Fiat Chrysler Automobiles NV (NYSE:FCAU) and French maker of Peugeot, PSA Group merger can move forth after shareholders unanimously approved the proposed $52 billion deal. The merger will result in the fourth largest auto company with the scale to compete.
Fiat-PSA Merger
The combined company will operate under the name Stellantis and will employ close to 400,000 people. In addition, it will boast of a robust portfolio of auto brands including Jeep, Ram Trucks, and the Maserati brands. French and Italian finance ministers have welcomed the merger, expected to result in a new European champion.
Stellantis will have its headquarters in the Netherlands but with manufacturing operations in France, Italy, and the United States. With the lack of major presence in China, the largest auto market could come to bite the company.
The two companies merge in an effort to enhance their manufacturing scale, to better compete in an industry experiencing a number of technological changes. Together, the two companies stand a better chance to survive the ongoing transition into electric cars.
Stellantis Headwinds
Amid the merger, PSA and Fiat Chrysler face grave problems including underused assembly lines which could make it difficult for Stellantis to fulfill promises to Unions and the French government. The company is also late to the party on the development of electric cars, a spectacle that is taking the auto industry by storm.
Similarly, PSA and Fiat Chrysler are merging having felt the full brunt of the COVID-19 pandemic. In the 11 months through November of last year, PSA’s vehicle sales were down 30%. Fiat Chrysler also reported a 30% decline in cars and truck sales for the nine months through September.
A decline in sales forced the two companies to adjust the terms of their merger plan. Fiat Chrysler was forced to cut a dividend offering to shareholders by half to 2.9 billion euros from 5.5 billion euros. However, Fiat Chrysler’s shareholders are entitled to a bigger share of future payouts under the combined company.