Fiat Chrysler and Peugeot agree to the merger they need to survive

Shareholders of Fiat Chrysler Automobiles and French company PSA, the maker of Peugeot, Citroen and Opel cars, on Monday voted to merge in a bid to get the size needed to stay in an industry dominated by technological change and hit by the epidemic.

The new company, to be called “Stellants”, will employ 400,000 people and will include Jeep brands, Ram trucks, Alfa Romeo and Maserati. It will be the fourth largest car maker in the world after Toyota, Volkswagen, Renault, Nissan and Mitsubishi, based on vehicle sales during the first nine months of 2020.

Fiat Chrysler and PSA executives At the end of 2019, it agreed to the merger The details and regulatory approval have been worked out since then.

Together, the two companies think they have a better chance of surviving the transition to electric cars, which is It happens faster Than most analysts expected.

“We are living in a deep era of change in our industry,” John Elkan, president of Fiat Chrysler, told shareholders via video, drawing comparisons with the founding of Fiat at the dawn of the automotive era. “We believe the next decade will redefine mobility as we know it.”

The new company, which will be based in the Netherlands and has large operations in France, Italy and the United States, will face significant challenges. Neither Fiat Chrysler nor PSA has a strong presence in China, the world’s largest auto market, and have been slow to introduce electric cars.

Peter Wells, a professor at Cardiff Business School in Wales, said the two companies have some assets, such as the iconic brands Jeep and Ram. Fiat and PSA delivery trucks are selling fast in Europe as people buy more goods online

Mr Wells said Fiat Chrysler and PSA are also facing serious problems, such as underutilized assembly lines, which will make it difficult for them to fulfill their promises to unions and to the French government, the main contributor, not to shut down factories.

Mr. Wells said PSA and Fiat Chrysler “have a host of structural problems that won’t easily go away”.

Bruno Le Maire, French Minister of Economy and Finance, and his Italian counterpart, Stefano Patuanelli, said in a joint statement that they “warmly welcome” the merger, which will create a “new European champion”.

“The two governments will also pay attention to Stilantis’ contribution to industrial employment in Italy and France,” they added.

Led the perceived intervention by the French government Fiat withdraws from merger talks with Renault In 2019.

Fiat and PSA have been hit hard by the pandemic. PSA vehicle sales fell 30 percent in the 11 months through November, while FCA sold 30 percent fewer cars and trucks in the nine months to September, the most recent reporting period.

The damage caused by the epidemic prompted companies to revise merger terms in September. The special dividend to Fiat Chrysler shareholders, which will be paid when the deal closes later in January, has been reduced to € 2.9 billion, or $ 3.6 billion, from € 5.5 billion. In return, Fiat Chrysler shareholders would receive a larger slice of potential future payments.

Alkan said the pandemic made the rationale for the merger “more convincing”.

Carlos Tavares, CEO of PSA, will hold the same title in the new entity. Mr. Elkann, a descendant of the Italian Agnelli family and descendant of the man who founded Fiat in 1899, is in the line of chairing the board of directors. Mike Manley, CEO of Fiat Chrysler, will direct the operations of the combined US company.

“We are ready for this merger,” Mr. Tavares said during the PSA shareholder meeting, which took place online. He said the merger would allow companies to share the cost of developing electric cars and give PSA access to the US market while reducing its dependence on Europe.

Mr Wells of Cardiff Business School said that despite all its drawbacks, the merger likely provided FCA and BSA their best chances of surviving in a tough competitive environment.

“If not, the consequences will be much worse,” said Mr. Wells. “The handwriting could have been on the wall for these two companies.”