Fiat Chrysler, Peugeot weeks away from $70b tie-up
The boards of Fiat Chrysler Automobiles and the Peugeot owner, Groupe PSA, have approved a plan to join forces in a 50-50 share merger that will create the world’s fourth-largest carmaker.
Executives at the two companies hope to finalise a deal in the coming weeks. The NZ$70 billion tie-up will deliver annual vehicle sales of 8.7 million, revenues of $296b and operating profits of more than $19b.
Moves to combine the US-Italian and French firms, details of which started to emerge this week, have come as carmakers seek scale to cope with costly new technologies and slowing global demand. The new group is expected to generate savings and other benefits of $6.4b without any factory closures, FCA and PSA say.
Agreement to pursue the deal comes months after a similar merger attempt between FCA and PSA’s French rival Renault fell apart, with the companies blaming the intervention of the French government, Renault’s largest shareholder.
In a joint statement, FCA and PSA say their boards of directors “have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger”.
The merger would be achieved via the creation of a parent company in the Netherlands in which the shareholders of each current group would own half. FCA's John Elkann, above right, would be chairman of the parent company and PSA's Carlos Tavares, above left, the chief executive and a member of the board.
FCA and PSA say they “both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility”.
The move comes as carmakers grapple with a downturn in their markets as well as hefty investments in electric and self-driving vehicles. FCA would get access to PSA’s more modern vehicle platforms, helping it to meet tough new emissions rules, while Europe-focused PSA would benefit from FCA’s profitable US business featuring brands such as Ram and Jeep.
The merged group would make the new carmaker the fourth largest in terms of sales behind Volkswagen, Renault-Nissan-Mitsubishi and Toyota, and would combine brands from Alfa Romeo, Jeep and Dodge to Citroen, Opel and Peugeot.
“We’re in a period where grey skies are gathering over the auto industry. When business is harder, competition is stronger and margins get thinner,” says Flavien Neuvy, director of the Cetelem Observatory, a research unit of BNP Paribas.
He adds that to offset the billions of dollars required to invest in advanced technologies, size is critical.
