FCA-Peugeot Merger Would Create World’s Fourth-largest Automaker

Fiat Chrysler Automobiles in Auburn Hills and France’s Peugeot have agreed to pursue a 50-50 merger that would create the world’s fourth-largest automaker (behind Volkswagen Group, Renault-Nissan, and Toyota) and give the combination the resources to develop and manufacture electric and autonomous vehicles.
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Peugeot car
FCA and Peugeot are pursuing a 50-50 merger that would create the world’s fourth-largest automaker. // Photo courtesy of Peugeot

Fiat Chrysler Automobiles in Auburn Hills and France’s Peugeot have agreed to pursue a 50-50 merger that would create the world’s fourth-largest automaker (behind Volkswagen Group, Renault-Nissan, and Toyota) and give the combination the resources to develop and manufacture electric and autonomous vehicles.

According to a press release issued by both companies, the plan to combine Groupe PSA (Peugeot’s legal name) and FCA follows intensive discussions between the senior managements of the two manufacturers.

“I’m delighted by the opportunity to work with Carlos (Tavares, CEO of Groupe PSA) and his team on this potentially industry-changing combination,” says Mike Manley, CEO of FCA. “We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world-class global mobility company.”

The proposed combination would create the 4th largest global OEM in terms of unit sales (8.7 million vehicles), with combined revenues of nearly $189 billion and recurring operating profit of more than $12.2 billion on a simple aggregated basis of 2018 results excluding Magneti Marelli and Faurecia.

The new company would be headquartered in the Netherlands, be listed on stock exchanges in Paris, Milan, and New York, and maintain the current operating head-office locations in France, Italy, and the U.S.

The significant value accretion resulting from the transaction is estimated to be approximately $4.1 billion in annual run-rate synergies derived principally from a more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology, and from the enhanced purchasing capability inherent in the combined group’s new scale. These synergy estimates are not based on any plant closures.

The companies project that 80 percent of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at $3.1 billion.

“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” Tavares says. “I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

The shareholders of each company would own 50 percent of the equity of the newly combined group and would therefore share equally in the benefits arising from the combination.

The new company’s board of directors would be composed of 11 members. Five members would be nominated by FCA including current FCA chairman John Elkann in the same role, and five would be nominated by Groupe PSA. Tavares also would be on the board and be named CEO for an initial five-year term.

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