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Fiat Chrysler and PSA, Maker of Peugeot, to Merge Fiat Chrysler and PSA, Maker of Peugeot, to Merge
(about 2 hours later)
Fiat Chrysler and PSA of France announced on Thursday that they plan to merge, a combination that would create one of the world’s largest carmakers. Fiat Chrysler and PSA of France announced on Thursday that they plan to merge, a combination that would create Europe’s largest carmaker and the fourth largest in the world.
The announcement came after a round of board meetings on Wednesday. The two automakers will team up as the car industry confronts a range of challenging technological issues, including the development of electric and autonomous vehicles. With combined annual sales of 8.7 million vehicles, the new entity would be slightly larger than General Motors. It would have more resources to deal with the industry’s challenges. The announcement came after a round of board meetings on Wednesday that endorsed what the companies described as “intensive” discussions among their senior managers. The two automakers described the transaction as a way to share the enormous cost of an industrywide transition to electric and autonomous vehicles.
But it will still have considerable weaknesses as well. Both companies lack a strong presence in China, relying largely on a weakening European market for sales. With combined annual sales of 8.7 million vehicles and 170 billion euros, or $190 billion, the new entity would be slightly larger than General Motors in terms of cars produced, and well ahead of Ford Motor Co.
After the merger, which will be an all-stock deal, the new company will be led by Carlos Tavares, the chief of PSA, as the chief executive, and John Elkann, the head of Fiat Chrysler, will be the chairman. But Fiat Chrysler and PSA will still have considerable weaknesses. Both lack a strong presence in China, and they are behind rivals like Renault or Volkswagen in developing electric vehicles.
This is a developing story, and will be updated. In Europe, Fiat and PSA, with its Peugeot and Citroën 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-term 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.”
Carlos Tavares, the chief of PSA, will be the chief executive of the new company. Mr. Tavares, described by people who have met him as charming but tough, has already expanded PSA’s presence in Europe by acquiring Opel from G.M. in 2017.
John Elkann, the chairman of Fiat Chrysler, will be the chairman of the new company. Mr. Elkann is a scion of Italy’s powerful Agnelli family, which has long controlled Fiat.
The merger will be accomplished by exchanging shares, with each company contributing 50 percent of the new entity. Shareholders of Fiat Chrysler will receive a special dividend of 5.5 billion euros.
An attempt by Fiat Chrysler to merge with Renault earlier this year foundered in part because of meddling by the French government. But the French finance minister, Bruno LeMaire, said Thursday that he “favorably welcomed” the deal between Fiat Chrysler and PSA.
However, the French government, long an influential shareholder in PSA, said it would be “vigilant” about ensuring the group retained a significant industrial presence in France, as well as sway over decision making. The government will also seek a commitment from the new merged company to be involved in a European effort to create an industry for electric car batteries, Mr. LeMaire said.
Most unions leaders at PSA welcomed the merger, saying it would let the automaker compete with giants like Volkswagen and Toyota and possibly create more jobs after a decade of cuts. PSA shed more than 3,200 employees in France last year and has a French work force of 64,560 compared to 100,000 ten years ago.
Only the militant CGT union expressed mistrust. “We are concerned that this merger will result in further losses,” said Jérôme Boussard, a CGT representative at the automaker.