To most of us, PSA and FCA might sound like a random arrangement of letters but should they join together, it would form one of the largest automotive groups in the world - 4th according to current numbers. That’s a big deal, and probably the main reason behind the proposed merger.
For the more automotive-attuned, PSA is the parent company to brands such as Peugeot, Citroen and DS. More recently, an ailing Opel/Vauxhall came under their wing after a jettisoning from General Motors, which the French group transformed into a profitable business within 12 months of acquisition.
However, tackling Fiat Chrysler Automobiles might be a task far more challenging, if not for the simple fact that under its umbrella many more brands are currently in active operation: Alfa Romeo, Chrysler, Dodge, Fiat, Lancia, Maserati, Jeep, and RAM.
There are some standouts, to be sure, and perhaps PSA sees potential in most if not all those brands, but the reality is that nearly every one is struggling to meet expectations of build quality and long term reliability; and have been for a while now. By contrast, Peugeot and Citroen (DS) have been making impressive strides on those fronts coupled with a strong push upmarket.
Prior to this, PSA, on the prowl to expand is portfolio, considered buying over Jaguar Land Rover from current owners Tata. Meanwhile, FCA had been known to have also been shopping a deal around with other big players in the automotive space. Rumours were rampant with the possibility of a partnership with an unnamed major Chinese automaker, talks of a Jeep spin-off, and a merger with the Renault-Nissan Alliance.
After a series of non-answers, news of the latter was finally confirmed before both parties fell out midway through negotiations; with Nissan casting a cloud of doubt and worry and the French government (which owns part of Renault) withholding their agreement behind further stipulations. FCA reportedly withdrew shortly after.
This announced merger would mean the setting up of a higher tier parent company to govern both PSA and FCA, with each taking a 50 percent stake. Naturally, this deal would first need to be approved by the relevant regulators and pass anti-trust inquiries. A binding Memorandum of Understanding is expected in the coming weeks.
Upon receiving the green light, this new Dutch-based entity would be responsible for a combined sales volume of 8.7 million vehicles annually and revenue of some €170 billion. Structurally, PSA chief executive Carlos Tavares will sit at the helm as CEO while John Elkann too will mirror his FCA role as chairman.
Importantly, it would give PSA instant presence in the North American market as well as access to not only an entrenched business in the lucrative full size pick-up market, but also a hand in commercial vehicles, large SUVs, and heck, even muscle cars.
For FCA, their new partners possess far more advanced technologies and platforms as well as the kind of coveted operational efficiencies that have so far escaped the grasp of the Italian-Americans. The combined position of Peugeot, Citroen, and DS in Europe is also much stronger than that of Fiat, Maserati, and Alfa Romeo.
According to the joint announcement, both companies are keen to efficiently allocate large-scale investments to vehicle platforms, powertrains and other technologies. They project 80 percent of synergies would be achieved after 4 years.