FCA-PSA merger
One of the great hurdles facing the Groupe PSA takeover of Fiat Chrysler Automobiles (FCA) is the image in American minds of cigar-chewing TV police detective Lieutenant Columbo and his less-than-reliable 1959 Peugeot 403 Cabriolet.
In fact, if Columbo's Peugeot 403 is the only image of the French carmaker in American minds, it will do little for PSA chief executive officer Carlos Tavares' chances of winning US government regulatory approval for the US$50 billion merger to create the fourth-largest automotive group behind Japan's Toyota.
The lack of a US footprint for Peugeot and the entry of Groupe PSA's state-owned Chinese stakeholder - Mao Zedong-founded Dongfeng Motor Corporation - means the merger will be automatically subject to in-depth and vigorous review by the US government's purposely opaque Committee on Foreign Investment in the United States (CFIUS).
While Tavares' financial and legal advisers have stated that Dongfeng Motor's stake in the merged entity will be lowered to around 5% (2.5% in merger) from its present stake of 12.2% (with voting rights of 19.2%), any Chinese shareholding in a US automotive group will generate strong opposition not only by President Donald Trump's administration but also by Michigan Democratic Senators Debbie Stabenow and Gary Peters.
CFIUS - an inter-agency committee chaired by US Treasury Secretary Steven Mnuchin along with representatives of the Central Intelligence Agency (CIA), Homeland Security, the Commerce Department, the Department of Defense (DOD), the US attorney general (DOJ), the director of national intelligence, and the US Trade Representative - is uniquely malleable to White House and congressional pressure.
"All it takes is one powerful congressman or senator to voice strong opposition to any deal and the deal is dead," one CFIUS lawyer in Washington said. "The agencies all know who approves their budgets, so they do not bite the hands that feed them."
For example, CFIUS under president George W Bush blocked the United Arab Emirates' port operator, Dubai Ports World, from acquiring the US operators of New York and New Jersey ports, for national-security concerns.
The Groupe PSA-FCA merger proposal comes after failed merger talks between Fiat Chrysler and Groupe Renault. The French government of President Emmanuel Macron pulled the plug on the Renault-FCA merger after vocal and stringent hostility against the tie-up by Renault's Japanese industrial partner, Nissan.
The PSA-FCA merger is already facing strong opposition by General Motors CEO Mary Barra, who has ordered her general counsel to file a lawsuit against FCA for allegedly bribing United Autoworkers of America (UAW) officials for favorable terms in collective-bargaining agreements.
Barra, who had to beat off unwanted merger approaches by the late FCA CEO Sergio Marchionne, may be more concerned that there could be a transfer of GM technology and intellectual property from PSA to the merged PSAFCA group after General Motors sold its lossmaking European automotive division Opel to PSA in November 2017.
While Peugeot ownership of Opel posed little threat to GM in the United States, Opel controlled by the PSA-FCA merger could open the door of GM technology being used in USand Canadian-made cars, industry sources say.
Even ignoring US opposition to the PSAFCA merger, there is little industrial logic to merging two European automotive groups without significant downsizing of industrial output and labor costs.
As with the failed FCA/Renault-Nissan merger, Fiat Chrysler chairman John Elkann and Groupe PSA's Tavares promise that there will be no plant closures in Europe after the merger scheduled to close in late 2020 or early 2021.