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Fiat-Chrysler and Peugeot Merger – It’s Official!

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Well that was easy! Earlier this week we reported on ongoing talks between the FCA (Fiat Chrysler Automobiles) and PSA (Peugeot Société Anonyme) groups regarding a possible merger. Today, after last discussions that stretched last into yesterday evening, the companies announced they will merge, in a marriage of equals. 

The agreement, which should be ratified quickly by the parties involved (both internal and external), will include a 50-50 split between each group’s shareholders.

12 brands, world's 4th biggest automaker
The new company will be valued at around $48 billion USD and instantly become the world’s fourth-largest auto manufacturer, behind Toyota, the Volkswagen group and the Renault-Nissan-Mitsubishi Alliance. In terms of annual sales, adding up those racked up by the two groups’ brands (of which there are 12 in all) in 2018 brings a total of 8.7 million units sold globally, with total revenue of $190 billion.

In North America we’re all quite familiar with FCA’s brands - Alfa Romeo, Fiat, Dodge, Chrysler, Jeep, Ram, Maserati and Lancia – but less so with those under the umbrella of the PSA Group. These include Peugeot of course, but also Citroën, DS Automobiles, Opel (bought from GM in 2017) and Vauxhaull.

PSA boss at the controls
Speaking of Opel, it’s interesting to note that its purchase from GM by the PSA Group came under the leadership of Carlos Tavares, today the chief executive at PSA. The highly regarded auto executive has been credited with righting the ship at PSA after arriving there five years ago, a time when the company was flirting with bankruptcy. Unsurprisingly, Tavares will be tapped to head up the new merged company, with a five-year mandate tucked under his arm.

The chairman of Fiat-Chrysler Automobiles, John Elkann, will lead the 11-member board of directors, six of whom will come from PSA, the other five from FCA. Current top executives from each company will be part of that board. The firm’s head office will be in the Netherlands, but its shares will be listed on the French, Italian and New York exchanges. 

As well, the two families behind the companies, the Peugeots and the Agnellis, will continue to hold shares in the new automotive giant, although their percentages of ownership will be reduced. The Peugeot family that held 12.23% of PSA will now control 6% of shares, while the Agnelli family, which owned 29% of FCA, will now retain around 15% of the pie of the new company.

Obviously, certain details remain to be ironed out, among them the approval that must be obtained from other partners such as the Chinese Dongfeng group, which holds 12.23% of PSA’s shares since the rescue of the firm in 2014. The French government, for its part, has already given its approval to the deal, but it says it will be keeping a close watch on the decisions being made by the new company to ensure the interests of France are protected.

The deal is expected to result in annual savings of 3.5 billion Euros, and this won’t come from cutting jobs or closing factories. Rather, this is a perfect example of the economies of scale that are possible when companies team up. In an age when automakers must contend with the huge expenses that come with developing new electric and self-driving technologies, sharing resources and costs becomes absolutely essential. Hence the new FCA-PSA mega-company.