Groupe PSA and Fiat Chrysler Automobiles (FCA) have just signed on the dotted line to merge both groups into one giant group. The newly formed cluster of companies will be the fourth largest automaker in the world with an estimated combined revenue of €170 billion (AU$276 billion) with annual sales of 8.7 million units. That’s a big deal, and probably the main reason behind the proposed merger.
The merger process isn’t instantaneous but rather takes place over the course of 12-15 months. The merger will also save both sides €3.7 billion (AU$6 billion) via ‘run-rate synergies’ through technology, product, purchasing and platform-related savings. Both sides have said that no plant closures will occur as result of the merger. Which is nice.
The equity between both the manufacturers will be spilt 50-50. There will be 11 members on its board of directors with FCA and PSA nominating five each. However, Carlos Tavares (the chairman of Groupe PSA), while the eleventh member of the board is not a PSA nominee and will be CEO of the new group. John Elkann, FCA’s chairman, will continue in that role with the combined entity. China’s state-run Dongfeng Motor Group, who reduced its 12.2 percent stake in PSA to just 4.5 percent in the new group will not be entitled to a seat on the board. It’s understood that the reduced stake could help make regulatory approval for the merger easier.
Speaking of the combined entity, the yet-to-be-named group will be headquartered in the Netherlands and will have its shares listed on Paris’s Euronext, Milan’s Borsa Italiana and the New York Stock Exchange.
Business aside, what does the merger mean for the automotive sphere aside from parts and technology sharing? While no concrete details have been announced, the two companies have said that more than two-thirds of its production will be focused on just two platforms, one for compact and the other for mid-sized cars.
“Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services. I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm” said Carlos Tavares.
Future FCA-branded products will benefit from their partner’s far more advanced technologies and platforms which contains better construction materials and has been designed to accommodate plug-in hybrid and fully-electric powertrains. That synergy allows the new group to invest significantly in technologies and services that will grow the market while meeting the ever-challenging CO2 regulatory regulations.
Furthermore, the merger will give PSA instant presence in the North and Latin American markets 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. Additionally, the new group “will reshape their strategy in other regions”, particularly the lucrative Chinese market in which both manufacturers have struggled to gain a foothold.
Are there any potential drawbacks as a result of this merger? Ferdinand Dudenhöffer, from the CAR-Center Automotive Research at Universität Duisburg-Essen, theorises that PSA’s Opel unit would be the “loser” in the merger and predicted at least 10,000 engineering job losses overall. “Opel’s role in the new group will become weaker. It will have to fight alongside mass-market brands Fiat, Citroën and Peugeot for the same customers,” he added. Only time will tell we reckon.
Stay tuned to this space as we bring you more updates from this mammoth merger in the coming weeks.