The real impact of the expected merger of Fiat Chrysler Automobiles and Peugeot will take some time to become clear, but an early test could come as negotiators for FCA and the UAW try to hammer out a new labor contract.
The announcement last week of a proposed 50-50 merger of FCA and PSA Groupe paints a broad picture of a global company intent on maintaining “significant presences” at current head offices in France, Italy and the United States, on saving money and on creating economies of scale.
At the same time, FCA and the UAW are preparing to ramp up contract bargaining as attention shifts from General Motors, where workers have already ratified a new deal following a 40-day strike, and Ford, where workers were to begin voting on their deal this week.
Several experts said they don’t expect a major impact, at least in the short term, on U.S. employment by a merged company, but the deal’s scope and reasoning have implications that highlight the broad changes underway in an industry seeking a path to a future laden with expensive technological requirements. Part of that future is believed to include vehicle production that simply requires fewer workers.
Marick Masters, a professor of business at Wayne State University, said the merger will be the “elephant in the room” even though it is far from a settled deal.
Negotiations will need to play out as if they were done before the announcement, in part because mergers take time and the deal could still fall apart, he said.
“It bodes well for the future (but) it’s not going to make the issues (in bargaining) any less difficult,” Masters said.
Harley Shaiken, a professor at the University of California, Berkeley, who specializes in labor issues, said the merger announcement will color the talks because of the unknowns it creates.
“I think the union will be looking for more assurance that a new corporate entity doesn’t come in and start shifting things around in a way that could be harmful for Chrysler workers,” Shaiken said.
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The pledge that the merger would save $4.11 billion (3.7 billion euro) annually without plant closures appears meant to reassure those worried about job cuts, but the use of terminology such as “synergies,” which appeared in the merger announcement, is often seen as code for shrinking personnel numbers.
When PSA rival Renault was involved in its brief fling with FCA earlier this year, Erik Gordon, a law professor at the University of Michigan’s Ross School of Business, noted that a merger made little sense without job cuts, even as the announcement noted that the deal’s benefits would not depend on plant closures. Despite initial excitement, FCA ultimately walked away, opening the door for the current proposal.
To be fair, however, Renault and PSA are not so comparable, despite their shared French lineage — Renault remains tied to a drama-laden alliance with Nissan, and PSA in just a couple of years successfully pulled off the purchase and remarkable turnaround of what had been GM’s money-losing Opel and Vauxhall brands.
PSA’s experience with concerns about job security, a major focus in France, could be helpful for workers whether now or later. That experience could make the company more open to discussing the issue in contract talks, but Masters noted that it’s simply too early for the potential merged entity to have much of a presence in the talks.
The employment and sales picture in the United States also differs from what is seen in much of the rest of the globe, where the market has been contracting. FCA’s massive east-side Detroit expansion, for instance, is well underway, and the company has said it will create almost 5,000 jobs. Those jobs are to be focused on Jeep SUV production, which has been an exceptionally profitable area for FCA and other U.S. automakers.
While the merger proposal does raise questions, it could add certainty.
“This bodes well for the negotiations in that I think it solidifies the picture regarding FCA’s future and gives it a sense of stability that it might not otherwise have, especially in light of the fact that it was widely known that FCA was shopping aggressively for a partner,” according to Masters.
Merger and consolidation speculation has been rampant for years regarding FCA. When the late Sergio Marchionne, FCA’s former CEO, raised the benefits of industry consolidation in his 2015 presentation “Confessions of a Capital Junkie,” the company’s future appeared more dependent on an eventual tie-up. These days, FCA comes to the table from a position of relative strength even though the industry as a whole is under pressure to change.
An FCA/PSA merger is expected to create the world’s fourth-largest automaker with the scale and finances that experts say should provide financial and technological resources to better manage the evolving market.
“There is clearly important positive promise here in terms of scale and what PSA was able to do with Opel and Vauxhall in Europe, but there are also some real unpredictable concerns here,” Shaiken said, noting that despite the positive possibilities from the scale of the company, skepticism is warranted until those possibilities are realized.
Contact Eric D. Lawrence: elawrence@freepress.com or 313-223-4272. Follow him on Twitter: @_ericdlawrence.
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