Deal would create 4th largest automaker
Both FCA and PSA looking to slash costs, increase profits
The deal to marry Fiat Chrysler Automobiles and the PSA Group is ready to get EU approval, says a new report. The $38B merger to create the fourth-largest automaker in the world needed some tweaking to the wording but is ready to go through.
News of the pending approval that would create the new automaker Stellantis comes from Reuters, citing “people close to the matter” with the information. The all-stock merger that was announced well before the COVID-19 pandemic would tie-up FCA’s brands, including Jeep, Ram, Fiat, and Maserati with Peugeot, Citroen, and Opel. It would also target $6B in annual cost cuts without closing factories from any of the brands.
According to the report, to help assure regulators that they would not dominate the commercial van segment in Europe, PSA offered to build more vans for Toyota at a joint venture plant in France as well as selling vans to Toyota at close to cost price. FCA and PSA will also allow dealers in some areas to perform repairs on rival brands.
Some terms of the deal were restructured as recently as last month as both sides worked to conserve cash and cut even more costs due to pandemic-related changes to the industry. The two sides have said that they expect 40 percent of the cost savings to come from product-related expenses (development cost-sharing) with 40 percent from purchasing and the rest from other business areas.
The official deadline for the decision merger is Feb 2, 2021, and the report says the final EU decision could come by end of year, allowing that deadline to be met and let the companies complete the merger in the first quarter.