PSA and FCA Confirm Merger Plan

Auto giants Fiat Chrysler and France's PSA Group have finally confirmed one of the most popular rumors of recent time and released the plan of a possible merger, which may give birth to the world's fourth-largest automaker. The joint company will be headquartered in the Netherlands, where the tax regulations are quite liberal. The newfound alliance will be led by the current PSA president Carlos Tavares, while FCA director John Elcan will be appointed as the chairman of the board.

The proposed union between major automakers, with a combined workforce amounting to 410,000 of regular workers, may lead to establishment of a new big player in the automotive industry half-owned by each party (i.e. 50/50 distribution of shares). The management structure of the new enterprise would be distributed between the active shareholders. It is said that the board would include 11 members, 5 nominated by PSA and 5 by FCA, with one more member added for solving deadlock situations.

The potential deal between these automotive businesses estimated at $50 billion (€45 billion) may help both parties to succeed on an extremely competitive international market and to deal with technological challenges related to the electrification trend dominating the auto industry all over the world. Both hope that this huge deal will help to achieve cost savings and other benefits of €3.7bn without any factory closures. It is planned to achieve by means of joint investments in shared vehicle platforms, powertrains and infotainment/self-driving solutions, and thanks to the growing parts purchasing capacity.

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It is interesting to point out that the merger — which is not guaranteed — comes after an unsuccessful attempt to merge Fiat Chrysler and Renault. That transaction failed partly due to unwillingness from the French government, which is a part-owner of Renault, because of apprehensions related to possible wave of employee dismissals.

If this deal happens, the new company will take the lead over the following brands:

The merger may also become some kind of a safety net, as currently the automotive industry is going through the period notable for volatile demand and the necessity of solid investments in sophisticated technologies to comply with severe environmental regulations. If the merger is approved, it would give PSA access to the promising US market reinforcing FCA's positions in Europe.