Fiat, Peugeot plan to merge
New operation would produce more cars than GM
Fiat Chrysler and PSA of France announced Thursday that they planned to merge, a move prompted by intense pressures transforming the automotive industry. The combined operation would produce slightly more cars than General Motors.
The companies have similar weaknesses, including a reliance on a slowing European car market and few sales in China, the world’s largest new-car market. But the industry is facing broad tensions as new technologies demand deep investments, global sales are flattening and consumers reconsider the appeal of car ownership.
In that context, Fiat and PSA, the maker of Peugeot and Citroen cars, are imperfect partners, but perhaps had no better prospects. And the combined company would certainly have size: With annual sales of 8.7 million vehicles, it would be the biggest automaker behind the Renault-Nissan alliance, Volkswagen and Toyota.
In Europe, Fiat and PSA, with its Peugeot and Citroen brands, will surpass Volkswagen to become market leaders. They also have a strong lineup of SUVs, which are increasingly popular with European buyers.
Overall, though, the European market has been in a long decline.
“Both groups would control Europe’s fastest growing segment and the source of
profits,” said Felipe Munoz, senior analyst at Jato Dynamics. “However,” he said in an email, “both companies lag behind rivals in terms of electrification.”
The announcement came after a round of board meetings Wednesday that endorsed what the companies described as intensive discussions among their senior managers. The automakers described the transaction as a way to share the enormous cost of an industrywide transition to electric and autonomous vehicles.
Both boards unanimously approved the general terms of the agreement and instructed their teams to come up with a memorandum of understanding “in the coming weeks.”
Fiat Chrysler’s chief executive, Mike Manley, said the companies had “plenty of work to do” before reaching a formal agreement but declared that a merger “is very compelling” for both companies.
“A merger would bring together two strong and complementary businesses to produce a genuine, global mobility leader,” Manley said on a conference call to discuss Fiat Chrysler’s third- quarter earnings. “If we are able to finalize this transaction, there is significant potential value to be released.”
Carlos Tavares, the chief of PSA, is to be the chief executive of the new company. Tavares, described by people who have met him as charming but tough, has already expanded PSA’s presence in Europe by acquiring Opel from GM in 2017.
John Elkann, the chairman of Fiat Chrysler, is to be the chairman of the new company. Elkann is a scion of Italy’s powerful Agnelli family, which has long controlled Fiat.
Manley did not discuss what his role would be in a merged company. He could stay on to run its North American operations, Fiat Chrysler’s main source of profit.