Peugeot Fiat merger makes it the fourth-largest automaker in the world

MANILA: The Groupe PSA and Fiat Chrysler Automobiles (FCA) have announced 50/50 merger that will create the world’s fourth-largest automaker in the world.

The $48 billion merger of PSA and FCA come amid slow global automotive sales, which could worsen as global economies also slow or even fall into recession. At the same time, automakers are scrambling to come up with electrified and hybrid technologies to meet stricter emissions targets and as demand for green energy vehicles surges.

As most automotive companies see electrification as the path to the future, the traditional industry business models are under threat. Thus, more capital is needed to meet the demands of these new challenges. This forced more and more automakers to find partners. And in the case of PSA and FCA, a mutually beneficent, synergistic merger.

Under the merger, the four automakers under Groupe PSA—Peugeot, Citroen, DS, and Opel/Vauxhall and the nine carmakers under FCA— Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati, and Ram will be joined together under one roof to create the fourth-largest automaker in the world. Next to the likes of VW Group, Toyota, and the Renault-Nissan-Mitsubishi Alliance.

If you are worried if some of the brands from FCA or PSA will get the ax, you don’t need to worry. PSA CEO Carlos Tavares assured that both PSA and FCA have no plans to pull out any of the 13 brands under the new alliance. "I see that all these brands, without exception, have one thing in common: they have a fabulous history, we love the history of car brands, it gives us a foundation on which we can project ourselves into the future. So today, I don't see any need, if this deal is concluded, to remove brands because they all have their history and they all have their strengths."

Besides, all the brands complement each other geographically according to Tavares. And he does have a point. Most of FCA’s revenue comes from North America where PSA is a minor player. On the other hand, PSA gets most of its sales from Europe.

The newly-formed company will be based in the Netherlands where the FCA is currently headquartered. John Elkann, a descendant of the Fiat founder will be sitting as the chairman, while PSA chief executive Carlos Tavares would take the CEO post. In a joint statement from the two companies, shareholders of each automaker would own 50 percent of the combined operation.

Also Read: Fiat-Chrysler and Renault to come together