Stellantis' Europe/North America bipolarity:asset or liability?

The presentation of the results of the first quarter of Stellantis's activity brings out vividly what we already sensed: the entity is torn, as FCA was, between an American and a European division. The two do not call for the same products and the same technologies and therefore the expected synergies are difficult to achieve. If the question is an old one that Ford and GM faced very early on, it is posed in new terms in 2021 because others have to manage a European and a Chinese division and this seems less difficult.
 
The first quarter of Stellantis, which was almost complete, gave us an incarnation of this new group at the beginning of May and allowed us to grasp its originality.
Indeed, in 2021, the other very large global groups are, like Volkswagen or GM, marked by a China-domestic market bipolarity, while Stellantis - as Florence Lagarde pointed out on Thursday - is a mainly American-European company. Since the stated intention of the managers of the two companies now combined is to make the group thus formed a competitor capable of doing at least as well as the other very large companies in the future, the question of the famous synergies deserves to be asked on the basis of this observation: is the bipolarity of Stellantis an asset or a handicap in order to benefit from the famous size effects?
 
The question is not completely new, since the profile of Stellantis in 2021 is basically that which has characterised the two American manufacturers for decades: they had to make a North American division and a European division coexist in the same company - and/or try to find synergies between them.
If we think today of the last few decades when the exercise proved to be very perilous and made the question of the Americans' disengagement from Europe recurrent, we must remember here that, for GM as for Ford, the European adventure was not always a disaster and that, on the contrary, during the 1970s and 1980s, the two Americans were good European manufacturers and were even rather driving forces in the process of European integration.
Nevertheless, the history of the European adventures of both GM and Ford shows how difficult this bipolarity - which Chrysler once attempted before giving up and selling its European activities to PSA in 1978 - is to organise and manage in a stable and balanced way.
 
The figures that Stellantis provides for its activity in the first quarter of 2021 allow us to measure this difficulty. Indeed, on a 'pro forma' basis - i.e. as if the Stellantis group had not been officially formed on 17 January but on 1 January - its turnover would amount to 37 billion euros, 16 of which would be generated in Europe and 15.9 in North America. The remaining five billion euros are mainly from South American activities (2.1 billion), to which must be added Maserati (400 million) and the 'rest of the world' (Middle East and Africa and China, India and Asia Pacific weighing 1.3 billion and 900 million respectively).
 
The 16 billion euros provided by the brands in Europe correspond to 823,000 vehicles sold and the 15.9 in the US to 451,000. The unit value of vehicles sold in Europe is thus 19,440 euros, whereas it is 35,255 euros in North America. In addition, in South America, where the Fiat Strada has been remarkably successful, the turnover per vehicle sold is 11,110 euros.
 
This means that, as the Stellantis group currently stands, the activities that coexist within Stellantis, and which are all rather successful, are rather distinct: it is neither the same products nor even the same brands that embody the group's performance in the different regions of the world. Jeep is the exception.
 
For the rest, Chrysler, Dodge and RAM exist only in North America. Opel only exists in Europe and this is not far from being true of Peugeot, Citroën and DS. Fiat is making Stellantis successful in South America but with a Strada which is a product adapted to the local market and without the expected "global" career. The question today for Stellantis is whether it is desirable and possible to move from a group that, like FCA in recent years, manages a portfolio of brands, products and country risks to maximise its profitability from year to year to an automotive industrial and technological group that develops and shares technologies, platforms and products that can be convincing in markets where its brands have to be positioned around 35,000, 20,000 and 10,000 euros. 
 
In a way, all the groups, as soon as they are present in North America, have to ask themselves this question and, in general, this leads, for most of the North American activity, to renounce the use of synergies. Typically, in the Renault-Nissan Alliance, what Nissan does for North America is of no interest to Renault. In the same way, what we will find under the Buick brand in China will not be what we find under the same brand in the United States but products designed for Europe by Opel.
 
Manufacturers such as Toyota, Honda and Hyundai-Kia, for whom North America is very important, all accept the American exoticism and - like GM or Ford - do not integrate their products and platforms developed for this continent into their global strategies. This makes it possible to be successful and convincing in the USA and Canada.
This does not allow the famous synergies claimed to come into play and therefore adding up - like VW - 4 million vehicles sold in China and 4 million vehicles sold in Europe seems to be much more promising in terms of economic performance than adding up - like GM - 4 million vehicles sold in China and 2.5 million vehicles sold in the US.
 
In one case, the 8 million vehicles are more or less the same and the manufacturer's strategy is global. In the other, it is imperative that the regions are highly autonomous to differentiate the offerings and the manufacturer's strategy is 'multi-domestic'.
 
By necessity, GM has, over the decades, managed its divisions by allowing them to take on a relatively large degree of autonomy from the American headquarters. This may have been the case for GM Europe with Opel and Vauxhall when the division was doing well. It seems to be the case today for GM China which has been able to develop Chinese brands such as Baojun or Wuling which for the last five or six years have kept GM at the top of the ranking of manufacturers in China alongside VW.
 
In another way, the need for Japanese or Korean constructors to leave Asia to ensure their expansion has given them a real ability to find the right balance between centralisation and regional autonomy. VW has hardly asked itself this question and has remained a very centralised and very globalised group. There is therefore no infallible recipe for successfully squaring the circle which consists of dealing with extremely heterogeneous markets while trying to make the most of the effects of size and therefore of synergies.
 
PSA has an operation and a way of managing its engineering and its brands which is similar to that of VW. Fiat has allowed its Brazilian branch to take up a lot of space compared to Turin. Chrysler has no international culture. Everything remains to be done today for this group which is not one. The fact that it has to live with the worst kind of bipolarity (North America / Europe) is a reason to play the regional autonomy game.
 
The need to electrify at breakneck speed all over the world calls for a global strategy which, following the example of VW, allows the same technologies to contribute to the performance of the activities of one pole and the other.
Stellantis will have to become a manufacturer in a few months and no longer the sort of conglomerate that presented its first results.  
 
10/5/2021
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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