The shareholders of France’s PSA Group and US-Italian rival Fiat Chrysler Automobiles NV were yesterday expected to approve their merger, creating the world’s fourth-biggest automaker by volume, Stellantis.
The outcome of the vote by PSA and Fiat shareholders was seen as a foregone conclusion, coming two weeks after the European Commission gave conditional approval to the megamerger announced in late 2019.
The 50-50 tie-up, which was delayed by the COVID-19 pandemic, is seen as crucial for the two groups to undertake the investment needed to transition to clean car technology.
Photo: Reuters
“This merger is a matter of survival for both Fiat and PSA,” said Giuliano Noci, professor of strategy at the Polytechnic University of Milan’s school of management, citing the “enormous technological and strategic challenges” faced by both, as well as the damage wrought by the pandemic.
The merger allows Fiat Chrysler to strengthen its presence in Europe and the French group to regain a foothold in the US.
Ranking behind global rivals such as Volkswagen AG, Renault-Nissan-Mitsubishi alliance and Toyota Motor Corp, Stellantis would be the fourth-largest automaker by volume and the third-largest by revenue, with a workforce of more than 400,000.
The new company would group producers such as Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo and Maserati, each of which would continue under their own brand names.
PSA and Fiat expect the merger to allow them to achieve billions of euros in synergies each year.
“Only the most agile, with a Darwinian spirit, will survive,” PSA CEO Carlos Tavares, who would take the helm of the merged group, said in November.
The European Commission had been worried the merger could affect competition in Europe’s lucrative van market, with PSA and FCA together accounting for 34 percent of market share.
To assuage those concerns, the commission said PSA would continue an agreement with Toyota to manufacture vans to be sold under the Japanese brand in Europe.
The disruptions wrought by COVID-19, which ground manufacturing to a halt for several weeks in the first half of last year, forced PSA and Fiat to change the terms of their tie-up to ensure it remained a merger of equals.
FCA agreed to lower the exceptional dividend to be distributed to its shareholders, while PSA agreed to share out its 46 percent stake in French automotive equipment maker Faurecia among all shareholders of the new company, rather than its shareholders alone as agreed to previously.
The two companies have so far shown relative resilience in the face of the pandemic.
Fiat Chrysler posted net profits of 1.2 billion euros (US$1.47 billion) in the third quarter, compared with losses of 1.04 billion euros in the second quarter, when much of the world was in lockdown.
PSA sold 589,000 fewer vehicles in the third quarter, but sold them for more money as part of a strategy to maximize profitability and cash flow, which boosted turnover by 1.2 percent.
At the time when the merger was announced Tavares said that no plant would be closed, but unions in France remain skeptical.
“On the whole, it’s a good insurance policy for the future of our group. Those who don’t make the shift risk being left by the wayside,” a representative for the CFTC union at PSA, Franck Don, said.
“What synergies will they find and what consequences will that have for sites in France?” he added.
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