Fiat and Peugeot announce plans to merge

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Fiat Chrysler and Peugeot are entering a merger that will create the world’s fourth largest automotive manufacturer with combined revenues of nearly €170bn.

Peugeot 508

According to a joint statement, the decision to merge has been brought about by the shared conviction ‘that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.’

The joint merger is expected to lead to annual savings of approximately €3.7bn that will be brought about in part by spreading the cost of large-scale investments in vehicle platforms, powertrain and technology. Consequently, neither company anticipates any plant closures.

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Peugeot boss Carlos Tavares will assume the role of CEO for an initial term of five-years. “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” he said.

"I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination,” added Fiat CEO Mike Manley. “We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company."

The new group’s Dutch-domiciled parent company will be listed on Euronext, the Borsa Italiana and the New York Stock Exchange and will continue to maintain ‘significant presences’ in the current operating head-office locations in France, Italy and the US.

Commenting on yesterday’s announcement, Julien Brunel, automotive sector specialist at management consultancy Vendigital, said: “For both brands, this is a hugely positive development. The merged business is planning to make significant cost savings by sharing common platforms for vehicle development and it will benefit from increased leverage in the supply chain.

"The synergies between the many car brands in their portfolios are strong across most segments; from small and medium cars to SUV and premium ranges. Both groups already successfully collaborate in the field of light commercial vehicles.

“The merged business will be sharing platforms and technologies with a particular focus on all-electric and hybrid vehicles, an area where Fiat Chrysler in particular has been lagging behind. PSA will take advantage of the new group’s expanded footprint to make a comeback on the North American market, where they have been absent for more than 30 years.”