French multinational automobile manufacturer, PSA Group and it’s Italian-American counterpart Fiat-Chrysler (FCA) have entered into talks about a potential merger.
Rabat – A joint venture between the two firms would make them the 4th largest automaker in terms of sales behind Volkswagen, Renault-Nissan, and Toyota.
International media sources reported the news on Wednesday, October 30.
In the wake of the announcement, FCA shares in Milan increased to over 9% higher in morning trading. Meanwhile, PSA shares climbed more than 6% in Paris.
If the joint-venture comes to light, the chairman of the board of directors of PSA, Carlos Tavares, would become managing director of the new entity. PSA-FCA board of directors would be chaired by FCA boss John Elkann, heir to the Agnelli dynasty.
In 2018, PSA sold a total of 3.9 million vehicles, reaching a turnover of €74 billion. Fiat-Chrysler, on the other hand, sold 4.8 million vehicles for €110 billion.
Commenting on the possible joint-venture, Patrick Michel, head of the FO trade union at PSA said that there are advantages to be gained from the joint-venture.
“I remain dubious—but I do see a number of advantages … this would give PSA greater heft vis-a-vis giants such as Toyota or Volkswagen, and it would give Fiat access to technology allowing it to respect future CO2 emission limits,” said Michel.
Between them, the automobile giants employ 400,000 people globally and would have a wide range of car brands being manufactured under one roof, including Alfa Romeo, Chrysler, Citroën, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot, and Vauxhall.
Although discussions may be translated into actions, speculation is rife that the ongoing talks may be affected by political pressure from PSA shareholders, including the French government.
The negotiations come four months after FCA attempted to unite with Renault, also part-owned by the French government. Discussions were affected by the French state.
Analyst Michael Hewson at CMC Markets UK said on Wednesday that political pressure from Paris could be an obstacle, given that the French government holds an approximately 12% stake in PSA.
“It is hard not to see that this attempt by Fiat might well go the same way as the failed Renault attempt earlier this year,” wrote Hewson. “Business and government always make uncomfortable bedfellows.”
Through the PSA-FCA merger, Peugeot-Citroen would consolidate its position in the US market and the same for FCA in the European market.
FCA aims to jump into the electric car market and the production of self-driving cars and sees PSA’s expertise on the development of technologies as an advantage in the field.