Auburn Hills’ Fiat Chrysler Automobiles and Peugeot today signed an agreement to merge the two automakers to create the fourth-largest global automotive OEM by volume and third largest by revenue. The deal is expected to be finalized in 12-15 months.
FCA and Peugeot officials say the combined financial strength and skills of the merged entity will be well placed to “provide innovative, clean, and sustainable mobility solutions, both in a rapidly urbanizing environment and in rural areas around the world.”
It is expected that the gains in efficiency derived from larger volumes, as well as the benefits of uniting the two companies’ strengths and core competencies, will ensure the combined business can offer all its customers best-in-class products, technologies, and services, and respond with increased agility to the shift taking place in the automotive sector.
“This is a union of two companies with incredible brands and a skilled and dedicated workforce,” says Mike Manley, CEO of FCA. “Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”
The combined company will have annual unit sales of 8.7 million vehicles, with revenues of nearly $189.5 billion (€170 billion), recurring operating profit of more than $2.2 billion (€11 billion), and an operating profit margin of 6.6 percent, all on a simple aggregated basis of 2018 results. The combined balance sheet provides financial flexibility and “ample headroom both to execute strategic plans and invest in new technologies throughout the cycle,” the officials say.
“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,” says Carlos Tavares, chairman of the Managing Board of Groupe PSA and the first chairman of the new entity. “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.”
Tavaras says the combined entity will have a balanced and profitable global presence with a highly complementary and iconic brand portfolio covering all key vehicle segments from luxury, premium, and mainstream passenger cars to SUVs and trucks and light commercial vehicles. The new company will have much greater geographic balance with 46 percent of revenues derived from Europe and 43 percent from North America, based on aggregated 2018 figures of each company.
The merger partners expect efficiencies that will be gained from optimizing investments in vehicle platforms, engine families, and new technologies while leveraging increased scale will enable the business to enhance its purchasing performance and create additional value for stakeholders. More than two-thirds of run rate volumes will be concentrated on two platforms, with approximately 3 million cars per year on each of the small platform and the compact/mid-size platform.
These technology, product, and platform-related savings are expected to account for approximately 40 percent of the total $4.1 billion (€3.7 billion) in annual run-rate synergies, while purchasing – benefiting principally from scale and best price alignment – will represent a further estimated 40 percent of the synergies. Other areas, including marketing, IT, and logistics, will account for the remaining 20 percent.
Those synergies will enable the combined business to invest significantly in the technologies and services that will shape mobility in the future, the companies say, while meeting the challenging global CO2 regulatory requirements.
The new group’s Dutch-domiciled parent company will be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and will benefit from its presence in France, Italy, and the U.S.