Fiat Chrysler and PSA Groupe have agreed to merge, according to a published report.
The Wall Street Journal, citing a source, said the companies are moving forward with a merger, in a deal that would create the world’s fourth largest automaker.
Reports that the companies were in talks began Tuesday, and both on Wednesday confirming the discussions.
The companies issued separate, nearly identical statements, signifying a coordinated messaging strategy, with Italian-American automaker FCA adding that it had no additional comment.
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“Following recent reports on a possible business combination between Groupe PSA and FCA Group, Fiat Chrysler Automobiles N.V. … confirms there are ongoing discussions aimed at creating one of the world‘s leading mobility Groups. FCA has nothing further to add at this time,” the company said.
Reuters reported that a merger between FCA and the French auto company could create a “$50-billion giant better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry.”
The Journal reported that an all-stock merger of equals is one possibility.
FCA came close to a merger last summer with Renault, but complications with the French government led FCA to withdraw.
FCA had proposed a 50-50 merger with Renault in May, saying it would create the world’s third-largest automaker and save $5.6 billion annually. Since then, FCA Chairman John Elkann, whose family has controlling interest in the company, confirmed the group’s bid to pursue an alternative alliance, Reuters said.
“If a combination of Peugeot and FCA succeeds in overcoming political, financial and governance hurdles, the new enterprise would still face substantial challenges,” Reuters said, with an expected sales slowdown ahead and huge investments needed to keep pace in electrification and future mobility.
Global automakers face the prospect of a slowdown in demand coinciding with a need to invest in electrification and autonomy.
With that in mind, several analysts noted the deal’s benefits.
Brian Moody, executive editor for Autotrader, noted that “each company has something the other wants. Fiat Chrysler could surely use some of Peugeot’s cash and/or existing platforms to help build out a fleet of fresh new cars, including electric and hybrid vehicles. On the other hand, Peugeot would love to have access to a vast dealership network as well as a way to capitalize on the success of brands and vehicles like Ram and Jeep.”
Matt DeLorenzo, managing editor at Kelley Blue Book, said the companies’ scale, portfolios and geographic presence complement each other.
“While FCA has a strong presence both in North America and Europe (thanks to Fiat), PSA has virtually no North American presence (other than its fledgling startup efforts) and as far as Europe is concerned FCA has got Italy cornered, while PSA is dominant in the French and German markets, the latter thanks to its acquisition of Opel. It also has a foothold in the UK with Vauxhall,” DeLorenzo said.
He noted that CEO Carlos Tavares is a solid executive with experience running merged entities.
“I think his style will blend well with Mike Manley’s,” he said, referencing the FCA CEO.
An FCA-Peugeot merger would create the world’s fourth-largest automaker, behind Volkswagen, Toyota and the Renault-Nissan alliance.
FCA, with U.S. operations based in Auburn Hills, was created out of the Chrysler bankruptcy of a decade ago, when American automakers crashed amid the Great Recession.
PSA’s supervisory board were meeting Wednesday to discuss the potential deal, Reuters and the Wall Street Journal reported.
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