fiat psa merger adjusted for eu approval
Source: istock, Fiat, Peugeot

Fiat and PSA Merger Adjusted for EU Approval

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Oct. 29 2020, Updated 10:59 a.m. ET

A merger between Fiat Chrysler and PSA, the manufacturer of Peugeot vehicles, may receive EU approval to create the fourth-largest automaker in the world. The all-share merger was first announced in 2019.

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FCA and PSA merger

According to Reuters, automakers face two challenges—funding the development of cleaner vehicles and navigating costs and changes amid the COVID-19 pandemic. A $38 billion merger between Fiat Chrysler and PSA should help meet these challenges. 

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Reuters also reported that the merger seeks to cut annual costs by 5 billion euros or $6 billion without closing any factories. 

Antitrust concerns are an issue in the merger, so some of the agreement has been modified. FCA and PSA will allow dealers to perform repairs on rival brands, which will help ease antitrust issues. 

With the EU having similar antitrust requirements, PSA offered to work with Japanese automaker Toyota, ramp up its joint van venture, and sell the vans at close to cost price. The deal could damage small van competition in several European countries, according to CNBC

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In May, the companies announced that they would waive a planned dividend payment of $1.3 billion due to impacts from the coronavirus pandemic, according to IndustryWeek

What is Faurecia?

Faurecia is a major global automotive supplier. The company's mission is “to develop technologies for Sustainable Mobility.” Headquartered in France, Patrick Koller is the company's CEO. French car manufacturer Groupe PSA (Peugeot S.A.) is its controlling shareholder with 46.34 percent ownership, according to Faurecia’s website

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PSA's earnings

There are concerns about the merger’s equilibrium. PSA’s “market capitalization has declined since the merger’s announcement,” reported IndustryWeek

What does Stellantis mean?

Stellantis is the name that will be given to the new auto company uniting Fiat, Jeep, Dodge, Ram, and Maserati with others like Peugeot, Opel, and DS. The word derives from the Latin verb “stello” or “to brighten with stars,” as reported by CNBC

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fiat chrysler jeep
Source: Pixabay

Auto brand names like Alfa Romeo, Chrysler, Jeep, Peugeot, and Fiat will remain the same after the merger is complete. The 50-50 merger is expected to be completed during the first quarter of 2021. 

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The companies’ combined press release stated that the merger will create “one of the new leaders in the next era of mobility while at the same time preserving all the exceptional value and the values of its constituent parts,” according to CNBC.

Stellantis will aim to use profits from U.S. sales of Jeep SUVs and Ram pickup trucks to assist in costs to develop zero-emission vehicles for sale in Europe and China.

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FCAU's stock price today

Fiat Chrysler Automobiles closed at $12.28 on Oct. 28—down 4.88 percent. 

PSA's stock price today

Peugeot S.A. was at a price of 15.28 euros as of 8:58 a.m. ET (1:58 p.m. CET) on Oct. 29. 

One of the largest automakers in the world

Stellantis would be the fourth-largest automaker after the merger based on volume. It would be third in terms of sales, as reported by IndustryWeek

In September, the three largest passenger automakers in the world were Volkswagen, Toyota, and Daimler—based on 2019 revenue. 

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