PSA could merge with Fiat-Chrysler.

After Failing with Renault, Fiat Chrysler wants to get Engaged with PSA

Finance

The two car groups, PSA and Fiat Chrysler have confirmed Wednesday 30th October 2019 discussions to create a giant valued at some 50 billion dollars.

A few months after its abortive merger with Renault, the Italian-American car manufacturer Fiat Chrysler discusses a merger with the other major French group in the sector, PSA, to give birth to the world number 4 in the sector.

After press reports on Tuesday night reporting such negotiations, the two groups confirmed Wednesday, October 30, 2019 discussions to create a giant valued at some 50 billion dollars.

“Following recent information regarding a possible strategic operation between the PSA Group and the FCA Group, Fiat Chrysler Automobiles confirms that discussions are underway to create a group among the world leaders in mobility,” said FCA in a statement of a few lines , where he says he has “nothing more to add for the moment”.

Even terse comment from PSA, which confirmed that “discussions are underway to create one of the world’s leading automotive groups”.

184 billion euros of turnover in total

A source close to the file told AFP that the two groups were discussing a merger of equals. Other options are also on the table, added this source on condition of anonymity.


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.

There is, however, no guarantee that these talks will lead to an agreement, warned the source, confirming information from the Wall Street Journal.

PSA sold 3.9 million vehicles last year, generating a turnover of 74 billion euros. FCA has sold 4.8 million vehicles, for 110 billion.

On the Paris Bourse, the French group has a capitalization of 22.54 billion euros, while the market valuation of FCA, listed on Wall Street and Milan, varies: it is a little over 28.1 billions of dollars in the United States and 20.74 billion euros in Milan.

Their union would give birth to world number 4 in the sector in the number of vehicles sold (based on annual figures 2018). It would point to Volkswagen, the Renault-Nissan-Mitsubishi Alliance and Toyota, and would have to its catalogue the brands Alfa Romeo, Chrysler, Citroen, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and Vauxhall.

This merger would allow the French group to return through the big door to the US market, where FCA, via Jeep brands and Dodge RAM pickups, holds significant market shares in segments with the most lucrative margins.

Fiat Chrysler and Peugeot discuss a merger of equals to create a group valued at nearly 50 billion USD
Fiat Chrysler and Peugeot discuss a merger of equals to create a group valued at nearly 50 billion USD (source close). (© AFP / Archives / STAN HONDA, HUGUEN PHILIPPE, MARCO BERTORELLO)

Complementarity

FCA, for its part, needs a partner in Asia, where it has very little presence, and which consolidates its positions in Europe, where the group is less strong, recently explained to AFP Giuliano Noci, professor of strategy at the Polytechnic Business School in Milan.

The group, which lives mainly in Europe sales of the city car Fiat 500, saw its market share melt from 6% in 2010 to 4.6% last year, its range of vehicles has not been enough renewed.

“Both the FCA group and PSA need an alliance” and “this is not the first time that Elkann and Tavares are talking,” said Tuesday evening the general secretary of the union Fim-Cisl, Marco Bentivogli, with the Italian agency AGI.

In particular, a merger should pool energy to facilitate the transition to electric vehicles, where FCA has fallen behind.

These talks come just months after an abortive merger between Fiat Chrysler and Renault, the French leader in the automobile industry.

The Italian-American group had quickly thrown in the towel, unable to obtain a commitment from the French, curbed by the state shareholder.

The French state is also present in the capital of PSA, through the public investment bank Bpifrance which holds about 12%.

Bercy declined to comment after the announcement of discussions between FCA and PSA.

PSA has never hidden its interest in consolidating the automotive sector. Mr Tavares said he was “open to any opportunity that might arise”.

“Everything is open, if we make money, we can dream of everything,” he said in March at the Geneva Motor Show, when press articles were already throwing him into the arms of FCA.

In recent years, PSA has pursued a policy focused on sales profitability and operational efficiency, rather than seeking volumes at all costs.

PSA Chief Executive Officer Carlos Tavares, Frankfurt, September 11, 2019.
PSA Chief Executive Officer Carlos Tavares, Frankfurt, September 11, 2019. (© AFP / Archives / Tobias SCHWARZ)

After Failing with Renault, Fiat Chrysler wants to get Engaged with PSA 1

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