Fiat Chrysler and Peugeot to merge into $46b automaker

Bloomberg

PSA Group and Fiat Chrysler Automobiles NV agreed to combine in a deal that will create the world’s fourth biggest auto manufacturer.
The French and Italo-American carmakers signed a binding accord for a 50-50 merger of their businesses, they said on Wednesday. The combined company will be led by PSA Chief Executive Officer Carlos Tavares, with Fiat Chairman John Elkann holding the same role at the enlarged firm.
The merger would forge a regional powerhouse to rival Germany’s Volkswagen AG and have a stock-market value of about $47 billion, surpassing Ford Motor Co. The tie-up also brings together two carmaking dynasties — the billionaire Agnelli clan of Italy, led by Elkann, and the Peugeots of France.
The deal will give Peugeot-maker PSA a long-sought presence in North America and should help Fiat gain ground in developing low-emission technology, where it’s lagged rivals. Yet the company will still be heavily reliant on Europe’s saturated auto market, and poorly positioned in China, the world’s largest country for car sales.
Fiat Chrysler shares rose as much as 1.8% by 9:07 am in Milan, while PSA climbed as much as 4.5% in Paris trading. Fiat has gained 16% since the companies revealed their merger talks in late October, while PSA has fallen 8.3%.
Like executives across the industry, Tavares and Elkann are responding to growing pressure to pool resources for product development, manufacturing and purchasing in the face of trade wars and an expensive shift toward electric and self-driving technology.
“The challenges of our industry are really, really significant,” Tavares told reporters on a call Wednesday. “The green deal, autonomous vehicles, connectivity and all those topics need significant resources, strengths, skills and expertise.”

Planned Savings
The companies are aiming to extract 3.7 billion euros in annual synergies from the deal, without closing any plants, unchanged from the target they announced when they disclosed their merger discussions.
The challenges will be manifold, from improving Fiat’s struggling European operations to meeting tough new rules on emissions that kick in next year in Europe.
Tavares, known as a hard-nosed cost-cutter, will also have to navigate the political crosscurrents in France, Italy and the US, where the automakers have deep national roots.