Report: Fiat Chrysler and PSA Group Boards OK Merger Deal

Report: Fiat Chrysler and PSA Group Boards OK Merger Deal
The merger could herald Peugeot’s return to the U.S. market. [Photo: PSA Group]

The boards of Fiat Chrysler Automobiles (FCA) and PSA Group approved a merger proposal Tuesday to become the world’s fourth-largest auto manufacturer, according to recent reports. Sources familiar with the merger talks say an announcement is coming on a joint memorandum of understanding (MOU).

A Bloomberg report outlined details of the board meetings. In their proceedings, PSA Group’s board unanimously approved the deal, while FCA’s directors also signed off late Tuesday. At the moment, both companies have not commented officially on approving the deal

Combined, the merged company would produce about 9 million vehicles each year. That would put them ahead of General Motors, Hyundai, Ford and Honda as the world’s fourth largest automaker. It would also surpass Ford Motor Company in value, with a stock market capitalization of $46 billion. The joint company will be a 50-50 venture operated in the Netherlands, led by current PSA Group CEO Carlos Tavares, with FCA’s John Elkann as chairman.

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What does it mean?

The merger will see both companies combine resources and potentially mix product pools across global markets, including the U.S. It will give PSA Group an avenue to re-introduce the Peugeot brand to North America. What’s more, the deal will let FCA use PSA Group’s development resources to make some progress on low-emissions powertrains and electrification.

The deal is still subject to regulatory approval, particularly by U.S. authorities. China’s Dongfeng Motor Corp. holds a 12 percent stake in PSA, which will decline to 4.5 percent as a result of the merger. The company also sold a portion of its holdings to the French automaker, but that doesn’t necessarily leave the deal free and clear. U.S. economic adviser Larry Kudlow expressed concerns over a Chinese company’s stake in the combined company. He said the Trump administration would review the merger, Bloomberg reported last month.