Fiat Chrysler and Peugeot confirm merger into one US$46-billion automaker – Driving

PSA Group and Fiat Chrysler Automobiles have agreed to combine to create the world’s fourth-biggest carmaker, as the manufacturers prepare to shoulder the costly investments in new technologies transforming the industry.

In the biggest auto tie-up since Daimler’s ill-fated purchase of Chrysler in 1998, the French and Italo-American carmakers will each own half of the enlarged business.

The new company, with global sales of 8.7 million vehicles, will be run by PSA Chief Executive Officer Carlos Tavares, with Fiat Chairman John Elkann holding the same role.

The transaction would forge a regional powerhouse to rival Germany’s Volkswagen and, with a market value of about US$47 billion, surpassing Ford. It will take as long as 15 months to complete, pending approvals by shareholders of both companies and by regulators, the carmakers estimated.

Like executives across the industry, Tavares and Elkann are responding to growing pressure to pool resources for product development, manufacturing and purchasing in the face of trade wars and an expensive shift toward electric and self-driving technology.

[Indeed, industry sources said that in the future, the new company plans to move “more than two-thirds” of production to “just two platforms, with 3 million cars per year on a compact/midsize platform and 2.6 million on a small platform,” reports Automotive News. “The smaller platform will be PSA’s CMP architecture and larger cars will be on the group’s EMP2 (while) Ram pickups and larger Jeep models will continue to use FCA underpinnings.” —Ed.]

“The challenges of our industry are really, really significant,” Tavares, 61, told reporters on a call Wednesday. “The green deal, autonomous vehicles, connectivity and all those topics need significant resources, strengths, skills and expertise.”

In an era when size is becoming ever more important, the deal will turn the two mid-sized carmakers into a global heavyweight, with a stable of popular brands and annual vehicle sales surpassing General Motors. The combination will give Peugeot-maker PSA a long-sought presence in North America and should help Fiat gain ground in developing low-emission technology, where it’s lagged rivals.

Yet the new company will still be heavily reliant on Europe’s sluggish and saturated auto market, and poorly positioned in China, the world’s largest country for car sales.

The companies are aiming to extract 3.7 billion euros in annual synergies from the deal, without closing any plants, unchanged from the target they announced when they disclosed their merger discussions.

China’s Dongfeng Motor Corp., which owns 12 per cent of PSA, will see its stake in the combined company decline to 4.5 per cent as a result of the deal and the sale of a portion of its holding to the French carmaker.

Dongfeng’s stake in PSA has attracted attention because of the possibility it could interfere with U.S. regulatory approval. U.S. economic adviser Larry Kudlow said last month the Trump administration would review the proposed merger because the deal would give the Chinese carmaker a stake in the combined company.

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