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Shareholders of Fiat Chrysler Automobiles and PSA, the French car maker Peugeot, Citroën and Opel, voted on Monday to merge to acquire the scale necessary to survive in an industry plagued by technological change and crushed by the pandemic.
The new company, to be called Stellantis, will employ 400,000 people and will include the Jeep, Ram Trucks, Alfa Romeo and Maserati brands. It would be the world’s fourth-largest automaker, 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 at the end of 2019 to merge and have worked on the details and obtained regulatory approval since then.
Together, the two companies believe they have a better chance of surviving a transition to electric vehicles, which is happening faster than most analysts had predicted.
“We are living a profound era of change in our industry,” John Elkann, president of Fiat Chrysler, told shareholders via video, making comparisons to the founding of Fiat at the dawn of the automotive age. “We believe the next decade will redefine mobility as we know it.”
The new company, which will be based in the Netherlands with significant operations in France, Italy and the United States, 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 introduce electric vehicles.
The two companies have certain strengths, such as the popular Jeep and Ram brands, said Peter Wells, professor at Cardiff Business School in Wales. Fiat and PSA delivery vans are selling fast in Europe as people buy more goods online.
But Fiat Chrysler and PSA also have serious problems, Mr Wells said, such as underutilized assembly lines, which will make it difficult for them to deliver on promises made to unions and the French government, a major shareholder, not to. not to close factories.
PSA and Fiat Chrysler “have a bunch of structural issues that won’t go away easily,” Wells said.
Bruno Le Maire, the French Minister of Economy and Finance, and Stefano Patuanelli, his Italian counterpart, 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 Stellantis’ contribution to industrial employment in Italy and France,” they added.
Perceived interference from the French government led Fiat to withdraw from merger negotiations with Renault in 2019.
Fiat and PSA have been hit hard by the pandemic. PSA’s vehicle sales fell 30% in the 11 months to November, while Fiat Chrysler sold 30% fewer cars and trucks in the nine months to September, the benchmark period. the most recent.
The damage from the pandemic prompted companies to adjust the terms of the merger in September. A special dividend to Fiat Chrysler shareholders, to be paid upon closing of the deal later in January, has been reduced 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 payments.
Mr Elkann said the pandemic had made the rationale for the merger “even more compelling.”
Carlos Tavares, CEO of PSA, will hold the same title in the new entity. Mr. Elkann, descendant of the Italian Agnelli family and descendant of the man who founded Fiat in 1899, is in line to be president. Mike Manley, chief executive of Fiat Chrysler, will lead the combined company’s US operations.
“We are ready for this merger,” Tavares said at the PSA shareholders meeting, which took place online. He said the merger would allow companies to share the cost of developing electric vehicles and give PSA access to the US market while reducing its dependence on Europe.
Mr Wells of Cardiff Business School said that, for all its flaws, the merger probably gave Fiat Chrysler and PSA their best chance of surviving in a brutally competitive environment.
“If that didn’t go through, the consequences would be much worse,” Wells said. “The writing would have been on the wall for these two companies.”
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