Stellantis: Brand Museum or Brand Future

Stellantis: Brand Museum or Brand Future

25/01/2021

by Michael Brandtner

Global Partner of Ries Positioning & Strategy Consulting

On January 16 this year, Handelsblatt.de reported: “Car manufacturers PSA and Fiat Chrysler complete mega merger.” This corporate alliance did not only create a new group under the name Stellantis, but also a new multi-brand system in the automotive industry. However, this larger new corporation might not be enough alone to be successful in the long run.

When companies merge within an industry, it is in many cases, on the one hand, aimed at achieving so-called critical size to become more competitive in the future. On the other hand, it is about driving synergies and cost savings. These conditions apply to Stellantis. Not only will Stellantis be the fourth-largest automotive group in the world in terms of sales figures, it is also expected to generate an annual savings potential of five billion euros.

Two kinds of size

Size in particular is seen as an important indicator of future success in many industries and is often equated with potential market dominance. It is also evident in many markets that the older an industry gets, the more endangered is the so-called mushy middle. From this perspective, the new Stellantis, with brands such as Abarth, Alfa Romeo, Chrysler, Citroen, Dodge, DS, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, Ram and Vauxhall is a completely different heavyweight than PSA and Fiat Chrysler had been on their own.

But from a branding point of view, we should always differentiate between two different types of size when evaluating a multi-brand company. To better understand what we are talking about, let’s look back to the 1990s. At that time, Brau & Brunnen brewery group became Germany’s largest brewing company after immense acquisitions. But its number one position on paper was indeed worthless, because apart from the beer brand Jever, the group had no strong national brands in its portfolio. So the dream of a strong and powerful brewing company was soon over. In other words, sheer company size does not necessarily mean brand strength for the future.

Stock exchange and experts versus customers

In many cases, the stock market and industry experts initially view mergers within an industry positively. They often say: “The strength of the new group lies in its high unit sales and market share. This offers important cost and competitive advantages.” But, ultimately, it is the customer who decides the success of a company.

Customers – unless they buy shares – don’t buy companies, they buy brands. The global strength of the VW Group, for example, lies not only in its economies of scale, but above all in its core brands, such as Porsche, Audi, VW, Skoda and Seat. This means the VW Group has leading brands in all important market segments.

The situation is quite different for Stellantis, which has only one global “pearl” from a branding perspective, and that is Jeep. In August 2017, a Morgan Stanley analyst even estimated Jeep’s isolated brand value to be higher than the stock market value of Fiat Chrysler as a whole. (That estimate alone should give those in charge pause for a thought or two).

More “brand museum” than brand future

From a brand perspective, Stallantis CEO Charlos Tavares has a lot of work ahead of him. On the one hand, he must not only ensure that all 14 brands are positioned in the best possible way for the future. But if that were not enough a task on its own, he also has to find the right answers to the current shift toward electro mobility.  Another complicating factor is that Stallantis’ current brands – apart from Jeep – are rather weak in Asia, the automobile industry’s growing market. If management fails to find the right answers and strategies to these challenges, Stellantis could become more of an “expensive brand museum” than a future strong competitor in the auto industry. The future will tell!