(Article published on 30/10 at 8:12, updated on 31/10 at 8:45)
It is done. In a global automotive industry under pressure, PSA and Fiat Chrysler announced, Thursday, October 31, their merger. The new entity will be owned 50-50 by both groups and will become, with 8.7 million vehicles produced each year, the world's number four in the sector. "The shareholders of both groups would hold respectively 50% of the capital of the new entity and share equally the fruits of this rapprochement", says a joint statement. The board of directors would consist of eleven members, five appointed by Fiat-Chrysler, five by PSA with Carlos Tavares, the current boss of the French manufacturer as general manager. The merger will be done "without factory closure"said Thursday the two companies in a joint statement, adding that annual synergies are estimated at "3.7 billion euros" excluding plant closures related to the merger. The headquarters of the new company will be established in the Netherlands and will have a majority of independent directors.
French Minister of the Economy Bruno Le Maire welcomed the announcement by declaring that this operation "give both groups the size they need to carry out the investments needed to face the challenges of the energy transition". The Minister of Economy and Finance has also assured that the French State, PSA shareholder, will remain "particularly vigilant" on maintaining the industrial apparatus in France, according to a statement from Bercy. These engagements are valued at around 50 billion dollars. The two groups, which together employ more than 400,000 people worldwide, confirmed Wednesday morning to be in talks to create the world's No. 4 sector. The announcement pleased investors: around 15:10 GMT, PSA rose more than 2% on the Paris Bourse, while Fiat Chrysler Automobiles (FCA) climbed more than 9% in Milan.
According to concordant sources, a PSA board of directors was held on Wednesday afternoon. The agreement was even "to be done quickly", according to a source close to the file. These discussions came just months after the bitter failure of a proposed merger between Fiat Chrysler and Renault, the number one French car. In terse communiqués, Fiat Chrysler as PSA had been content to report "ongoing discussions" for "create one of the world's leading automotive groups". A source close to the case, confirming information from the Wall Street Journal, told AFP that the discussions were about a merger of equals, noting that other options were also on the table. The chairman of the PSA board Carlos Tavares would become managing director of the new entity, whose board of directors would be chaired by Fiat Chrysler boss (FCA) John Elkann, heir to the Agnelli dynasty. The market value of the merged entity is estimated at around 50 billion dollars (45 billion euros).
This merger will make it one of the leading companies in the sector, giving birth to the world's fourth-largest manufacturer of vehicles sold, behind the Volkswagen behemoths, the Renault-Nissan-Mitsubishi alliance and Toyota. PSA sold 3.9 million vehicles last year, for a turnover of 74 billion euros. FCA has sold 4.8 million vehicles, for 110 billion euros. The couple controls the Alfa Romeo, Chrysler, Citroën, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and Vauxhall brands.
At a time when the global automotive market is facing a gloomy economic situation, and major technological challenges related to the rise of electric vehicles, "It's a remarkable rebound for PSA, which was close to death in 2012", said Michael Hewson, broker analyst CMC. The builder was saved from bankruptcy only by the entry into its capital of the French State and Chinese Dongfeng, alongside the other major shareholder, the Peugeot family. A merger would allow PSA to return through the big door to the US market thanks to the Jeep and Dodge RAM pickups of his fiance. Fiat Chrysler on its side would consolidate its positions in Europe, where the group suffers from not having sufficiently renewed its range.
"Both the FCA group and PSA need an alliance", commented Tuesday the general secretary of the union Fim-Cisl, Marco Bentivogli, with the Italian agency AGI, noting that contacts had already been made in the past.
The same tone is cautiously optimistic at Force Ouvrière, the first union at PSA.
"I'm still suspicious, but I see a lot of benefits (…) this will allow PSA to have a larger size vis-à-vis the big ones, like Toyota or Volkswagen, and for Fiat, to have access to a technology that will allow them to respect the future standards of CO2 emission "reacted Patrick Michel, secretary general of the PSA consortium committee for FO.
Read also: PSA: Despite a mixed quarter, markets applaud
"First elements transmitted by the Group Management on this subject (Wednesday) morning", it seems "that there is no plan to close a site in France as part of this project", for its part indicated the union CFE-CGC in a statement. But the games are not made, with this "bulky comrade" what is the French state, as described by Mr. Hewson. In its negotiations with Renault, Fiat Chrysler had quickly thrown in the towel, unable to obtain a commitment from the French manufacturer, curbed by the state shareholder.
Vigilance on both sides of the border
However, the French State is also represented in the capital of PSA, via the public investment bank Bpifrance which holds about 12%. Bercy warned Wednesday "follow with attention" the discussions initiated, warning that Paris will show "particularly vigilant" on employment, governance and the industrial footprint of the eventual set.
The reaction in Rome was more distant. "This is a market operation and I think it's appropriate not to make statements about it"said Italian Minister of Economic Development Stefano Patuanelli.
Vice Minister of Economy Antonio Misiani, for his part, "vital to preserve the sites" Fiat Chrysler (FCA) in Italy, Wednesday at a forum of the Italian economic agency Radiocor.
"FCA is a large company at the international level that has a significant productive presence in Italy, with thousands of employees". Therefore, "the Italian government is watching closely the evolution of the sector and the future of FCA"said Mr. Misiani.