Fiat Chrysler and Peugeot owner announce $48 billion merger

[banyan]

London (CNN Business)Fiat Chrysler and Peugeot owner PSA Group have announced the terms of a $48 billion merger that would create the world's third-largest automaker and help spread the huge cost of developing electric and autonomous vehicles.

Shareholders of each automaker would own 50% of the combined operation, the companies said in a joint statement on Thursday. A binding agreement could be finalized within weeks, the statement said.
The combined company would be based in the Netherlands, which is the current headquarters of Fiat Chrysler. John Elkann, the US-born scion of the Italian family that founded Fiat, would be chairman of the combined company, while PSA chief executive Carlos Tavares would be CEO.

The combined company would have roughly 410,000 employees and annual revenues of $190 billion. Fiat Chrysler (FCAU) and PSA (PUGOY) sold a combined 8.7 million vehicles last year, just ahead of General Motors (GM), which sold 8.3 million, and not far behind Volkswagen (VLKAF) and Toyota (TM), which each sold over 10 million.

The merger comes amid a global auto sales slowdown. At the same time, carmakers are scrambling to invest in the electric and hybrid technologies needed to meet strict new emissions targets in China and Europe. The autonomous vehicles of the future also present a threat to traditional industry business models. The huge amount of capital needed to meet these new challenges has forced some automakers to find partners and turned others into acquisition targets.

Jessica Caldwell, Edmunds' executive director of industry analysis, said the planned merger of Fiat Chrysler and France's PSA "isn't really about product or expanding to new markets." Instead, it's about funding research into the vehicles of the future.
"The electrified, autonomous future everyone is waiting for just isn't feasible without automakers merging and forming strategic alliances to share research and development costs," she said. "This is a smart move by both Fiat Chrysler and PSA to ensure their companies continue to be viable and relevant as the industry evolves."

The carmaker with the most urgent need to combine in this case was PSA, which has fallen behind on developing clean cars. Electric vehicles account for less than 0.3% of its overall sales, and it had to pay Tesla (TSLA) for credits needed to comply with EU emissions standards. Fiat Chrysler has also trailed larger rivals in developing electric vehicles.
Even the biggest players in the industry are making changes. Volkswagen and Ford (F) are working together to develop electric and self-driving vehicles, while German carmakers BMW (BMWYY) and Daimler (DDAIF) have formed a joint venture that will develop driverless technology. Honda has invested in General Motors' self-driving car unit.

A history of mergers
It's not the first time that PSA has used a merger to bulk up. In 2017 it paid $2.3 billion to buy GM's European business, adding the Opel and Vauxhall brands as GM exited the continent. While GM lost about $22.4 billion in Europe over the 17 years before that deal, Opel and Vauxhall are now profitable for PSA.

Teaming up during times of adversity is also a familiar strategy for Fiat, which started the purchase of US rival Chrysler out of bankruptcy a decade ago. It completed the merger five years later. But even following that deal, Fiat Chrysler was still significantly smaller than many of its rivals, putting it at a disadvantage in purchasing muscle as well as spreading out the cost of research and development.
Sergio Marchionne, the late CEO who brought Fiat and Chrysler together, spoke publicly about his desire for a deal with GM. He also expressed interest in a combination with a tech company such as Google or Apple.

Earlier this year, Fiat Chrysler made a merger proposal to another French automaker, Renault, a company of comparable size to PSA. But it withdrew the offer, saying that "it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."

The French government owns 15% of Renault and is its largest shareholder; it also owns 12.2% of PSA. France has said it would approve the Renault deal only if there were protections for French jobs and factories.

New challenges
Fiat Chrysler and PSA will face huge challenges even if their merger is completed.
Both have struggled to break into China, the world's largest market for new cars. Automakers have sold 10% fewer cars there so far in 2019, but the joint ventures of Fiat Chrysler and PSA have been hit especially hard. Sales dropped by a third for Fiat Chrysler in the first half of the year, and more than 50% for PSA.

PSA also has no presence in the United States, the world's second largest car market. Miniscule US sales of Fiat branded cars show the difficulty in bringing mass market European brands, as opposed to luxury brands, to US showrooms.
"Both Fiat Chrysler and PSA have a lot of quirky city cars that couldn't be further from what US car shoppers want right now," said Caldwell.

https://www.cnn.com/2019/10/31/busin...oup/index.html

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[T-37]

Nice to see all of the worlds leading quality manufacturers now under one roof.

[BeepBoop]

Originally Posted by T-37

Nice to see all of the worlds leading quality manufacturers now under one roof.

This was my first thought as well

So are they just gonna keep absorbing all the european failures as they themselves fail? What's the end-game here. What do they get from Peugeot that will help them turn their own ship around?

[neg_matnik]

Originally Posted by T-37

Nice to see all of the worlds leading quality manufacturers now under one roof.

Originally Posted by BeepBoop

This was my first thought as well

So are they just gonna keep absorbing all the european failures as they themselves fail? What's the end-game here. What do they get from Peugeot that will help them turn their own ship around?

There's nothing fundamentally wrong with PSA; it's one of the best auto manufacturers in Europe at the moment, second only to VW.
Their sales figures speak for themselves and they turned Opel/Vauxhall around as GM had been neglecting it for years.
But, don't take my (I admit, somewhat biased) word for it; look them up for yourselves.

[subyski]

This will help Peugeot as they return to the US market as they can rely on FCA's dealer network.

[neg_matnik]

Originally Posted by subyski

This will help Peugeot as they return to the US market as they can rely on FCA's dealer network.

I think the merger will probably help Fiat in Europe more than anything else because they are in trouble over there.
FCA sold 1M cars in Europe in 2018 and that's including all their brands; PSA sold 1.6M and that's excluding Opel/Vauxhall.
Adding Opel/Vauxhall, the number swells to 2.5M; #2 in Europe; #1 is VW group with 3.7M and #3 is Renault group with 1.6M.
FCA is #5 right now.

[Genericuser1]

Peugeot 508 wagon would be welcome.

[arghx7]

The fundamental problem of excess capacity and the need for BEV R&D will remain.

[neg_matnik]

Originally Posted by arghx7

The fundamental problem of excess capacity and the need for BEV R&D will remain.

Agreed.
But, instead of FCA and PSA investing into BEV separately and on their own, they can combine resources and share the same platform. Maybe it's going to make things easier... or maybe not...

[torquemada]

a merger of FCA and PSA will kill some of the brands, I think Opel will die first, than Lancia.

And I don´t believe that PSA has something in their portfolio that would sell well in the US.

[neg_matnik]

Originally Posted by torquemada

a merger of FCA and PSA will kill some of the brands, I think Opel will die first, than Lancia.

And I don´t believe that PSA has something in their portfolio that would sell well in the US.

I don't think PSA was planning to rely on FCA (or anybody else) to come back to the U.S.; but, nonetheless, I agree, they're probably going to have a tough time selling their current products in the UDSM.
But, hey, like they say in French: qui ne tente rien n'a rien (no pain, no gain).

[4S-TURBO]

Originally Posted by Genericuser1

Peugeot 508 wagon would be welcome.

Looks great!

[hi5.0]

So when Fiat leaves, Peugeot will step in? I'm OK with that.

[Keshav]

Europe depending on JEEP to keep them in the battle in a war against Germany and Japan. Sounds familiar.

[torquemada]

Originally Posted by Keshav

Europe depending on JEEP to keep them in the battle in a war against Germany and Japan. Sounds familiar.

if you rely on the actual Jeep, you have lost the war before it has begun

[subyski]

Between all the brands that exist under the PSA and FCA umbrella, there's quite a bit of overlap in models. The one "big brand" that just seems so weak and can't imagine to survive among all of them is Chrysler.

[Sid03SVT]

Originally Posted by subyski

Between all the brands that exist under the PSA and FCA umbrella, there's quite a bit of overlap in models. The one "big brand" that just seems so weak and can't imagine to survive among all of them is Chrysler.

Hey, Chrysler has like 4 luxury models; granted 3 of them are the same minivan, but 4 is twice as much as 2; so you know, it's twice the brand power.

I agree with you - FCA/Chrysler needs to S*** or get off the pot.

[neg_matnik]

Originally Posted by Sid03SVT

Hey, Chrysler has like 4 luxury models; granted 3 of them are the same minivan, but 4 is twice as much as 2; so you know, it's twice the brand power.

I agree with you - FCA/Chrysler needs to S*** or get off the pot.

I'd buy a 300 in a heartbeat if it had all the hardware from the Charger Scat Pack with its Dynamics Package.
Basically, the 300 SRT8 they stopped selling after MY2014...

[Sid03SVT]

Originally Posted by neg_matnik

I'd buy a 300 in a heartbeat if it had all the hardware from the Charger Scat Pack with its Dynamics Package.
Basically, the 300 SRT8 they stopped selling after MY2014...

wide body 300 hellcat.... just think about it...

[4S-TURBO]

Originally Posted by Sid03SVT

wide body 300 hellcat.... just think about it...

nasty.

[Keshav]

Originally Posted by Sid03SVT

wide body 300 hellcat.... just think about it...

chop the roof and sell it with drag tires

[KC]

Maybe that will put the GTV and 8C back on the roadmap?

I was hoping to get a Giulia Coupe.

--kC

[KC]

Originally Posted by Genericuser1

Peugeot 508 wagon would be welcome.

No one will buy it when they see it only has 222hp. The Buick TourX has 250hp (and near 300ft/lb tq) AND AWD, and no one is buying.

--kC

[4S-TURBO]

Originally Posted by KC

Everyone one will buy it when they see it has a 485hp Hemi. The Buick TourX has 250hp (and near 300ft/lb tq) AND AWD, and no one is buying because the Hemi will decimate all.

--kC

It's damn near solid gold.

[subyski]

Originally Posted by Sid03SVT

Hey, Chrysler has like 4 luxury models; granted 3 of them are the same minivan, but 4 is twice as much as 2; so you know, it's twice the brand power.

I agree with you - FCA/Chrysler needs to S*** or get off the pot.

So maybe Chrysler should bring back other model brands like Town & Country, move Caravan to the brand, and add a "German luxury" version called the Routan. Then they can add "Grand" to all of them and just like that, they will have 9 more models.