Fiat Chrysler and Peugeot Citroen merger agreed
FCA and Groupe PSA come to an agreement for merger; union creates the world's fourth largest car company
The 50/50 merger will see the FCA/PSA Group become the fourth largest car manufacturer by production volume. An output of 8.7 million units annually places the group behind only the Volkswagen Group, Toyota, and the Renault-Nissan alliance. It also becomes the third largest by revenue at €170 billion (£144.3 billion).
The news comes as the two groups released a joint statement adding more details to the earlier confirmation of merger talks. An advantageous move for both firms, it would provide PSA access to American markets, while FCA would potentially be able to make use of PSA's newer, and electrified, vehicle architectures. The scale of the future giant would also present new opportunities linked to autonomous and connected vehicle projects.
Ownership of the merged companies is split 50-50 between PSA and FCA shareholders, with a €5.5 billion (£4.7bn) dividend for FCA shareholders, with PSA shareholders receiving a reported €3 billion (£2.6bn). Based on 2018 figures, the Group estimates that its revenues would be split 46 percent from Europe and 43 percent from North America.
The news also confirmed that current FCA Chairman John Elkann would chair the new Group, while the role of PSA CEO Carlos Tavares will expand to cover both FCA and PSA.
As it stands, the merger could put PSA’s proposed plans to enter the North American market on hold, according to Tavares, given FCA’s strong presence there already. “We see strength of FCA in North America is outstanding, and we have 12 months ahead [while the merger process concludes] to think about it.”
However, should the US introduce any regulatory changes related to CO2 emissions, PSA would be primed to introduce its low-emission vehicles there. Tavares added, “All the electrification know-how we have developed for the European market would be a very significant asset to bring to the US market for the appropriate level of improvement.”
We’ll have to wait for the first fruits of the merger, but potentially no longer than a couple of years. Mike Manley, FCA CEO, noted the quick development time of the new Opel/Vauxhall Corsa after the brands were acquired by PSA, saying that “it shows you that with the speed and the focus that you can actually converge on platforms, very quickly.”
FCA had net revenues of €115.4 billion (£99.66bn) on sales of 4.84 million vehicles across brands including Fiat and Jeep in 2018, on which profits of €5bn (£4.3bn) were generated - a profit increase of 34 per cent on the previous year. Groupe PSA, meanwhile, sold 3.88 million vehicles last year, generating €74 billion (£63bn) in revenue, and €3.295 billion (£2.844bn) in consolidated net income, up 40.4 per cent on 2017.
Car companies are increasingly seeking business synergies and mergers as markets become ever-more competitive and crowded, and regulations continue to make the future of automobile production and use uncertain. In April this year, news broke that FCA would link up with Tesla to share its ‘pool’ of CO2 emissions in order to comply with EU regulations. Ford, meanwhile, will use Volkswagen’s MEB platform to build electric cars from 2023.
Mike Manley, former FCA CEO whose role in the new group is as-yet unspecified said: "I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company."
Carlos Tavares, new FCA/PSA CEO, said: “This is going to be exciting, this is going to be a once in a lifetime opportunity and I’m really looking forward to support the creation of this merged company.”
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