The shareholders of Fiat Chrysler Automobiles and PSA, the French manufacturer of Peugeot, Citroën and Opel vehicles, voted on Monday to merge to achieve the extent necessary to be part of a technological change and by the Surviving pandemic-ridden industry.
The new company, named Stellantis, will employ 400,000 people and will include the Jeep, Ram Trucks, Alfa Romeo and Maserati brands. It would be the fourth largest automaker in the world after Toyota, Volkswagen and the Renault-Nissan-Mitsubishi alliance based on vehicle sales in the first nine months of 2020.
Fiat Chrysler and PSA executives agreed on a merger in late 2019 and have been working on the details and regulatory approval ever since.
Together, the two companies believe they stand a better chance of making a transition to electric vehicles that is happening faster than most analysts predicted.
“We are experiencing a profound era of change in our industry,” said John Elkann, chairman of Fiat Chrysler, on video to shareholders, comparing it to the founding of Fiat at the beginning of the automobile age. “We believe that the next decade will redefine mobility as we know it.”
The new company, based in the Netherlands and with large branches in France, Italy and the USA, will face major challenges. Neither Fiat Chrysler nor PSA have a strong presence in China, the world’s largest auto market, and they have been slow to adopt electric vehicles.
The two companies have some assets, such as popular Jeep and Ram brands, said Peter Wells, a professor at Cardiff Business School in Wales. Fiat and PSA vans are selling fast in Europe as more goods are bought online.
But Fiat Chrysler and PSA also have serious problems, Wells said, such as underutilized assembly lines that will make it difficult for them to keep promises to unions and the French government, a major shareholder, not to close factories.
PSA and Fiat Chrysler “have a number of structural problems that are not going to go away easily,” Wells said.
The French Economy and Finance Minister Bruno Le Maire and his Italian counterpart Stefano Patuanelli said in a joint statement that they “warmly welcome” the merger that will create a “new European champion”.
Jan. 4, 2021, 2:51 p.m. ET
“Both governments will also watch out for Stellantis’ contribution to industrial employment in Italy and France,” they added.
Perceived interference by the French government led Fiat to withdraw from the merger talks with Renault in 2019.
Fiat and PSA have been hard hit by the pandemic. PSA vehicle sales fell 30 percent in the eleven months to November, while Fiat Chrysler sold 30 percent fewer cars and trucks in the nine months to September, the most recent reporting period.
The damage caused by the pandemic prompted companies to adjust the terms of the merger in September. A special dividend to Fiat Chrysler shareholders, due to be paid when the deal closes in January, has been cut from € 5.5 billion to € 2.9 billion, or $ 3.6 billion. In return, Fiat Chrysler shareholders will receive a larger share of possible future payouts.
Mr Elkann said the pandemic made the reasons for the merger “even more compelling”.
Carlos Tavares, the managing director of PSA, will bear the same title in the new unit. Mr Elkann, a scion of the Italian Agnelli family and descendant of the man who founded Fiat in 1899, is to become chairman. Mike Manley, Fiat Chrysler’s general manager, will lead the combined company’s American operations.
“We are ready for this merger,” said Tavares during the PSA shareholders’ meeting held online. He said the merger would allow the companies to share the cost of developing electric vehicles and give PSA access to the American market while reducing reliance on Europe.
Cardiff Business School’s Mr Wells said that despite its flaws, the merger offered Fiat Chrysler and PSA probably the best chance of surviving in a highly competitive environment.
“If it didn’t go through, the consequences would be much worse,” said Mr. Wells. “The handwriting would have been on the wall for these two companies.”