Fiat Chrysler and PSA want to merge into one group

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Carmakers Fiat Chrysler Automobiles (FCA) and the PSA group are planning a merger. Enterprises have revealed that they want to merge to build a world-leading car company.

The French company PSA, and the Italian-American concern Fiat-Chrysler (FCA) agreed in merger talks. The companies published a joint announcement. The fourth-largest car manufacturer in the world is to be created, with sales expected at 8.7 million vehicles a year.
According to both companies, thanks to the merger and the related synergy effect, they should obtain financial benefits of up to EUR 3.7 billion per year, without the necessity of closing even one factory as a result of the agreement. Only Toyota, Volkswagen and the Franco-Japanese Renault and Nissan union will be larger than the new automotive giant.

Fiat Chrysler and PSA are worth $ 50 billion

The PSA supervisory board already gave the green light for the merger on Wednesday evening. The goal sought by the companies is to be a fusion between equals. PSA head Carlos Tavares is to become the president of the board of the new concern.

John Elkann, chairman of the FCA supervisory board – grandson of Fiat Giovanni Agnelli ‘s long-time boss – would take the same role in the new company as he currently does. According to the Wall Street Journal, Fiat Chrysler and PSA are worth approximately $ 50 billion (€ 45 billion) on the stock exchange.

The French state is a shareholder in PSA

The government in Paris welcomed the talks of PSA and Fiat Chrysler (FCA) representatives about building a global giant. As a result, a group with approximately 400,000 employees could be created, said French Economy and Finance Minister Bruno Le Maire.
The French state is a shareholder of Opel’s parent group, PSA, and through its proprietary business support bank, holds 12.23 per cent of shares and 9.75 per cent of votes. The other largest PSA shareholders are the Peugeot family and the Chinese manufacturer Dongfeng. The planned merger is a response to the “need for consolidation facing the car industry,” said Minister Le Maire.

Talks with Renault failed

Fiat Chrysler already wanted to merge with the French manufacturer Renault and thus create the third automotive concern in the world. However, the talks failed. After months of negotiations, Fiat Chrysler withdrew its merger offer in June.

The automotive industry is under enormous pressure. Car manufacturers must invest billions in autonomous cars and electromobility and are still looking for partners for these ventures. The industry is constantly pointing out Fiat Chrysler’s main problems. The company, under the leadership of the deceased in the meantime boss Sergio Marchionne, withdrew large investments in electric drives. Currently, the group is successful mainly in the US with fuel-eating cars of the Jeep and Ram brands. This, however, does not make it easier for him in Europe, in which new standards limiting carbon dioxide emissions will apply from 2021 at the latest. On the home continent for Fiat, the company is losing market share and has recently avoided operating loss by just a hand.

Automotive industry and expert responses

According to Reuters, in the face of the merger of Fiat Chrysler with the owner of Opel, PSA, the IG Metall trade union insists that the Ruesselsheim brand be independent. “The union will opt for this,” announced on Thursday the head of IG Metall’s central district, Jörg Köhlinger. Speculation on the possible negative consequences of the merger for Opel facilities, IG Metall association does not comment. “They are counterproductive and harmful,” emphasized Köhlinger. He recalled the collective agreement negotiated in 2018 with Opel, which by July 1, 2023, precludes termination of the employment contract due to organizational changes in the enterprise.

The possible merger of PSA and FCA opens up many possibilities. The French could increase visibility on US market, said the head of the Center of Automotive Management in Bergisch Gladbach on Wednesday. PSA brands such as Peugeot, Citroën, DS and Opel do not have strong representation in the US. In contrast, FCA has a strong position there thanks to the portfolio of Chrysler, Dodge and Jeep. Also, on the European market, PSA’s share could increase.

As with the acquisition of the former General Motors daughter company, Opel, sharp restructuring is expected in Fiat. “PSA Chief Carlos Tavares is doing what is necessary. Nor is it beneficial for him to resort to drastic measures,” said Bratzel.

This would only be possible if the Parisian group could take the lead in the new company. “The fusion between equals will not work”, noted the expert. Common chassis, plant closures or the possible end of production of Lancia brands that are not selling well will be impossible to carry out. The logic of the global automotive industry is based on increasingly large mergers that enable the industry to deal with investments in electromobility, autonomous vehicles and joint construction solutions that are awaiting the industry.