Toronto, Ontario — Following the initial announcement on Oct. 31, Fiat Chrysler Automobiles (FCA) and Peugeot S.A. have signed a binding merger agreement in a deal expected to reshape the global car industry.
The combined company will create the world’s fourth-largest automaker. Based on 2018 figures, the company could achieve annual unit sales of 8.7 million vehicles and revenues of nearly US$190 billion—a profit of more than US$12 billion.
The combined company—which remains unnamed—will be led by PSA CEO Carlos Tavares, with FCA chairman John Elkann holding the same role at the enlarged company. It will have an 11-person board, with five members nominated by PSA and another five by FCA. It will also include labour representatives from both companies.
FCA and PSA also aim to achieve annual cost savings of US$4 billion with the merger.
The deal gives PSA a long-sought-after presence in North America and is expected to help FCA progress in its development of low-emission technology, where it is currently lagging compared to other OEMs.
Over the next 12-15 months, both companies will have to jump through some serious hoops to seek approval from shareholders and join together in 50/50 harmony. The deal has been subject to scrutiny since its initial announcement in October.
“This is obviously a huge consolidation of the sector that will surely require a considerable effort in securing competition and merger control across a variety of jurisdictions, and especially the European Union,” said Jonathan Branton, head of competition at global legal business DWF. “This will take time and will create some uncertainty, although the parties will surely have planned this aspect meticulously.”
Further, with the new company’s European-based leadership, vehicle production in Canada is expected to be a low priority. In other words, no one should expect FCA’s Ontario assembly plants to start pumping out new PSA Group models for the North American market anytime soon.
Brands involved in the merger include Abarth, Alfa Romeo, Citroen, Chrysler, Dodge, DS, Fiat, Jeep, Lancia, Maserati, Opel, Ram and Vauxhall.
