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4 years ago .Washington D.C., DC, USA

Peugeot, Fiat merger expected to be approved by shareholders today

  • The merger was delayed due to the pandemic
  • The deal will allow Fiat Chrysler to strengthen its presence in Europe
  • The new firm will group producers such as Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo and Maserati

Written by:Ayushi
Published: January 04, 2021 04:49:22 Washington D.C., DC, USA

To create the world’s fourth-biggest automaker by volume, Stellantis, the shareholders of France’s PSA and US-Italian rival Fiat Chrysler are likely to permit their merger on Monday, reported AFP.

The result of the vote by PSA and Fiat shareholders is seen as a foregone conclusion, coming two weeks after the European Commission gave conditional approval to the mega-merger announced in late 2019.

Notably, the 50-50 deal, which is seen as a crucial move for the two groups, was delayed due to the pandemic.

Also read: Ford pulls out of plan to cede India operations to Mahindra

“This merger is a matter of survival for both Fiat and PSA,” Giuliano Noci, professor of strategy at Milan Business School said, citing the “enormous technological and strategic challenges” faced by both as well as the damage wrought by the pandemic.

The coalition will allow Fiat Chrysler to strengthen its presence in Europe and the French group to get back at the forefront in the US.

Ranking behind global rivals such as Volkswagen, Renault-Nissan-Mitsubishi and Toyota, Stellantis will be the fourth-largest automaker by volume and the third-largest by revenue, with a workforce of over 400,000.

The new firm will group producers such as Peugeot, Citroen, Fiat, Chrysler, Jeep, Alfa Romeo and Maserati, each of which will 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 chief Carlos Tavares, who will 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% of market share.

Also read: The most notable supercars of 2020

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 2020, 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% 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 ($1.47 billion) in the third quarter, compared with losses of 1.04 billion euros ($1.27 billion) 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 maximise profitability and cash flow which boosted turnover by 1.2%.

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