News

Fiat Chrysler and Peugeot group sign deal for 50-50 merger

Time 8:19 am, December 18, 2019

FIAT Chrysler and PSA Peugeot have signed a binding deal to merge the two firms, creating the world’s fourth-largest car company.

In a joint statement, the companies said the new group will be led by PSA’s cost-cutting CEO Carlos Tavares, with Fiat Chrysler’s John Elkann becoming chairman of the merged company.

No name for the new company has been decided yet.


Fiat Chrysler CEO Mike Manley will stay on, but it was not announced in what capacity.

The 50-50 merger – unveiled in October – gives birth to a group with revenues of nearly 170 billion euro (£143.6 billion) and producing 8.7 million cars a year – just behind Toyota, Volkswagen and the Renault-Nissan alliance.

Daily management

The companies said the merger would create 3.7 billion euro (£3.12 billion) in annual savings, which will be invested in ‘the new era of sustainable mobility’ and to meet strict new emissions regulations around the globe.


No factories will be closed under the deal, the companies said.

The savings will be achieved by sharing investments in vehicle platforms, engines and new technology, while leveraging scale on purchasing.

Executives also said there would be cuts. Decisions on where those will come will be made after the deal closes.

The deal was announced as a 50-50 merger, but PSA has one extra seat at the board and Mr Tavares at the wheel, giving the French car maker the upper hand in daily management.

Executives expect the deal to take 12-15 months to close.

The car makers said in a joint statement: ‘The merged entity will manoeuvre with speed and efficiency in an automotive industry undergoing rapid and fundamental changes.’

New technologies includes electrified engines, autonomous driving and connectivity.

Both the Peugeot and Fiat brands are strong on small-car technology, with significant overlap in Europe.

Mr Manley said that the convergence of platforms would be ‘an early target’ that will likely take two years to achieve.


The company will be legally based in the Netherlands, and traded in Paris, Milan and New York.

Carlos Tavares

The executives played down the significance of the new entity’s name and headquarters location, but both are symbolic choices that go a long way to signalling who is in the driver’s seat, where engineering and management brains will be based, and the relative importance of each entity in the new company.

The French and Italian governments as well as unions will be on the look-out for the responses, given the national significance of the car industries to both economies.

The French government helped bail out PSA Peugeot in 2014 and owns a 12 per cent stake in the French company through the state investment bank.

While the merger of Fiat and Chrysler has been a success, with the Italian-American car maker thriving on the strength of the US market and the executive prowess of longtime CEO Sergio Marchionne, the history of car mergers is littered with failed tie-ups.

Most famous among those is the Daimler-Chrysler merger, which foundered on cultural differences between the German and US entities.

The new company will start with a strong base in Europe, where PSA is the second-largest car maker, and while Fiat makes most of its profits in North America and has a strong presence in Latin America.

Too much debt

It will be looking to strengthen its position in China, where both PSA and FCA lag.

Mr Tavares said the deal has the support of its Chinese partner and investor Dongfeng, which ‘understood what needed to be done’.

As part of the deal, Dongfeng’s stake in the new company will be diluted from 6.2 per cent to 4.5 per cent, through the sale of 30.7 million shares.

FCA will pay its shareholders a 5.5 billion euro (£4.64 billion) premium, raising questions about whether the new company will be saddled with too much debt.

Analysts estimate that Peugeot is paying a hefty 32 per cent premium to take control of Fiat Chrysler.

Fiat Chrysler has long been looking for an industrial partner to shoulder investment costs as the industry faces a transition to electrified power trains and autonomous driving.

A previous deal with French rival Renault last spring fell apart over French government concerns about the role of Renault’s Japanese partner, Nissan.

Mr Tavares said both the French government and unions backed the new deal from the beginning.

MORE: Merry Car-istmas! Auto Trader giving away a brand new Fiat

MORE: Fiat Chrysler confirms talks with Groupe PSA

MORE: Robins & Day Peugeot celebrates official opening after redevelopment

Car Dealer Magazine's avatar

Car Dealer has been covering the motor trade since 2008 as both a print and digital publication. In 2020 the title went fully digital and now provides daily motoring updates on this website for the car industry. A digital magazine is published once a month.



More stories...

Advert
Server 108