Peugeot Finally Takes A Bite Out of Fiat Chrysler To Create 4th Biggest Auto Maker
Peugeot and Fiat have announced plans to merge. The deal comprises of a 50-50 share swap and will create the fourth biggest carmaker in the world. The entity will have a combined net worth of $50 billion and will be domiciled in the Netherlands. The late Sergio Marchionne had been seeking such an auto union for years arguing that consolidation was the only way forward for the future of the car industry.
Marchionne was correct in arguing about the benefits of consolidation in an industry undergoing considerable technological change. It is more beneficial for Fiat to lean on a partner because Fiat was and is a loss-making entity, effectively being propped up by its more profitable acquisition of Chrysler. However, now the deal is done what does consolidation actually mean? In this case, it literally means a 50-50 merger where everything is shared assets, production, platforms, technologies, sales territories and ultimately profits.
The merger hasn’t been signed just yet, discussions are on-going to finalize the smaller details and who gets what, but the deal is all but done. When the group is finally rubber-stamped into existence it will form a company with 8.7 million in annual vehicle sales and will make savings of around $4.1 billion.
The combined group will comprise of 11 brands, Peugeot, Citroen, DS, Opel, Vauxhall, Maserati, Alfa Romeo, Chrysler, Ram, Dodge, and Fiat. The group will have access to premium and mass passenger markets on top of light commercial vehicles and trucks.
FCA Group (Fiat-Chrysler) shareholders will receive a $6.1 billion dividend as a result of the merger. The deal will give the PSA Group access to Fiat’s North American territory and markets.
How will the savings be made? Whenever two companies merge and push the narrative of “savings” it really means plant closures and job losses. Not in the immediate present, but sometime in the immediate future.