'I Do': Fiat Chrysler, PSA Sign Binding Merger Agreement

Steph Willems
by Steph Willems

Regulatory and shareholder approvals will take some time, but the pending merger between Fiat Chrysler and France’s PSA Group is now chiseled in stone. The two automakers signed a binding combination agreement on Wednesday, positioning their respective companies for a 50:50 tie-up and the creation of the world’s third-largest automaker (by revenue).

Going by sales would make it the fourth-largest.

The move comes after the French government, which owns 12 percent of PSA, gave the deal ther green light, with the Peugeot family offering its own thumbs-up.

Headquartered in The Netherlands, the combined entity — once fully meshed — will span the globe, drawing 46 percent of its revenue from Europe and 43 percent from North America. The companies are aiming for $4.1 billion in annual savings achieved through platform and technology sharing, with two vehicle platforms (small and compact/midsize) expected to account for two-thirds of its volume.

One-time costs associated with the merger total $3.1 billion.

Broken down, FCA and PSA see tech- and platform-related synergies as making up 40 percent of the combined entity’s cost savings, with another 40 percent derived from purchasing. Marketing, IT, and logistics will make up the remaining 20 percent.

Helming the whole operation will be PSA CEO Carlos Tavares, who’ll hold a seat on the 11-person board. Term length is five years. In the group chairman seat is FCA Chairman John Elkann. The agreement stipulates that no shareholder will be able to exercise more than 30 percent of the votes cast at the entity’s shareholder meetings.

“Carlos Tavares, Mike Manley and their executive teams have a strong track record in successfully turning around companies and combining OEMs with diverse cultures,” the automakers said in a joint statement. “This experience will support the speed of execution of the merger, underpinned by the companies’ strong recent performances and already robust balance sheets. The merged entity will maneuver with speed and efficiency in an automotive industry undergoing rapid and fundamental changes.”

Key to ensuring French support for the deal was the assurance that no assembly plants would be mothballed as a result of the merger; both companies anticipate positive cash flow starting in Year One.

In a letter to employees seen by Reuters, FCA CEO Mike Manley told employees to remain focused on the business of selling Jeeps and Rams, saying, “We have aggressive goals and high expectations to meet as FCA well into 2020. Let’s deliver them all.”

He added that the binding agreement signed Wednesday kicks off “an extended process of regulatory and shareholder approvals which could take from 12 to 15 months.”

[Image: Fiat Chrysler Automobiles]

Steph Willems
Steph Willems

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  • Indi500fan Indi500fan on Dec 18, 2019

    I'm thinking the Citroen Hellcat Stinkeye Narrowbody is gonna be HUGE in Europe....

  • Pete Zaitcev Pete Zaitcev on Dec 19, 2019

    When was the last time anyone at FCA was able to design a car? Gulia, right? In the U.S., the only thing they managed to make was the JL. But before that, it was Mitsubishi DS platform, then the old E-series, then Dart, then Renegade -- all imported. If not a BOF, the last time they did anything was PT (Cruiser), based on PL 2K (Neon).

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  • Michael Gallagher I agree to a certain extent but I go back to the car SUV transition. People began to buy SUVs because they were supposedly safer because of their larger size when pitted against a regular car. As more SUVs crowded the road that safety advantage began to dwindle as it became more likely to hit an equally sized SUV. Now there is no safety advantage at all.
  • Probert The new EV9 is even bigger - a true monument of a personal transportation device. Not my thing, but credit where credit is due - impressive. The interior is bigger than my house and much nicer with 2 rows of lounge seats and 3rd for the plebes. 0-60 in 4.5 seconds, around 300miles of range, and an e-mpg of 80 (90 for the 2wd). What a world.
  • Ajla "Like showroom" is a lame description but he seems negotiable on the price and at least from what the two pictures show I've dealt with worse. But, I'm not interested in something with the Devil's configuration.
  • Tassos Jong-iL I really like the C-Class, it reminds me of some trips to Russia to visit Dear Friend VladdyPoo.
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