Fiat Chrysler-Peu­geot merger may mean more clean ve­hi­cles

Orlando Sentinel - - BUSINESS - By Tom Krisher, Colleen Barry and An­gela Charl­ton

DETROIT — Fiat Chrysler and Peu­geot agreed Wed­nes­day to merge into a sin­gle com­pany that will be­come the world’s fourth­largest au­tomaker, a gi­ant that could bring con­sumers a wider va­ri­ety of cleaner ve­hi­cles at a faster pace, in­clud­ing more pow­ered by elec­tric­ity.

The boards of the two com­pa­nies signed the deal to achieve what nei­ther was good at alone: con­quer­ing the chal­lenges of stricter emis­sion rules and nav­i­gat­ing the tran­si­tion to bat­tery­pow­ered and au­tonomous ve­hi­cles.

The new com­pany, which doesn’t yet have a name, will be led by Peu­geot’s cost-cut­ting CEO Car­los Tavares. Fiat Chrysler CEO Mike Man­ley will stay on, though it was un­clear in what ca­pac­ity and for how long.

For con­sumers, the agree­ment will give Fiat Chrysler ac­cess to “multi-en­ergy plat­forms” al­ready de­vel­oped by Peu­geot, in­clud­ing elec­tric ve­hi­cles, Man­ley said.

“That ob­vi­ously in­creases choice and im­proves over­all fleet per­for­mance from a CO2 per­spec­tive,” he said. “In any com­pet­i­tive en­vi­ron­ment, you win be­cause you of­fer your cus­tomers great value.”

But don’t ex­pect to see Peu­geot sedans in the U.S. any­time soon. Tavares said the com­bined com­pany’s brands would stay where they orig­i­nated.

The deal, long sought by both cor­po­ra­tions, is ex­pected to close within 15 months, al­though it will have to clear an­titrust and other reg­u­la­tory hur­dles.

On a se­ries of con­fer­ence calls, Tavares and Man­ley talked about ob­tain­ing $4.1 bil­lion in an­nual sav­ings, largely from com­bin­ing re­search and plat­forms, the un­der­pin­nings on which ve­hi­cles are built. The com­pa­nies said they do not ex­pect any fac­tory clo­sures, but ad­min­is­tra­tive cuts will be con­sid­ered. Added ve­hi­cles should be able to fill up un­der­uti­lized plants, they said.

By them­selves, the com­pa­nies were rel­a­tively weak in new tech­nol­ogy, such as elec­tric ve­hi­cles, with Peu­geot ahead of Fiat Chrysler. But to­gether, they will be able to turn out more plug-in hy­brids and elec­tric ve­hi­cles.

“In go­ing this route, they should be more af­ford­able,” said Stephanie Brin­ley, prin­ci­pal an­a­lyst for IHS Markit. “Con­sumers should be able to get it faster, and they should be able to get it at a lower cost.”

Peu­geot has strong small and mid­size cars, mar­kets that Fiat Chrysler has al­most aban­doned in the U.S. be­cause of a huge con­sumer shift to­ward SUVs and trucks. But Brin­ley said Fiat Chrysler could use the Peu­geot un­der­pin­nings to build more small and mid­size SUVs at a faster pace for sale in the U.S.

Mean­while, Peu­geot would get Fiat Chrysler’s ex­per­tise in pickup trucks and com­mer­cial ve­hi­cles and could per­haps sell some of the pop­u­lar Jeep brand ve­hi­cles Europe and else­where.

Tavares said both com­pa­nies’ brands have a strong fol­low­ing, es­pe­cially in their home coun­tries, that could be used as an ad­van­tage. “When there is pas­sion and emo­tion, in there is room to work on the mar­ket­ing com­mu­ni­ca­tions,” he said.

The merger will not be the last in a cap­i­tal-in­ten­sive in­dus­try that faces chal­lenges of new tech­nolo­gies, Brin­ley said. Al­though she ex­pects more com­bi­na­tions, she said com­peti­tors such as Ford Mo­tor Co. have been able to get economies of scale and share tech­nol­ogy costs through part­ner­ships that are short of a full-blown com­bi­na­tion.

Ford, for in­stance, is part­ner­ing with Volk­swa­gen, while the much smaller Mazda of Ja­pan is join­ing with Toy­ota.

“I think that it’s not un­re­al­is­tic that we will see an­other merger or ac­qui­si­tion,” Brin­ley said. “But strate­gic al­liances can be just as ef­fec­tive or more.”

The deal, which was first un­veiled in Oc­to­ber, will cre­ate a com­pany with rev­enues of nearly nearly $190 bil­lion that pro­duces 8.7 mil­lion cars a year — just be­hind Volk­swa­gen, the Re­naultNis­san al­liance and Toy­ota.

ELIOT BLONDET/ABACA PRESS

The merger’s new com­pany, led by Peu­geot CEO Car­los Tavares, will be the world’s fourth-largest au­tomaker.

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