The PSA Group and Fiat Chrysler Automobiles have confirmed plans to merge on a 50/50 basis, firming up yesterday’s news that the two companies were in discussions regarding such a move.
Both firms said today that the discussions would be finalised “in the coming weeks” to reach a binding Memorandum of Understanding, which will create one of the world's largest automotive groups.
They added that the “combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency”.
The likely merger will create a car giant worth around £40 billion and encompass some of the world’s biggest car brands. FCA owns Fiat, Jeep, Alfa Romeo, Maserati, Ram, Lancia and Chrysler, while the PSA stable includes Peugeot, Citroën, DS and Vauxhall-Opel.
The deal would create the fourth largest car manufacturer globally in terms of annual sales, at 8.7m vehicles, behind Volkswagen Group, Toyota and the Renault-Nissan-Mitsubishi alliance, as well as revenues of €170bn (£147bn) and recurring operating profit of over €11bn (£9.5bn).
Today’s announcement also stated there are estimated synergies of €3.7bn (£3.14bn) synergies annually “without any plant closures resulting from the transaction”. This would come from a more efficient allocation of resources for major investments in vehicle platforms, powertrain and technology as well as purchasing power. The two firms projected that 80% of the synergies would be achieved after four years.
The shareholders of FCA and PSA will each take a 50 per cent stake in a new Dutch parent company, under the proposals, with the governance structure balanced between the two firms. There would be 11 board members, with five nominated by FCA and five by PSA. Current FCA chairman John Elkann will become the chairman of the new firm, while PSA group boss Carlos Tavares would become the CEO, standing on an initial five-year term.
PSA Group chief Carlos Tavares is famous for cutting costs - for example, turning Vauxhall into profit in under 12 months of taking ownership - and PSA and FCA claimed the merger would make “among the highest margins in the markets where it would operate,” based on FCA’s strength in the Americas and PSA Group’s in Europe.
As well as broadening the global reach of both firms, the merger will also mean the new entity will comprehensively cover all areas of the market including luxury, premium, volume, trucks and light commercial vehicles.