Fiat Chrysler and PSA Confirm Merger Deal

Matt Posky
by Matt Posky

Fiat Chrysler Automobiles and Groupe PSA both confirmed their intention to merge on Thursday, verifying reports that the pair were in the final stages of approving the deal. The arrangement will be a 50-50 share swap, with the new company’s shares listed on the New York, Paris and Milan stock exchanges.

The duo hope to finalize a deal in the coming weeks to create a group with 8.7 million in annual vehicle sales. That would make it the fourth-largest automaker in the world — behind Volkswagen, Toyota and the Renault-Nissan-Mitsubishi alliance.

“There is still plenty of work to do before we reach a formal agreement, but what’s clear is that the opportunity that represents for both companies is very compelling,” FCA head Mike Manley told Reuters. It would appear the arrangement is getting plenty of support. French and Italian leadership have both endorsed the move, provided there are no significant job losses in either country.

France, which owns a 12-percent stake in PSA, was originally seen as a minor obstacle — as its foot-dragging is often cited as the core reason FCA did not merge with Renault (of which France owns a 15 percent chunk) earlier in the year. That didn’t happen this time, leaving us to look elsewhere for conflict.

As it turns out, there isn’t much. China’s Dongfeng Motor has a 12.2-percent equity stake and minority voting rights in PSA, potentially creating conflict with the United States (what with the trade war). But most think it’ll use the merger to sell its shares. Following the deal’s announcement, FCA shares rose as much as 11 percent to a one-year high of 14.25 euros. PSA shares fell as much as 14 percent to a two-week low of 22.33 euros.

As part of the deal, FCA plans on paying its shareholders a 5.5 billion-euro dividend and and some shares of its Comau robot-making unit. PSA plans on handing over its 46-percent stake in Faurecia to its investors.

Head office locations will exist in France, Italy and the U.S. — with the parent company HQ stationed in the Netherlands. The newly formed board will have 11 members — half nominated by FCA, half by Groupe PSA, with Carlos Tavares serving as the group’s CEO for five years and getting a seat of his own.

“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” Tavares said in a statement. “I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

“I’m delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination,” gushed Manley. “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.”

With FCA heavily dependent on older platforms, PSA could help it adhere to stringent emission rules around the globe. Fiat Chrysler is presumed to be on the hook for millions in European fines if it doesn’t start swapping over to hybrids and EVs. Meanwhile, PSA can take advantage of Fiat Chrysler’s profitable U.S. brands and direct access to the North American market. The merger is also believed to help the duo weather the storm of expensive investments into mobility and electrification (synergy!). But those are just the broad strokes — expect us to begin digging into how the union will change both businesses’ product portfolios in the coming days. For now, Jeep, Dodge, Ram, Chrysler, Fiat, Alfa Romeo, Maserati, Peugeot, Citroen, DS, Opel and Vauxhall have all been accounted for.

[Image: Daniel J. Macy/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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4 of 27 comments
  • Jeff S Jeff S on Oct 31, 2019

    I doubt PSA would develop new RWD platforms for the Charger and Challenger as well. PSA's main interest would be the NA market, Jeep, and Ram. Dodge and Chrysler will not survive especially if they do not get new platforms and I doubt putting another Dodge on a shared front wheel drive platform or rebadging a PSA product as a Dodge will be successful. I do understand sharing and consolidating manufacturing is a necessity in a global market but I cannot see Dodge or Chrysler products surviving and I fear that PSA might undo some of the success of Jeep and Ram. It is what it is. If someone wants a Hellcat Charger and Challenger they better buy soon because they will eventually go away between Government regulations and this merger. There is only so long in today's market that an old platform can survive.

    • See 1 previous
    • Lou_BC Lou_BC on Nov 01, 2019

      They could kill Dodge with minimal effects to overall sales. Just Hellcat pickups to replace the Challenger. Tub a shortbox Ram and put in a fully braced cage and you have your Hellcat Demon. Flare and slam a Ram and you have a Hellcat Redeye wide-body. Extended and crewcab variants become the Charger. Problem solved.

  • Jeff S Jeff S on Oct 31, 2019

    Agree it is a matter of how long the Charger and Challenger last. FCA has done a lot in extending the life of those products with Hellcat and other special editions. I doubt Dodge and Chrysler will survive as brands. At least FCA got the RAM truck and the Jeep brand right.

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  • Jeff Buy whatever works for you if you own an EV and are happy with it good, if you buy a hybrid or plug in hybrid and it works for you good, if neither and you like your ICE the way it is that is also good. I believe over time EVs will get better and have a larger segment of the market.
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