Fiat, PSA to win EU approval for $38bn merger

Fiat Chrysler and PSA are set to win EU approval for their $38bn merger (roughly R614bn) to create the world's No.4 car maker, people close to the matter said, as they strive to meet the industry's dual challenges of funding cleaner vehicles and navigating the coronavirus pandemic.

The green light from the European Commission would formalise the creation of Stellantis, a carmaking group that could tap hefty profits from selling Ram pickup trucks and Jeep SUVs to US drivers to fund the expensive development of zero-emission vehicles for sale in Europe and China.

The all-share merger announced late last year would unite brands such as Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel and DS - while targeting annual cost cuts of $6bn (about R97bn) without closing factories.

The Commission and France's PSA did not immediately respond to requests for comment. Italian-American group Fiat Chrysler Automobiles (FCA) declined to comment.

To allay EU antitrust concerns, PSA has offered to strengthen Japan's Toyota Motor Corp, with which it has a van joint venture, by ramping up production and selling it vans at close to cost price, the sources said.

The companies will also allow their dealers in certain cities to repair rival brands.

After feedback from rivals and customers, the carmakers only had to tweak the wording of their concessions, with no changes in the substance, the people said.

The companies did not have to use the Covid-19 pandemic to argue for the merger, they added.

FCA and PSA have said they hope to complete the merger in the first quarter of next year.

The challenge of switching to electric cars has been complicated by the Covid-19 pandemic.

Just last month, FCA and PSA restructured the terms of their deal to conserve cash and raised their targeted cost savings because of the economic fallout from the health crisis.

The companies have said about 40% of the savings will come from product-related expenses, 40% from purchasing and 20% from other areas, such as marketing, IT and logistics.