Peugeot and Fiat Chrysler agree on terms of mega-merger

18 December 2019 - 16:11 By AFP Relaxnews
Peugeot SA and Fiat Chrysler have finally agreed to a long-awaited merger.
Peugeot SA and Fiat Chrysler have finally agreed to a long-awaited merger.
Image: AFP Photo

French car maker PSA and US-Italian rival Fiat Chrysler announced on Wednesday that they had agreed on the terms of a merger to create the world's fourth-largest car maker.

The merger comes as the sector grapples with the difficult and costly transition to cleaner and more sustainable mobility. 

"Fiat Chrysler Automobiles and Peugeot SA (Groupe PSA) have signed a binding combination agreement providing for a 50/50 merger of their businesses to create the fourth-largest global automotive original equipment manufacturer by volume and third- largest by revenue," the companies said in a statement.

They added that there would be "no plant closures resulting from the transaction". 

Ranking behind global rivals such as Volkswagen, Renault-Nissan-Mitsubishi and Toyota, the combined group will have a workforce of more than 400,000, total revenues of close to 170bn euros (more than R2.7-trillion) and annual unit sales of 8.7-million vehicles.

Its brands will include Fiat, Alfa Romeo, Chrysler, Citroen, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and Vauxhall. 

The joint entity will have "the leadership, resources and scale to be at the forefront of a new era of sustainable mobility," said PSA and Fiat Chrysler.

The tie-up – which the two sides had originally agreed to at the end of October – will "deliver approximately 3.7bn euros (R59bn) in estimated annual synergies" or cost savings.

The merger is expected to be completed in 12 to 15 months.

'Huge opportunity'

"Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility," said PSA's Carlos Tavares.

Fiat Chrysler CEO Mike Manley said the deal was "a union of two companies with incredible brands and a skilled and dedicated workforce".

"Both have faced the toughest of times and have emerged as agile, smart, formidable competitors," he said. 

The combined group – which has yet to be given a name – will be headquartered in the Netherlands and continue to be listed on the Paris, Milan and New York stock exchanges.

Fiat Chrysler chief John Elkann will be chairman and Tavares chief executive. 

The lion's share of the savings will be generated by joint technology, product and platform development, as well as in purchasing - but also in marketing, IT systems and logistics.

"Those synergies will enable the combined business to invest significantly in the technologies and services that will shape mobility in the future, while meeting the challenging global CO2 regulatory requirements," said the companies. 

Prior to the closure of the merger, Fiat Chrysler will distribute a special dividend of 5.5bn euros (nearly R88bn) to its shareholders, while PSA will distribute to its shareholders its 46% stake in parts maker Faurecia. 

Analysts argue that the two companies are still too dependent on the declining European market and lack a strong presence in China, the world's largest car market.