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]
This will be a hideously complex business to run and if you look at the likes of Ford, GM and others probably won’t generate much more profit than a brand like Mercedes….
Ultimately I think it’s why PSA wanted to buy JLR and Ford wanted to build PAG. Focusing on the premium products is something FCA/ PSA need to make a success of.
Lots of international airline miles for execs.
Lots of time in “coordinating” meetings for junior domos.
Probably not much value created.
Sometimes these deals actually have negative value for both parties.
The boys and girls who do Jeep will soldier on under yet another banner.
The value comes from shared components, that’s about it. Otherwise its just another mouth to feed for Ram and Jeep.
So what is the new name? PSA-FCA?
Franco-American Spaghettios
It sounds like a “merger of equals” to me. Let the games begin!
I wonder who will “merge” with GM?
That would be one of the up and coming Chinese companies. GM will soon become a prime target for acquisition.
One concern of mine going forward is how much the French government will interfere with operations.
Exactly. There is nothing more meddlesome than a French government bureaucrat. And boy-howdy there are a lot of them.
They save Tavares is extremely cheap and a cost cutter. Makes me think of the tupperware special Dodge interiors during the daimler era.
Thank you, Mary Barra, for helping make a French car company larger than all American car companies.
FCA CEO Mike Manley: “We have aggressive goals and high expectations to meet as FCA well into 2020. Let’s deliver them all.”
GM CEO Mary Barra: “We have timid goals and low expectations to meet as GM well into 2020. Let’s deliver some of them.”
Ford CEO Jim Hackett: “Unicorn, fairy tale, synergy. Rainbow, rainbow.”
So the US taxpayer bailed out Chrysler, which was run into the ground by the Germans before the great recession, to have it sold to the Italians to have it sold to the French.
Suckers.
[INSERT BUT GM HERE]
At least the paychecks aren’t bouncing.
Care to reference which Germans bankrupted Chrysler? A little revisionist history maybe? The way I remember it, Eaton sold the Germans a bankrupt company and took his golden parachute. The Germans took a massive bath and sold to Cerberus at a massive loss. They proceeded to put the final few nails into Chrysler’s coffin, and then the taxpayer got to pay FIAT to play ball. An I missing something?
Bleh
Well, that was quick.
Quickest courtship since Britney Spears and Kevin Federline.
All at the cost of North American tax payers. What a waste of money and energy. Don’t mind me, Bailout Blues…
I’m thinking the Citroen Hellcat Stinkeye Narrowbody is gonna be HUGE in Europe….
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).