Fiat Chrysler, Peugeot considering merger

Fiat Chrysler, Peugeot considering merger

Complex foreign ownership, subsidiary spinoffs could complicate the potential pairing.

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October 31, 2019

Cleveland, Ohio – Officials with France’s PSA Group, owner of the Peugeot brand, and Fiat Chrysler Automobiles (FCA) say they are considering a merger that would create one of the world’s largest automakers, but the deal would face significant challenges.

Both companies simply confirmed talks without sharing any details of how a merger would work, but the rationale is clear. With automakers facing regulatory demands for electric and autonomous vehicles, companies will need to invest heavily in research and development, so scale becomes vitally important.

That was PSA’s logic forbuying General Motors’ Opel European brand in 2017, and it was behind FCA’s failed attempt at merging with France’s Renault earlier this year.

Combined, the two companies had $205.5 billion in revenue in 2018 and earned $7.2 billion in profits.

Geographically, the companies compete heavily in Europe, but PSA has no presence in North America where FCA has Jeep, Dodge, Ram, and Chrysler production and sales. PSA is much stronger than FCA in China, giving the potential merged company new products to sell into the world’s largest car market (by unit volume, the U.S. leads in dollar volume).

However, the deal could get tricky very quickly. The Agnelli family, descendants of Fiat’s founders, own the larger block of FCA stock, controlling about 29% of shares. PSA, on the other hand, is a socialist-capitalist hybrid with 20% of shares held by various French national banks and agencies, 12% owned by China’s Dongfeng Motor (its largest partner in Asia), and 12% owned by the Peugeot family.

Founded by Mao Zedong, Dongfeng’s ownership by China’s government would be an especially difficult issue for U.S. securities regulators.

The companies would also have to deal with a complex web of subsidiaries. FCA is already considering the possible spinoff of its Comau robotics division, and PSA owns nearly half of Faurecia, an automotive supplier with a strong presence in North America.

Still, the ability for FCA to gain better access to Asia and for PSA to gain access to North America might be worth the effort. Soon after it bought Opel, PSA set up an office in the U.S. to explore exports here, and FCA officials have said the company need to expand in fast-growing Asian markets.

The failed Renault merger shows how difficult these tie-ups can be, and neither company shared details on negotiations other than stating talks had begun.

About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 19 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.

rschoenberger@gie.net