Fiat Chrysler, Peugeot shareholders approve merger
MILAN, Italy (AP) — Shareholders of Fiat Chrysler and PSA Peugeot voted yesterday to merge and create the world’s fourth-largest auto company which, its architects hope, can more readily take on an enormous technological shift in the industry.
Addressing separate meetings, PSA Peugeot CEO Carlos Tavares and Fiat Chrysler Chairman John Elkann spoke of the “historic” importance of the merger, which combines car companies that helped write the industrial histories of the United States, France, and Italy. Tavares will run the new company, while Elkann stays on as chairman.
The only real hurdle left to closing the deal is listing shares of the new company, to be called Stellantis. The companies expect it to be finalised January 16, with shares in the combined company trading on January 18 in Milan and Paris and January 19 on the New York Stock Exchange. Fiat Chrysler shares were up 0.2 per cent in New York yesterday at US$18.13, while Peugeot rose 1.7 per cent to 22.75 euros.
Fiat Chrysler announced yesterday that its stockholders as of January 15 will get a special cash payment worth 1.84 euros (US$2.26) per common share after the merger closes. The payments will cost 2.9 billion euros (US$3.56 billion).
The new company will have the capacity to produce 8.7 million cars a year, behind Volkswagen, Toyota and Renault-nissan, and create five billion euros in annual savings.
The marriage of the ItalianAmerican and French rivals is built on the promise of cost savings in the capital-hungry industry during a technological shift to electrified powertrains and autonomous driving. But what remains to be seen is if it will be able to preserve jobs and heritage brands in a global market still suffering from the novel coronavirus pandemic.
“Together we will be stronger than individually,” Tavares told a virtual gathering of shareholders. “The two companies are in good health. These two companies have strong positions in their markets.”
The new company will put together French mass-market carmakers Peugeot and Citroen, top-selling Jeep, and
Italian luxury and sports brands Maserati and Alfa Romeo — pooling brands with histories spanning from 75 to over 120 years with strong emotional pull in their home markets.
“We are living through a profound era of change in our industry,” said Elkann, heir to the Fiat-founding Agnelli family and Fiat Chrysler’s biggest shareholder. “We believe that the coming decade will redefine mobility as we know it.”
While the tie-up is billed as a merger of equals, the power advantage goes to PSA, with Tavares running Stellantis and holding the tie-breaking vote on the 11-seat board. Tavares is set to take control of the company early this year, possibly by the end of January.
Fiat Chrysler CEO Mike Manley will head North American operations, which is key to Tavares’ long-time goal of getting a US foothold for the French carmaker he has run since 2014, and the clear money-maker for Fiat Chrysler.
Manley said about 40 per cent of the savings will come from combining platforms, the underpinnings of vehicles, and engines and transmissions. Another 35 per cent of the savings will come from joint purchasing, especially with electric and high-tech components, he said, while seven per cent will come from sales, general and administrative cost savings.
The companies will get the rest of the savings from optimising other areas including logistics, supply chain, quality and parts sales, he said.
“We feel confident that this integration can be achieved as both companies have previously gone through significant business combinations,” Manley said. “And by virtue of successful execution, they have both emerged stronger from each of them.”
Such a deal was long wanted by Fiat Chrysler’s longtime CEO Sergio Marchionne, who had predicted the necessity of consolidation in the industry. He was unable to find a deal before his sudden death in July 2018.
Tavares comes into the new role with a reputation as a cost-cutter and skilled manager, qualities he put to use as head of Nissan’s North
American operations from 2009 to 2011 and in integrating Opel and Vauxhall into the PSA Peugeot family after buying them in 2017. Experts say he is likely to follow a blueprint that showed little tolerance for vehicles or ventures that didn’t make money.
That could put into the crosshairs any of the 14 car brands that Stellantis will house, five from PSA and nine from Fiat Chrysler. The companies also have significant overlaps in manufacturing and engineering operations in Europe.
PSA told the AP last week that decisions on brands would be communicated after the deal is closed. Fiat Chrysler said there are no plans to close any plants.
Analyst Patrick Hummel from UBS bank said he expected “immediate action to be taken right after closing, for example by bringing FCA’S European product on the PSA architectures”.
The French and Italian economic ministers, in a joint statement, said the new company will strengthen Europe’s industrial leadership. Innovation by Stellantis will help Europe play a role in the transition toward green vehicles, they said, adding that “both governments will also pay attention to Stellantis’ contribution to industrial employment in Italy and France”.
Analysts point out that gaining cost savings is only the first of many challenges that the new company will face. Both PSA and Fiat Chrysler have poor records and infrastructure in China, and both are lagging in electrified powertrains, requiring investments that will off-set some of the savings.
PSA has set a goal of having all-electric or hybrid powertrains on its entire model range by 2025, while Fiat Chrysler has committed to electrifying 30 of its models by 2022.
Meeting those challenges will take more than restructuring prowess, said Ferdinand Dudenhoeffer of the Center for Automotive Research in Germany.
“Carlos Tavares is a restructuring guy. He knows how to restructure, but he has no ideas for a new tack,” he said.