Fiat Chrysler Automobiles and Groupe PSA have agreed to a 50/50 merger of the two companies and plan to finalize a binding memorandum of understanding in the coming weeks.
In a statement, FCA said the plan to combine the two entities will help 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 mobility.”
Once the merger is complete, the Groupe PSA and FCA joint venture will create the fourth-largest global OEM in terms of annual unit sales (roughly 8.7 million vehicles) and will generate combined revenues of 170 billion euros and recurring operating profit of over 11 billion euros.
The merger will help FCA and Groupe PSA navigate new challenges the auto industry is expected to face in coming years, allowing it to leverage each other’s large-scale investments in vehicle platforms, electric and internal combustion powertrains, autonomous vehicles and other technologies. The two companies estimate these “synergies” will save a total of 3.7 billion euros annually and says 80 percent of the synergies will be achieved after four years. These savings will be achieved without plant closures, according to FCA and Groupe PSA.
FCA and Groupe PSA’s respective shareholders will own 50 percent of the equity of the newly created company, which does not yet have a name and will be based in The Netherlands, and will “share equally in the benefits arising,” from the merger. The board managing the company will be comprised of 11 members, with five being nominated by FCA (including FCA chairman John Elkann) and another five nominated by Groupe PSA. Peugeot CEO Carlos Tavares will serve as the company’s CEO for a term of five years and will also be a member of the board.
“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” Tavares said in a prepared statement. “I’m pleased with the work already done with Mike [Manley] and will be very happy to work with him to build a great company together.”
“I’m delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination,” added FCA CEO Mike Manley. “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.”
PSA bought the Opel and Vauxhall brands from General Motors in 2017. The two companies were unprofitable under the management of GM, but by simplifying their respective management structures and product lineups, the French conglomerate was able to quickly turn them into profit producers.
You can read the full details of the merger at this link.