PSA Board Green Lights Negotiations For Merger With FCA

The board of the PSA Group has reportedly given the green light to CEO Carlos Tavares to further negotiate a merger with Fiat Chrysler Automobiles.

Citing a source familiar with the matter, Reuters reports that the two car makers are moving closer to a deal that could create a new global entity able to reshuffle the balances within the auto industry.

FCA’s board is expected to meet with the board of Exor, the holding company of the Agnelli family that controls Fiat Chrysler, later today the report adds.

Related: PSA And FCA Merger Talks Officially Confirmed

A formal agreement is anything but certain at this point, as the deal could collapse as negotiations dig deeper into the details of the merger, but the two car makers are making quick progress towards an announcement that could come as early as Thursday morning.

Previous reports suggested that if the deal between FCA and PSA goes through, it would have FCA Chairman John Elkann as the chairman of the merged entity and PSA CEO Carlos Tavares would be CEO. The board of the merged company would give six seats to PSA and five seats to FCA.

Earlier today, both Fiat Chrysler and the PSA Group confirmed they were in talks about a possible merger, without providing any further information. The two car makers sold a combined 8.7 million vehicles last year, which would position their proposed merged unit in fourth place, ahead of General Motors.

The French government currently holds a 12 percent stake in PSA, as does the Peugeot family and Dongfeng Motor, which in turn is owned by the Chinese government.

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  • Giannis Antypas

    And Citroen meets Maseratti once again…

    If only the larger economies of scale meant they could also bring back the hydropneumatic suspension.

    • Matt

      Yes and more recently FIAT Commercial’s tie up with PSA. I wonder if FIAT is working on a Ducato successor…

      • mist

        Actually, Fiat commercial tie-up with Citroën dates back to the following the Citroën-owned Maserati era and Citroën’s near bankruptcy. Fiat had shares in Citroën and wanted to buy Citroën but the French Peugeot was “encouraged” by the French government to buy Citroën instead. The partnership still continues to this day between PSA and FCA, even though the partnership was supposed to end with PSA’s former tie-up with General Motors – hence the new partnership between FCA and Renault. What a mess.

        • Oscar Cereijo

          It’s very common that brands work together in specific areas or models. PSA shares engines with Ford; Fiat provided platform to previous GM’s Opel Corsa, Combo…; Renault shared utility vehicles with Opel and Daimler; PSA worked with Fiat and now with Toyota in minicars and utilities; and so, and so on…

  • RobPul

    A bit surprised by the board arrangement of 6 PSA to 5 FCA if confirmed, as well as the speculations of non-US mass market vehicles operations (basically most of what they’ll sell in Europe, Latin America and Asia) being based in Paris.

    FCA is considerably larger than PSA both by volume and by revenues, would have expected more weight in the merger. I guess it’s the price the Agnelli family decided to pay to become the largest shareholder of the 3rd largest group in the world.

    • Romain AA

      look at their respective stock values, it’s that simple

      • RobPul

        PSA’s slightly higher market value but the two sides are going to bring value to parity by selling other businesses and giving out dividends, so before merger they’ve be valued the same.

        Therefore it’s still surprising that FCA accepted to be under-represented in the board.

        From other article it appears there have been a lot of negotiations to make the Peugeot family accept a minority stake compared to the Agnelli’s Exor, and an advantageous governance structure has been what they’ve been given in return.

    • designer_dick

      FCA might lead by volume, but PSA’s operating margin is considerably higher. Financially, it’s the stronger of the two companies, and its market value reflects that. The share price is €26.05 vs FCA’s €12.87.

      • RobPul

        2018 FCA net income US$ 3.63bn, PSA US$ 3.29

        So no, FCA have higher volume, higher revenues and higher profit.

  • Mr. EP9

    It’s happening one way or another. Brace yourselves.

  • Dennis James

    It looks like in a few years there will be just one global automotive company 🙂

    • Bash

      I do believe in the same idea, i think it is eventually going to happen with every major mega industry i the world, it is very evident that the world economy is shifting toward this strategy. its a matter of time, few decades maybe.

  • designer_dick

    A merger of equals where PSA (six seats on the board) is slightly more equal than FCA (five seats) sounds about right to me. Both companies are profitable, but PSA’s operating margin is considerably higher at 8.7%, and it’s managed to maintain and improve its profitability while spending big bucks on acquiring Opel and Vauxhall (not to mention returning those two brands to profitability after twenty years of losses) engineering new platforms, implementing its electrification strategy and developing other new technologies.

    Meanwhile, FCA maintains its carefully constructed illusion of robust profitability by recycling ageing platforms across as many of its cars as it can get away with, spending very little on new technologies, and milking the RAM and Jeep lines for all they’re worth.

    • Oscar Cereijo

      First I would think PSA should focus on completing its portfolio with a luxury brand (it worked for VW, but not for Ford), but now I see this merge would help not only PSA’s brands in North American markets, but also FCA’s in European and Asian markets

  • ThatGuy

    If all this happens, i might have and opportunity to get a current era Dodge in right hand drive. Man i was hoping one day it might happen. Yes i know it still may not, and if it does they might not do right hand drives, but still this gives me hope.

    • Alduin

      Are you really that desperate for a right hand drive Dodge?

      • ThatGuy

        Yep, very we had them before they pulled out. However it was the Nitro, Caliber and Journey. No charger, challenger, dart and avenger. Yes i know they not the most reliable but they epic in my opinion.
        Will still be cheaper to maintain than a 3 series or A4.

  • Maisch

    I cant really get it, why would anyone want to partner with FCA. There is so much investment needed with all the age old platforms around the world, I cant really see this ending up well.

    • Oscar Cereijo

      PSA needs American (both north and south) factories and dealers. After what they managed with Opel, can’t wait to finally see (among other) Fiat, Dodge and Chrysler’s rebirth.

      • Maisch

        i wonder if its really a good move, the US market is very special, very low margins, cars that cant be sold to the rest of the world, extremely crowded market etc. For FCA it will probably be a improvement, hopefully the “keep investments as low as posssible” destructive death spiral can be ended, and they cam reclaim some ground. Im not sure the money will be there though.

        • Oscar Cereijo

          You know there is more America than just the USA, as there are more cars and business than just pick ups… If one thing is clear, “American Big Three” were never ready for any changes and always making wrong and late decisions in domestic and foreign markets…

    • RobPul

      Economies of scale, access to the vast North American market, strength in the SUV and pick-up market, strong presence in Latin America. It won’t require much investment for PSA’s European platforms to be adapted to FCA and for the new entity to become strong in three major markets.

  • Alduin

    This might be a big merger but it will also signals the companies with the worst reliability track records ever. All they need now is Nissan Renault Mitsubishi to be involved and they’re all set.

    • ThatGuy

      I will say with FCA the reliability is the worst, Peugeot and Citreon have come a very long way and while their reliability is in total average being above average for mechanical and engines and below average for electronics and interior wear. This benefits FCA more with platforms and engines and even electronics as Renault-Nissan became.

      Both groups are average in terms of reliability but that no issue, in general they will be good car for the life of the cars but with all of then depreciation is their achilles heel.

  • AintYerPa

    Turd plus turd does not equal gold. Just a bigger turd…

  • sidewaysspin

    Who knew a french company could get so big? Don’t bail them out when the inevitable collapse comes.

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