Italian car manufacturers Fiat Chrysler and PSA (Peugeot) of France announced on Thursday that they plan to merge, a combination that would create Europe’s largest carmaker and the fourth largest in the world.
After intensive discussions and deliberations, the two companies came to an agreement before going ahead to announce the merger. The two automakers described the transaction as a way to share the enormous cost of an industrywide transition to electric and autonomous vehicles.
The two companies have a combined annual sales of 8.7 million vehicles and 170 billion euros, or $190 billion, the new entity would be slightly larger than General Motors in terms of cars produced, and well ahead of Ford Motor Co.
Despite all that, the two companies will still have considerable weaknesses. Both lack a strong presence in China, and they are behind rivals like Renault or Volkswagen in developing electric vehicles.
In Europe, Fiat and PSA, with its Peugeot and Citroën brands, will surpass Volkswagen to become market leaders. They also have a strong lineup of SUVs, which are increasingly popular with European buyers.
“Both groups would control Europe’s fastest growing segment and the source of profits,” said Felipe Munoz, senior analyst at Jato Dynamics. “However,” he said in an email, “both companies lag behind rivals in terms of electrification.”
The chief of PSA Carlos Tavares, , will be the chief executive of the new company. Mr. Tavares, described by people who have met him as charming but tough, has already expanded PSA’s presence in Europe by acquiring Opel from G.M. in 2017.
John Elkann, the chairman of Fiat Chrysler, will be the chairman of the new company. Mr. Elkann is a scion of Italy’s powerful Agnelli family, which has long controlled Fiat.
The merger will be accomplished by exchanging shares, with each company contributing 50 percent of the new entity. Shareholders of Fiat Chrysler will receive a special dividend of 5.5 billion euros.
Earlier in the year FIAT and Renault tried to make a merger but that collapsed because of meddling by the French government. But the French finance minister, Bruno LeMaire, said on Thursday that he “favorably welcomed” the deal between Fiat Chrysler and PSA.
The French government has cautioned that it intends to monitor the companies to ensure that the PSA retained a significant presence in France. The government will also seek a commitment from the new merged company to be involved in a European effort to create an industry for electric car batteries, Mr. LeMaire said.
Many have welcomed the merger saying that the company would bring competition to the likes of Volkswagen and Toyota and possibly create more jobs after a decade of cuts.
Author: Moses Echodu
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