elements of difficulty were added to the restrictions due to the pandemic: it became very difficult to find certain components important for the production of vehicles, such as chips, and to important discontinuities have been created in the so-called global value chains, ie the set of international processes that allow the production of goods to be divided into different parts of the world. Production saw a slight improvement of 3% compared to 2020 but was still 13% lower than in 2019. The same goes for sales.
There is no global data yet for 2022, but the global trade crisis and commodity shortages lasted through the first half and then started to ease. Added to these problems, however, are the significant increases in raw materials and energy, which make production even more difficult and costly.
On the demand side, things were no better. The sharp drop in consumption in 2020 has never been compensated, especially due to the climate of great uncertainty which has never really disappeared: consumers have often postponed decisions on important purchases such as the purchase of a car ; inflation leaves little room for spending for many families.
The financial statements of the main companies for 2022 are not yet available, but the perception and concerns of analysts about the sustainability of their business are reflected in stock prices: in 2022, some of the largest European car companies lost 22 percent of their market value.
The resilience of StellantisIn all of this, many analysts and pundits agree that Stellantis fared a bit better. Not so much because it sold more vehicles than other companies. Indeed, it sold less than the average: in the European Union, there were 4.1% fewer registrations in 2022 and there were nearly 14% fewer registrations involving Stellantis vehicles.
According to many, what made the difference was the leadership of General Manager Carlos Tavares, a manager considered very competent in the sector and renowned for being able to quickly clean up the accounts of the major car manufacturers: he is arrived from the Renault group ten years ago, first saved Peugeot Citroën from bankruptcy, then took over in 2017 Opel – also a member of the Stellantis group – managing to make it a profitable company in one year, after two decades of losses .
Various observers believe that Stellantis was also subjected to what is today called “Tavares method which consists of making processes much more efficient and significantly reducing costs. It must be said that the merger between PSA and FCA alone has already produced 3.2 billion in so-called “synergies”, that is to say savings made possible by the union of two companies which can now share, for example, factories, workers, etc. Street.
Carlos Tavares reduced his costs through innovative managerial choices, such as putting his factories in competition, thus trying to push them to become more efficient, and reducing stocks to the bare minimum so as not to occupy too much warehouse space, risking thus generating additional expenses, even if it means delaying deliveries, as has been the case for several months.
Competition between the group’s factories has also highlighted Tavares’ strategy of cutting jobs in high-cost countries. Reducing costs therefore also implied a reduction in the number of employees, with a consequent social cost: in the factories in France, second The world , we have gone from 59,000 industrial employees in 2013 to just over 40,000 today and last year a plan was launched to encourage the resignation of 2,600 employees; the same in Italy, where there was a difficult union negotiation for the resignation of 1,820 employees ; in December it was announced closing of an American factory in Illinois, where more than 1,300 employees worked.
The reduction in operating costs has enabled the company to better adapt to the significant drop in demand in recent years and the enormous difficulties experienced by the entire sector due to problems in the production lines.
At the beginning of the year, simply referring to how the company intends to continue to face this difficult period, Tavares notably mentioned “unpopular choices “, such as possible closures or downsizing of certain factories, but excluding further job cuts. Unpopular choices and cost reductions are also functional for the future development of the company and the success of its investments in electric cars: “if we do not optimize the cost structure, we cannot absorb the additional costs of ‘electrification. If we don’t absorb the costs, consumer prices go up and the market shrinks, and if that happens, fewer factories are needed. It’s a vicious circle, a dog chasing its tail.”
It was precisely the goal of cost reduction that initially led to the merger between PSA and FCA. The decision was born from a very present need for consolidation in the automotive sector: over the years, many companies in the sector have grown through mergers or acquisitions, to respond to an increasingly international market. and requiring huge investments, such as those needed for the transition to electric cars.
Now, all analysts agree that the future of mass mobility is electric cars, and even if autonomous cars are inaccessible for the moment, the IT and technological aspect is as important as the mechanical aspect in the production process of a car.
When it comes to technology, however, the French and Italian branches of Stellantis (especially the Italian one) are far behind, not only against innovative rivals such as Tesla, but also against Volkswagen and other traditional automakers. Neither, for example, has an architecture designed exclusively for an electric car, in part because of the distrust that Tavares and Sergio Marchionne (historical CEO of FCA who died in 2018) have always had towards this technology. One of the reasons for the union is therefore to have enough resources and technical capabilities to develop next-generation cars.
Source: ilpost
