Peugeot and Fiat-Chrysler announce merger

Peugeot 508 Hybrid

Italian-American carmaker FCA and Europe's Groupe PSA intend to merge in a 50-50 venture, potentially creating the world's fourth-largest carmaker in terms of unit sales (8.7 mn cars) with revenue of €170 bn.

The combined company would be based in the Netherlands, which is the current headquarters of Fiat Chrysler.

Before the merger can be completed, regulators and the shareholders of both parties must still agree. "We believe auto industry consolidation is not just a fad but a strategy, with far reaching implications for labor, policy makers, technology shifts from internal combustion engines to electric vehicles to EV and relationships with suppliers", the bank said in a research note about the potential merger.

The deal would seek to pool resources and gain strength in scale. Combined estimated revenues, based on 2018 figures would hover around $190 billion and operating profit is an estimated $12.2 billion. The deal will also make it the world's fourth-largest automaker, following the top three of Volkswagen Group, Renault-Nissan, and Toyota.

Fiat Chrysler narrowed losses in Asia to 10 million euros, while losses in Europe almost doubled to 55 million euros due to lower sales.

A planned merger between FCA and France's other big carmaker Renault collapsed in June after FCA said there had been interference from the French government, which owns 15% of Renault and 13% of PSA.

A deal would give Peugeot a presence in the US market, which it exited in 1991.

For the past several years, beginning under the administration of former CEO, the late Sergio Marchionne, it's been reported that Fiat Chrysler Automobiles has been searching for a new partner. His Fiat Chrysler counterpart John Elkann becomes chairman.

Peugeot CEO Carlos Tavares will take on the same role at the newly merged FCA-Peugeot. Within a year the German operation was in the black for the first time in two decades.

Approximately €3.7 billion in annual run-rate synergies (cost savings) could be derived, they claim.

A merger of the two groups would bring a number of brands under one roof including Alfa Romeo, Citroen, Jeep, Opel, Peugeot and Vauxhall.

Ahead of a meeting in 2018 with British unions to discuss job cuts at a Vauxhall plant inherited from Opel, Tavares told reporters in Detroit that United Kingdom production costs were twice those of Peugeot plants in France. That is where the companies can expect to have the most overlap.

Manley called it "an industry-changing combination", and noted the long history of cooperation with Peugeot in industrial vehicles in Europe.

The President of Unifor Local 444, representing workers at the Windsor Assembly Plant, says it is business as usual, despite a company merger.

Now the 61-year-old Portuguese vehicle fanatic and weekend racer will face his biggest challenge yet. There were no signs of resistance to this deal, beyond concerns for jobs.

A representative for Dongfeng declined to comment.

Fiat Chrysler is one of Italy's largest private sector employers, with almost 60,000 workers. The governance structure of the new company would be balanced between the contributing shareholders.

The companies said head offices would continue to operate in France, Italy and the USA, and shares would be traded in the main exchanges in those three countries.

In the wake of the announcement, FCA shares in Milan increased to over 9% higher in morning trading.

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