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[Automotive News] FCA PSA Merger

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4th largest automotive group in the making...

Fiat Chrysler and Peugeot reach deal to merge

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DETROIT – From Daimler-Chrysler to Fiat Chrysler, the former American automaker Chrysler Corp. has gallivanted around the world to find partners to assist in its growth or help keep it afloat.

It now has its sights set on Peugeot maker PSA Group. Both the French carmaker and Fiat Chrysler on Wednesday confirmed they are in talks to create the world’s fourth-largest automaker with a roughly $50 billion valuation.

The PSA board approved the merger and the Fiat Chrysler board is set to meet Wednesday, a person familiar with the deal told CNBC. Executives have briefed regulators in the U.S. and France, the Wall Street Journal reported, citing unnamed sources.

Peugeot CEO Carlos Tavares is expected to lead the combined automaker as its CEO, while John Elkann, Fiat Chrysler chairman and heir of the Agnelli family dynasty that founded Fiat, would continue his role with the combined company, the WSJ reported.

The deal gives Peugeot six board seats and Fiat Chrysler five, according to the WSJ.

“We will not comment beyond the press release issued this morning,” PSA Spokesman Pierre-Olivier Salmon said in an email, citing a press release issued earlier in the day that confirmed the two companies were holding “ongoing discussions aiming at creating one of the world’s leading automotive groups.”

Fiat Chrysler spokesman Niel Golightly said he had “nothing to add at this time.”

Reports of the talks, including a potential “all-share merger of equals,” as the Wall Street Journal first reported, sent shares of Fiat Chrysler surging as much as 8% on Tuesday. The stock rose by less than 2% in midday trading Wednesday.

The confirmation of the talks comes about five months after Fiat Chrysler ended merger discussions with PSA’s French rival, Renault. Fiat Chrysler, the world’s seventh-largest automaker, has been on a quest for a tie-up to grow scale and consolidate costs for several years.

‘Litany of obstacles’

Even if the deal wins approval from both boards, it faces a lot of obstacles. Challenges include consolidation, clashing corporate cultures and government and regulatory approval, among other issues.

Talks of a potential tie-up between Fiat Chrysler and Renault ended earlier this year largely due to the French government, which owns a roughly 12.2% stake in Renault. The French government currently owns a 13.7% stake in PSA.

Bank of America Merrill Lynch analyst John Murphy cited the French government’s ownership as one of a “litany of obstacles” facing such a deal. Murphy said similar to Fiat Chrysler’s potential tie-up with Renault, the “industrial logic” is “unclear unless there is massive headcount reduction.”

Such a deal, according to Murphy, also could alienate U.S. buyers, lowering the potential benefit of the two automakers combining.

Even if the merger is approved by shareholders and regulators, “there is a material risk American consumers may shift to Ford and GM products due to FCA possibly no longer being perceived as an ‘American’ identity, not to mention the potential political implications of this potential deal.”

Bernstein analyst Max Warburton said a merger between Fiat Chrysler and Peugeot “has more logic” than one with Renault. He specifically cites the potential for Tavares to create “long-term value.”

“We ultimately think a deal could be made to work — this would be as much about raising performance as it would be about synergies,” he wrote in a Tuesday note to investors.

However, Warburton noted a deal between the two does little to increase business in China, the world’s largest auto market, and the timing is “sub-optimal” given FCA’s earnings are at all-time high.

Rewards

Analysts see the merger as a quick way for Peugeot to re-enter the U.S. market after a decades-long hiatus, while continuing to grow its European operations following the company’s acquisition of GM’s European business in 2017.

“This news is not unexpected, given that both companies have been actively exploring tie-ups with others to yield cost savings and other synergistic benefits,” said David Leggett, automotive editor at data analytics firm GlobalData.

For Fiat Chrysler, it would finally cement former CEO Sergio Marchionne’s vision of creating a global automaker with the resources to successfully compete in the ever-changing auto industry.

In 2015, Marchionne, who unexpectedly died in July 2018, called for industry consolidation in a presentation called “Confessions of a Capital Junkie.” Consolidation would save capital that was being wasted by automakers developing redundant technologies, he said.

“These were not hallucinations of somebody looking to grandstand in the industry,” Marchionne said at the time. “We have spent a lot of time trying to understand what makes this machine tick. And the machine can tick a lot better if certain things happened.”

Marchionne believed only a handful of the world’s largest automakers would survive and have the capital to compete as automakers push for autonomous and all-electric vehicles.

The deal with PSA would give Fiat Chrysler access to PSA’s newer vehicle platforms in Europe as well as emerging technologies.

Marchionne’s methodical combination of Fiat and Chrysler a decade ago is considered one of the more successful tie-ups for the auto industry in the recent years.

Chrysler’s previous “merger of equals” with German automaker Daimler-Benz in 1998 was a culture clash and failure that led to a divorce less than a decade later, followed by Chrysler spiraling into bankruptcy in 2009.

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It is official.

Groupe PSA and FCA plan to join forces to build a world leader for a new era in sustainable mobility

Discussions have opened a path to the creation of a new group with global scale and resources owned 50% by Groupe PSA shareholders and 50% by FCA shareholders. In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency.

  • The combination would create the 4th largest global OEM in terms of annual unit sales (8.7m vehicles)
  • At its inception, the combined company would realize among the highest margins in the markets where it would operate, based on FCA’s strength in North America and Latin America and Groupe PSA’s in Europe
  • The combination would unite the groups’ respective brand strengths across Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial – making them stronger together
  • The merged entity would bring together the companies’ extensive and growing capabilities in the technologies shaping the new era of sustainable mobility, including electrified powertrain, autonomous driving and digital connectivity
  • Approximately €3.7 billion estimated annual run-rate synergies without any plant closures resulting from the transaction
  • Highly respected combined management team recognised for exceptional value creation and with proven success in previous OEM combinations
  • Dutch parent company Board would have balanced representation and a majority of independent Directors. John Elkann as Chairman and Carlos Tavares as CEO and member of the Board

AJF3MgI.jpg

 

London and Rueil Malmaison 31 October 2019. The Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles N.V. (“FCA”) (NYSE: FCAU / MTA: FCA). have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger. Both boards have given the mandate to their respective teams to finalize the discussions to reach a binding Memorandum of Understanding in the coming weeks.

The plan to combine the Groupe PSA and FCA businesses follows intensive discussions between the senior managements of the two companies. Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.

The proposed combination would create the 4th largest global OEM in terms of unit sales (8.7 million vehicles), with combined revenues of nearly €170 billion[1] and recurring operating profit of over €11 billion[2] on a simple aggregated basis of 2018 results excluding Magneti Marelli and Faurecia. The significant value accretion resulting from the transaction is estimated to be approximately €3.7 billion in annual run-rate synergies derived principally from a more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology and from the enhanced purchasing capability inherent in the combined group’s new scale. These synergy estimates are not based on any plant closures.

It is projected that 80% of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at €2.8 billion.

The shareholders of each company would own 50% of the equity of the newly combined group and would therefore share equally in the benefits arising from the combination. The transaction would be affected by way of a merger under a Dutch parent company and the governance structure of the new company would be balanced between the contributing shareholders, with the majority of the directors being independent. The Board would be composed of 11 members. Five Board members would be nominated by FCA (including John Elkann as Chairman) and five would be nominated by Groupe PSA (including the Senior Independent Director and the Vice Chairman)[3]. The Chief Executive Officer would be Carlos Tavares for an initial term of five years and he would also be a member of the Board.

Carlos Tavares said: “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

Mike Manley said, "I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company."

The new group’s Dutch-domiciled parent company would be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and would continue to maintain significant presences in the current operating head-office locations in France, Italy and the US.

It is proposed that the by-laws of the new combined company would provide that the loyalty voting program will not operate to grant voting rights to any single shareholder in the Shareholders Meeting exceeding 30%[4] of the total votes cast. It is also foreseen that there would be no carry over of existing double voting rights but that new double voting rights would accrue after a three-year holding period after completion of the merger.

A standstill in respect of the shareholdings of EXOR N.V., Bpifrance Participations SA, DFG and the Peugeot Family would apply for a period of 7 years following completion of the merger. EXOR, Bpifrance Participations and the Peugeot Family would be subject to a 3-year lock-up in respect of their shareholdings except that the Peugeot Family would be permitted to increase its shareholding by up to 2.5% during the first 3 years following the closing, only by acquiring shares from Bpifrance Participations and DFG.

Prior to the completion of the transaction, FCA would distribute to its shareholders a special dividend of €5.5 billion, as well as its shareholding in Comau. In addition, prior to completion, Peugeot would distribute to its shareholders its 46% stake in Faurecia. This would enable the combined groups’ shareholders to equally share in the synergies and benefits that would flow from a merger while recognizing the significant value of FCA’s differentiated platform in North America and strong position in Latin America, including its market-leading margins in those regions. It would also reflect the added value that FCA’s higher-end global brands Alfa Romeo and Maserati would bring given their substantial development potential.

The extended portfolio would cover all market segments with iconic brands and strong products based on rationalized platforms and optimization of investments.

The proposal would be submitted to the information and consultation process of the relevant employee bodies, and would be subject to customary closing conditions, including final board approvals of the binding Memorandum of Understanding and agreement on definitive documentation.

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8 minutes ago, Mockngbrd said:

Bad + bad does not always equal good. 

Bad + Bad => Worse

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Some see it as simple mathematics, but not for me. They might need to review all their branding strategy as the very first step. This is not a competition for the most number of automotive brands under 1 single group...

A recap of all brands under the new group, all 16 brand all in. A little too many to manage, imo.

PSA

Peugeot
Citroën
DS
Opel
Vauxhall

 

FCA

Abarth
Alfa Romeo
Chrysler
Dodge
Fiat
Ferrari
Lancia
Maserati
Jeep
Ram
SRT

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9 minutes ago, Carbon82 said:

Some see it as simple mathematics, but not for me. They might need to review all their branding strategy as the very first step. This is not a competition for the most number of automotive brands under 1 single group...

A recap of all brands under the new group, all 16 brand all in. A little too many to manage, imo.

PSA

Peugeot
Citroën
DS
Opel/Vauxhall

 

FCA

Abarth
Alfa Romeo
Chrysler
Dodge
Fiat
Ferrari
Lancia
Maserati
Jeep
Ram
SRT

 

Edited by Davidtch

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1 hour ago, Carbon82 said:

It is official.

Groupe PSA and FCA plan to join forces to build a world leader for a new era in sustainable mobility

Discussions have opened a path to the creation of a new group with global scale and resources owned 50% by Groupe PSA shareholders and 50% by FCA shareholders. In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency.

  • The combination would create the 4th largest global OEM in terms of annual unit sales (8.7m vehicles)
  • At its inception, the combined company would realize among the highest margins in the markets where it would operate, based on FCA’s strength in North America and Latin America and Groupe PSA’s in Europe
  • The combination would unite the groups’ respective brand strengths across Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial – making them stronger together
  • The merged entity would bring together the companies’ extensive and growing capabilities in the technologies shaping the new era of sustainable mobility, including electrified powertrain, autonomous driving and digital connectivity
  • Approximately €3.7 billion estimated annual run-rate synergies without any plant closures resulting from the transaction
  • Highly respected combined management team recognised for exceptional value creation and with proven success in previous OEM combinations
  • Dutch parent company Board would have balanced representation and a majority of independent Directors. John Elkann as Chairman and Carlos Tavares as CEO and member of the Board

AJF3MgI.jpg

 

London and Rueil Malmaison 31 October 2019. The Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles N.V. (“FCA”) (NYSE: FCAU / MTA: FCA). have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger. Both boards have given the mandate to their respective teams to finalize the discussions to reach a binding Memorandum of Understanding in the coming weeks.

The plan to combine the Groupe PSA and FCA businesses follows intensive discussions between the senior managements of the two companies. Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.

The proposed combination would create the 4th largest global OEM in terms of unit sales (8.7 million vehicles), with combined revenues of nearly €170 billion[1] and recurring operating profit of over €11 billion[2] on a simple aggregated basis of 2018 results excluding Magneti Marelli and Faurecia. The significant value accretion resulting from the transaction is estimated to be approximately €3.7 billion in annual run-rate synergies derived principally from a more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology and from the enhanced purchasing capability inherent in the combined group’s new scale. These synergy estimates are not based on any plant closures.

It is projected that 80% of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at €2.8 billion.

The shareholders of each company would own 50% of the equity of the newly combined group and would therefore share equally in the benefits arising from the combination. The transaction would be affected by way of a merger under a Dutch parent company and the governance structure of the new company would be balanced between the contributing shareholders, with the majority of the directors being independent. The Board would be composed of 11 members. Five Board members would be nominated by FCA (including John Elkann as Chairman) and five would be nominated by Groupe PSA (including the Senior Independent Director and the Vice Chairman)[3]. The Chief Executive Officer would be Carlos Tavares for an initial term of five years and he would also be a member of the Board.

Carlos Tavares said: “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

Mike Manley said, "I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company."

The new group’s Dutch-domiciled parent company would be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and would continue to maintain significant presences in the current operating head-office locations in France, Italy and the US.

It is proposed that the by-laws of the new combined company would provide that the loyalty voting program will not operate to grant voting rights to any single shareholder in the Shareholders Meeting exceeding 30%[4] of the total votes cast. It is also foreseen that there would be no carry over of existing double voting rights but that new double voting rights would accrue after a three-year holding period after completion of the merger.

A standstill in respect of the shareholdings of EXOR N.V., Bpifrance Participations SA, DFG and the Peugeot Family would apply for a period of 7 years following completion of the merger. EXOR, Bpifrance Participations and the Peugeot Family would be subject to a 3-year lock-up in respect of their shareholdings except that the Peugeot Family would be permitted to increase its shareholding by up to 2.5% during the first 3 years following the closing, only by acquiring shares from Bpifrance Participations and DFG.

Prior to the completion of the transaction, FCA would distribute to its shareholders a special dividend of €5.5 billion, as well as its shareholding in Comau. In addition, prior to completion, Peugeot would distribute to its shareholders its 46% stake in Faurecia. This would enable the combined groups’ shareholders to equally share in the synergies and benefits that would flow from a merger while recognizing the significant value of FCA’s differentiated platform in North America and strong position in Latin America, including its market-leading margins in those regions. It would also reflect the added value that FCA’s higher-end global brands Alfa Romeo and Maserati would bring given their substantial development potential.

The extended portfolio would cover all market segments with iconic brands and strong products based on rationalized platforms and optimization of investments.

The proposal would be submitted to the information and consultation process of the relevant employee bodies, and would be subject to customary closing conditions, including final board approvals of the binding Memorandum of Understanding and agreement on definitive documentation.

Will the new group call PFC? Peugeot-Fiat-Chrylser.

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Maybe hope for FCA? But I see a big overhaul at FCA needed. PSA is doing quite well on it's own and had the more advance mass production platform than FCA.

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Why not?

 

Shared chasis and in R&D to save cost. 

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1 hour ago, kobayashiGT said:

Will the new group call PFC? Peugeot-Fiat-Chrylser.

PSFCA ?? [laugh][laugh][laugh]

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3 hours ago, Carbon82 said:

Some see it as simple mathematics, but not for me. They might need to review all their branding strategy as the very first step. This is not a competition for the most number of automotive brands under 1 single group...

A recap of all brands under the new group, all 16 brand all in. A little too many to manage, imo.

PSA

Peugeot
Citroën
DS
Opel
Vauxhall

 

FCA

Abarth
Alfa Romeo
Chrysler
Dodge
Fiat
Ferrari
Lancia
Maserati
Jeep
Ram
SRT

Rojak car of sorts 

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73333321_3060079110882899_68063967359721

 

"Refocus on brand" = crossover, crossover, crossover. hahaha... bye bye alfa.

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Problematic Car Brands Merged with Problematic Cars Brands,become Super Problematic Cars..😭

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FCA Just Slaughtered Alfa Romeo’s Future Product Plan – 8C And GTV Coupes Among The Victims

697ac4e9-maserati-future-product-pla.jpg

During last year’s Capital Markets Day presentation, Fiat Chrysler Automobiles revealed bold plans for Alfa Romeo and Maserati.

Of course, FCA has a horrible record of following through with their plans and that will happen once again.

The changes to Maserati’s product plan are minor, but the redesigned Levante has been pushed back to 2023. The GranTurismo and GranCabrio have also been given a second lease on life as they’ll be redesigned instead of replaced by an all-new sports car which was preferably referred to as the Alfieri.

As for the timeline, 2020 will see the introduction of facelifted versions of Levante, Ghibli and Quattroporte. That same year, the company will introduce an “all-new sportscar” which will be available with an electric powertrain.

In 2021, there will be a convertible version of the aforementioned sports car as well as an all-new GranTurismo. The company will also introduce their so-called “D-UV” which is a crossover that will slot beneath the Levante. All three models will also be offered with an electric-only powertrain.

The product launches slow down for 2022, but include a redesigned GranCabrio and Quattroporte. Like the rest of the all-new models, they’ll be offered with an electric powertrain and a Level 3 semi-autonomous driving system.

While Maserati’s plan largely carries over, the same can’t be said about Alfa Romeo. FCA has decided to cut capital spending and rationalize Alfa Romeo’s product plan to focus “on current market strengths with reduced global reach and overlap with other Group brands.”

1d3a3007-alfa-romeo-future-product-p.jpg

As a result, their future lineup has been gutted. Last year’s plan called for an assortment of new models including an updated Giulietta as well as an all-new E-UV, 8C and GTV. All those models have apparently been canceled.

Instead, we’ll get facelifted versions of the Giulia and Stelvio in 2021.  However, there’s no mention of their previously announced long wheelbase variants.

A compact SUV (C-UV),  previewed by the Tonale concept, will be launched in 2021 and offered with a plug-in hybrid powertrain. It will be joined by a previously unannounced B-UV that is slated for 2022. Little is known about the smaller crossover, but it will be offered with an electric powertrain.

 

@kobayashiGT @Tianmo I think the new group are more likely to be known as PFC (Peugeot-Fiat-Chrysler) instead of PSFCA, as PSA is for Peugeot S.A. while FCA is for Fiat-Chrysler Automobiles (the 'A' have different meaning in he 2 group).

@Hamburger costing saving in R&D, technology and part sharing are the push factors for most merger, but there is a limit to how much it can save (or yield). If say any of the brands under the group are not distinctive enough to gain a decent market share, the lower sales  volume will eventually make it less profitable than before.

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No no no....

Bad+bad is badder...it’s as simple as 3+1=4 and 1+2=3 

 

F190C512-6DE2-4589-BDE7-179E536C30D6.jpeg

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Italian,German,British,French & America...i wonder all can ''work'' together.??

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American, Italian, French. They are not know for reliable engineering...... So what can go wrong? 

 

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