Caribbean Business Reports

Motor vehicle manufacturers Fiat Chrysler Automobiles (FCA) and Peugeot SA (PSA) last week agreed to an equal partnership merger of their businesses into one entity that could realise revenues of approximately €170 billion.

“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 vigour and enthusiasm, ” Carlos Tavares, chairman of the managing board of Groupe PSA, said.

The merger will make the combined operation the fourth-largest global automotive original equipment manufacturer (OEM) by volume and the third-largest by revenue. In addition, the two auto manufacturers will combine management expertise, capabilities, resources, and scale.

According to a joint release from FCA and PSA, “With combined financial strength and skills, the merged entity will be particularly well placed to provide innovative, clean and sustainable mobility solutions, both in a rapidly urbanising environment and in rural areas around the world.”

“… the benefits of uniting the two companies’ strengths and core competencies, will ensure the combined business can offer all its customers best-in-class products, technologies and services and respond with increased agility to the shift taking place in this highly demanding sector,” the document continued.

At present, both companies are projecting a sales volume of 8.7 million vehicles, which will include luxury, premium and passenger vehicles, as well as SUVs, trucks and light commercial vehicles.

With combined revenues of €170 billion — 46 per cent from the European market and 43 per cent from North America — the car manufacturers predict that, based on 2018 financial results, the new company will earn more than €11 billion in recurring operating profit. They also expect an operating profit margin of 6.6 per cent.

“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,” Mike Manley, chief executive officer of FCA, said.

Expected to to be completed within then next 12-15 months, the merger subject to closing conditions, which include approval by shareholders of both companies at their respective extraordinary general meetings and the satisfaction of antitrust and other regulatory requirements.