Fiat Chrysler Automobiles and PSA Group plan to merge in the biggest auto tie-up since Daimler's ill-fated purchase of Chrysler in 1998. The merger will help the two automakers to shoulder the costly investments in new technologies transforming the industry, creating the world's fourth-biggest automaker with a market value of about $47 billion.
Here are key details of the deal:
FCA Chairman John Elkann, 43, will have the same role in the new company for an initial five-year term. PSA CEO Carlos Tavares, 61, will be CEO of the merged group, also for an initial five-year term. Reports say FCA CEO Mike Manley, 55, will take the role of chief operating officer.
The new group will be domiciled in the Netherlands, with listings in Paris, Milan and New York. The company will have 11 board members including Tavares and five nominated by PSA and five by FCA, including labor representatives from each.
The companies did not say what would happen when Tavares leaves. Two sources close to PSA told Reuters last week that French stakeholders were seeking reassurances they would retain a numerical advantage on the new company's board.
FCA and PSA will have annual sales of 8.7 million vehicles and generate recurring operating profit of more than 11 billion euros ($12.1 billion) on revenue of nearly 170 billion, based on aggregated 2018 results. Once completed the merger is expected to generate 3.7 billion euros in annual synergies starting from the fifth year. The companies said they expect to reach 80 percent of synergies by the fourth year.
The companies expect to make about 40 percent of savings from product-related expenses, 40 percent from purchasing and 20 percent from other areas, such as marketing, IT and logistics, they said in a statement.
Future of factories
The companies have potential manufacturing capacity of 14 million vehicles, according to forecasters LMC Automotive. They have yet to say precisely how they plan to tackle that potential excess capacity but have said no plants will be closed.
NordLB analyst Frank Schwope says the automakers will have to consider shutting plants. "The merged group will have to make massive savings and probably also close plants, even if the CEOs' choice of words is different."
Unions have warned they will resist job losses. The finance ministers of both France and Italy welcomed the deal, but also said they would closely monitor any impact on jobs in their respective countries.
The group will have 14 brands. Tavares said in November that there were no current plans to scrap any of the brands, but he acknowledged that managing the portfolio would be part of the "challenge" he and his leadership team will face.
More than two-thirds of production will be concentrated on two platforms. Automotive News Europe sources say 3 million vehicles will built annually on PSA's EMP2 compact/midsize platform and 2.6 million on PSA's CMP small platform.
The EMP2 platform covers the upper part of the compact segment up to midsize models. It is used for models such as the Peugeot 3008 and 5008, Citroen C5 Aircross and Opel Grandland, all of which are SUV/crossovers. The Peugeot 508 midsize model is the first passenger car to use the architecture. EMP2 can accommodate gasoline and diesel powertrains, as well as gasoline plug-in hybrids. PSA said EMP-2 could also underpin future pure battery models.
The CMP platform covers the small car and the lower part of the compact segment. It is used by the new generations of Peugeot 208 and 2008, Opel/Vauxhall Corsa and DS 3 Crossback. It allows for gasoline, diesel or full-electric power.
Ram pickups and larger Jeep models will continue to use FCA underpinnings.
Exor will become the new automaker's single largest investor, with a stake of just over 14 percent. Exor is the holding company of the Agnelli family which controls FCA with a 29.2 percent stake. The Peugeot family will have a 6 percent stake, as will the French government's Bpifrance investment bank. China's Dongfeng Motor will have 4.5 percent after reducing its 12.2 percent stake in PSA by selling 30.7 million shares to PSA in a move that could help smooth U.S. approval.
PSA and FCA expect the deal to close in the next 12 to 15 months. They will have to win over regulators in the U.S. and Europe. "This is obviously a huge consolidation of the sector that will surely require a considerable effort in securing competition (approval) across a variety of jurisdictions and especially the European Union," said Jonathan Branton, head of competition at global legal business DWF.
Financial analysts Bernstein said PSA-FCA will have dominant share in low margin small cars in Italy and a massive share in profitable light commercial vehicles so EU regulators will closely scrutinize the merger.
Reuters and Bloomberg contributed to this report