Fiat Chrysler and Peugeot sign deal for 50-50 merger
MILAN: The boards of Fiat Chrysler Automobiles and PSA Peugeot on Wednesday signed a binding merger deal creating the world’s fourth-largest automaker with the scale to confront the challenges of stricter emissions regulations and the transition to new driving technologies.
The companies said in a joint statement the new group will be led by PSA’s cost-cutting chief executive officer (CEO) Carlos Tavares, with Fiat Chrysler’s chairman John Elkann as chairman of the merged company. Fiat Chrysler CEO Mike Manley will stay on, but it was not announced in what capacity.
No name for the new company has been decided, executives said in a conference call, but both Tavares and Manley insisted that it was not a “touchy subject.”
The deal, which was unveiled in October, was announced as a 50-50 merger, but PSA has one extra seat at the board and Tavares at the helm, giving the French carmaker the upper hand in daily management.
The executives said they expect the deal to take 12-15 months to close. It will give birth to a group with revenues of nearly €170 billion (nearly $190 billion) and producing 8.7 million cars a year—just behind Toyota, Volkswagen and the RenaultNissan alliance.
The merger is expected to create €3.7 billion in annual savings, which will be invested in “the new era of sustainable mobility’’ and to meet strict new emissions regulations, particularly in Europe.
“’The merged entity will manoeuvre with speed and efficiency in an automotive industry undergoing rapid and fundamental changes,’’ the companies said in their statement.
New technologies includes electrified engines, autonomous driving and connectivity, part of what Tavares described as ‘’the transition to a world of clean, safe and sustainable mobility.’’
No plants will be closed under the deal, the companies said. Savings will be achieved by sharing investments in vehicle platforms, engines and new technology, while leveraging scale on purchasing.
But the executives also said there would be cuts. Decisions on where those will come will be made after the deal closes.
“There is room for sharing (a) significant amount of existing platforms and avoiding excess investments for the future,” Tavares said.
Both the Peugeot and Fiat brands are strong on small-car technology, with significant overlap in Europe. Manley said that the convergence of platforms would be “an early target’’ that will likely take two years to achieve.
Nick Oliver, a management professor at the University of Edinburgh Business School, said that most of the savings are likely to come from cost-cuts as ‘’it is not clear how the merger will boost joint revenues.’’