€40bn Merger Between Fiat Chrysler And Peugeot Owner PSA Announced

A merger between Chrysler Automobiles (FCA) and the Peugeot owner, Groupe PSA, has finally been announced by the companies for in a deal that will be worth €40bn and r4result in the fourth largest car maker of the world.

The boards of the tow companies passed the merger proposal on Thursday. The net entity will have a 50-50 ownership and the new company will have a combined sale of 8. Million vehicles annually and combined annual revenue of €170bn. The new entity will also have operating profits of more than €11bn. Cost-savings and other benefits of €3.7bn is expected out of the merger while no factories will be closed down, said the companies.

While the chief executive of the new company will be Carlos Tavares, the chief executive of PSA, which also owns Vauxhall and Citroën, the Fiat chair, John Elkann, will become its chairman.

The news of the negotiations between the two companies on Wednesday also brought out concerns of possible job losses of about 1,100 workers at Vauxhall’s factory in Ellesmere Port, Cheshire. The Unite union, which represents employees at the plant, has been seeking urgent meetings with PSA bosses.

The company had warned in June that the fate of the factory was dependent on the outcome of a Brexit deal. An additional 1,200 employees manufacture Vauxhall vans in Luton, Bedfordshire.

In June, an attempt by FCA to merge with the French car maker Renault resulted in a failure with the FCA bailing out of the talks following intervention of the French government, the largest shareholder of Renault. About 12 per cent of Renault is owned by the French government against a bailout package given by it to the company in 2014. Gthe French government has urged the Renault board to focus on mending its ties with its Japanese partner Nissan instead of the merger.

The agreed tie-up suggests “any concerns the French government may have had have been allayed. The lack of pushback by the French government may be down to assurances on job losses, which could well be bad news for car plants, outside of France and Italy, with the UK an obvious target. Any deal will still need to be scrutinised by regulators, but there remains little in the way of overlap outside of markets in Europe,” said Michael Hewson, the chief market analyst at CMC Markets UK.

“The plan to combine the Groupe PSA and FCA businesses follows intensive discussions between the senior managements of the two companies. Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobilitym” said the joint statement of the companies on the merge.

(Adapted from TheGuardian.com)

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