Stellantis, the merged company resulting from the combination of Fiat Chrysler STLA 0.71% and Peugeot owner PSA, is starting its journey on a strong financial footing. With the car industry and stock market gripped by technology fever, though, that isn’t enough.
Fiat Chrysler and PSA both reported their last numbers as stand-alone entities Wednesday. PSA, whose chief executive, Carlos Tavares, has taken the reins of Stellantis, passed the financial test posed by the pandemic with flying colors, including record second-half margins. On a combined basis, Stellantis, which owns brands ranging from Jeep and RAM to Citroën and Maserati, made an operating margin of 5.3% last year, behind General Motors but ahead of Ford.
Stock analysts understandably like the Stellantis story. The company expects to achieve more than €5 billion in savings through the merger, which would increase operating profits by roughly 70% from the 2020 level over the coming years. The plan is plausible, based on greater purchasing muscle with suppliers, sharing research-and-development costs and bringing new vehicles onto combined production platforms. None of this growth is factored into the share price, which trades at a discount to both GM and Ford on most measures.
But the reality is that investors these days are more interested in growth driven by new technology than old-school industrial consolidation. Electric vehicles, self-driving features and vehicle web connections present as many challenges as opportunities for even the largest car makers. And unlike companies such as GM, Hyundai and Volkswagen, Stellantis hasn’t yet articulated much of a technology strategy.
When the company unveiled its new management structure in January, only one job remained unfilled: chief technology officer. Given that Mr. Tavares had two sets of top executives to pick from, the gap suggests Stellantis needs something that neither Fiat Chrysler nor PSA could provide. Neither company was a leader in electric-vehicle technology, the foundation for other digital technologies that will transform the car this decade.
The company committed to a software push Wednesday. This makes sense, but leaves big questions unanswered. For example, will Mr. Tavares expand Fiat Chrysler’s existing deal with Alphabet’s Waymo for driverless cars into a more comprehensive technology partnership? Alphabet’s Google has been making inroads into infotainment software with other car makers, including Ford and GM.
Stellantis is promising a capital markets day late this year or early next. Along with a plan for China—the glaring gap in an otherwise nicely balanced portfolio—comprehensive responses to the challenges raised by the car’s digitization are the priority. Until a clearer technology road map emerges, it is hard to see Stellantis exciting investors about its future in the way its Detroit peers have lately.
Write to Stephen Wilmot at [email protected]
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