Italo-American carmaker Fiat Chrysler Automobiles (FCA) and France’s PSA group, owner of Peugeot, Citroen and Opel, has announced a 50-50 merger to form the world’s fourth-largest car company.
The companies made this known in a joint statement last week.
“Discussions have opened a path to the creation of a new group with global scale and resources owned 50 per cent by Groupe PSA shareholders and 50 per cent by FCA shareholders,” they said.
FCA Chairman John Elkann and PSA chief executive Carlos Tavares are to retain their respective positions in the new merged entity, which should achieve annual synergies worth 3.7 billion euros (4.1 billion dollars) without closing any factories.
“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” Carlos Tavares said.
“I am convinced that together with our great people we can create a world-class global mobility company,” FCA chief executive Mike Manley added.
The merged PSA-FCA group would be registered in the Netherlands, listed on the Paris, New York and Milan stock exchanges, and have head offices in France, Italy, and the U.S.
It will have a market value of around 50 billion dollars, with combined annual sales of just under 9 million vehicles, behind the market leading trio of Volkswagen, Renault-Nissan-Mitsubishi, and Toyota.
The merger plan, first reported on Tuesday by the Wall Street Journal, was welcomed by markets.
FCA’s stock on the Milan stock exchange rose by almost 10 per cent on Wednesday, closing at 12.87 euros (14.35 dollars), while PSA was up almost 4 per cent on the Paris Euronext exchange to just over 26 euros.
PSA’s main shareholders are China’s state-owned Dongfeng Motor Group, the Peugeot family and French state investment bank Bpifrance.
FCA, with the Jeep, Ram, Dodge Alfa Romeo and Maserati brands, is controlled by the Agnelli family, who founded Fiat and oversaw a merger with Chrysler completed in 2014.
The company has long been looking for further partners to share costly investments in new technologies, a must in a rapidly changing industry moving towards hybrid and electric vehicles.
Under late boss Sergio Marchionne, who died in 2018, FCA held back on those investments, and the company now offers mostly outdated products, such as gas-guzzling Jeep SUVs and RAM trucks.
According to Professor Ferdinand Dudenhoeffer of the Centre for Automotive Research at the University of Duisburg-Essen in Germany, a leading German auto industry expert, FCA needed a deal quickly.
“FCA has no time, (it) is in a very difficult situation because they have no electric vehicles and just old technology.
“They urgently need a partner fast,” he told dpa.
In June, FCA withdrew a merger offer for Renault after the French government insisted on waiting for agreement from Renault’s Japanese partner firm Nissan.
For PSA, the deal with FCA brings access to the lucrative US market and into the premium car segment with the Alfa Romeo and Maserati brands.
Dudenhoeffer also said Tavares would be a “strong manager” able to fix Fiat’s problems in Europe, albeit at the cost of “very strong job cuts,” as with Opel’s turnaround.