Big news coming out of the auto industry today is that Fiat Chrysler Automobiles (FCA) and Peugeot (PSA) have today signed a binding agreement providing for a 50/50 merger of their businesses. The merger is reportedly worth $50bn. The FCA PSA merger will create the 4th largest global automotive OEM by volume and 3rd largest by revenue. The new company will include Fiat, Jeep, Ram, Dodge, Alfa Romeo, Chrysler, Maserati, Peugeot, DS, Opel and Vauxhall.

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Interesting times ahead

The combined company will have annual unit sales of 8,7 million vehicles, with revenues of nearly €170 billion, recurring operating profit of over €11 billion and an operating profit margin of 6,6 per cent, all on a simple aggregated basis of 2018 results.

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Completion of the proposed combination is expected to take place in 12-15 months, subject to customary closing conditions, including approval by both companies’ shareholders at their respective Extraordinary General Meetings and the satisfaction of antitrust and other regulatory requirements. The FCA PSA merger creates a diversified business with among the highest margins in its core markets of Europe, North America and Latin America.

The efficiencies that will be gained from optimising investments in vehicle platforms, engine families and new technologies while leveraging increased scale will enable the business to enhance its performance and create additional value for stakeholders. More than two-thirds of run rate volumes will be concentrated on two platforms, with approximately three million cars per year on each of the small platform and the compact/mid-size platform.

In their own words

Carlos Tavares, chairman of the managing board of Groupe PSA, said: “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services. I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm.”

Mike Manley, chief executive officer of FCA, added: “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”