Fiat Chrysler and Peugeot agree mega-merger deal which will create the world’s fourth largest car company
- French carmaker and US-Italian rival agreed merger due to costly transitions
- They are gearing up to produce cleaner and more sustainable vehicles
- Move comes as the pair rank behind rivals including Volkswagen and Toyota
Fiat Chrysler and Peugeot have agreed a mega-merger deal which will create the world’s fourth largest car company.
The French carmaker and its US-Italian rival’s decision comes as the sector grapples with the difficulty of a costly transition to producing cleaner and more sustainable vehicles.
There will be no factory closures due to the deal, agreed today, they said.
The two motor companies have been ranking behind global rivals Volkswagen, Renault-Nissan-Mitsubushi and Toyota, which have a total revenue of $190million (£150million) and annual sales of some 8.7 million vehicles.
Fiat Chrysler and Peugeot have agreed a mega-merger deal to create the world’s fourth largest car company. The new group will be based in the Netherlands and continue to be listed on Paris, Milan and New York stock exchanges
In a statement, the company said: ‘Fiat Chrysler Automobiles and Peugeot SA (Groupe PSA) have today signed a binding combination agreement providing for a 50/50 merger of their businesses to create the fourth largest global automotive original equipment manufacturer by volume and third largest by revenue.’
Its brands will include Fiat, Alfa Romeo, Chrysler, Citroen, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and Vauxhall.
The joint entity will have ‘the leadership, resources and scale to be at the forefront of a new era of sustainable mobility,’ PSA and Fiat Chrysler said.
The tie-up – which the two sides had originally agreed to at the end of October – will ‘deliver approximately 3.7 billion euros in estimated annual synergies’ or cost savings.
The merger is expected to be completed in 12-15 months, the statement said.
There will be no factory closures due to the deal, the company said. Fiat Chrysler chief John Elkann, left, will be chairman and PSA’s Carlos Tavares, right, chief executive. Mr Elkman will be chairman of the group and Mr Tavares will be chief executive
Brands for the company will include Fiat, Alfa Romeo and Citroen. Above is a file photo taken in Bayonne, south-west France, this year
‘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,’ PSA’s Carlos Tavares said in a statement.
Fiat Chrysler CEO Mike Manley saw it as ‘a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors’.
The combined group – which has yet to be given a name – would be headquartered in the Netherlands, and continue to be listed on the Paris, Milan and New York stock exchanges.
Fiat Chrysler chief John Elkann will be chairman and PSA’s Tavares chief executive.
The lion’s share of the savings will be generated by joint technology, product and platform development, as well as in purchasing, but also in marketing, IT systems and logistics, the statement said.
The merger is expected to produce savings for both companies to help them grapple with a changing automotive market
‘Those synergies will enable the combined business to invest significantly in the technologies and services that will shape mobility in the future while meeting the challenging global CO2 regulatory requirements.’
Prior to closure of the merger, Fiat Chrysler will distribute a special dividend of 5.5 billion euros to its shareholders, while PSA will distribute to its shareholders its 46-percent stake in parts maker Faurecia.
Analysts nevertheless argue that the two companies are still too dependent on the declining European market and lack a strong presence in China, the world’s largest car market.