Groupe PSA and Fiat Chrysler Automobiles have officially signed a binding agreement that will see the two automakers enter a 50-50 merger, creating the third largest automaker in the world by revenue and fourth largest by volume.
PSA-FCA claims it will have a combined annual unit sales of around 8.7 million vehicles, with revenues of nearly 170 billion euros and a recurring operating profit of over 11 billion euros. By combining PSA and FCA, the companies say they will now have “ample headroom both to execute strategic plans and invest in new technologies throughout the cycle.” The merger will also enable the resulting company to benefit from greater economies of scale, helping both PSA and FCA to remain competitive as vehicle development costs continue to rise.
“With its combined financial strength and skills, the merged entity will be particularly well placed to provide innovative, clean and sustainable mobility solutions, both in a rapidly urbanizing environment and in rural areas around the world,” the automaker said in a prepared statement. “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 this highly demanding sector.”
The newly established company will be well positioned to compete globally, with FCA having a strong presence in North America and Latin America and Groupe PSA being one of the largest automakers in Europe. About 46% of its total revenue will from Europe, while 43% will come from North America. The company also plans to “reshape” their strategies in other regions like Latin America and Asia, it says.
Groupe PSA CEO Carlos Tavares and FCA CEO Mike Manley held a press conference this week, engaging in a congratulatory handshake after signing documents and making the union of the two automotive giants official. Tavares will serve as CEO of the newly created company for an initial term of five years. Manley will continue in his role leading FCA.
Earlier this year, General Motors filed a lawsuit against FCA claiming it corrupted the negotiating processes with the UAW in 2011 and 2015, offering bribes in exchange for a favourable labor agreement. The automaker also claims FCA did this with the specific intention of weakening GM’s business and forcing it to merge with FCA. Former FCA CEO Sergio Marchionne had previously sought a merger with GM, but was turned down by GM CEO Mary Barra. FCA has said the claims made in the lawsuit are baseless and plans to fight them in court.