On Dec. 18, Fiat Chrysler Automobiles N.V. and Peugeot S.A. (also known as Groupe PSA), made automotive history by agreeing to a binding 50-50 merger of their businesses that’ll wind up becoming a massive $50 billion international car conglomerate (the third largest by revenue in the industry and the fourth largest by volume).
The merged entity, which will be based in the Netherlands, aims to benefit by pooling resources and reducing costs, optimizing investments in vehicle platforms and clean, safe and cutting-edge sustainable transport technology, enhancing purchasing performance and scale and diversifying and amplifying their standing in their respective existing core markets and reshaping strategy in other regions.
As reported first by the Wall Street Journal, the combined company’s name is still undecided.
Describing the merger, Mike Manley, CEO of FCA, stated that this is a union of “two companies with incredible brands and a skilled dedicated workforce.” Manley went on to say, potentially alluding to the FCA’s recent legal woes with General Motors and Peugeot’s diesel scandal in 2017, that both have “faced the toughest of times and have emerged as agile, smart, formidable competitors.”
Carlos Tavares, chairman of the managing board of Groupe PSA, echoed the optimistic sentiment in the official statement. “I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm,” Tavares said.
Tavares will be the unnamed company’s CEO, and current chairman of Fiat Chrysler, John Elkann, will retain his title as chairman.
Projected fiscal outcomes of the Combination Agreement, plans which were first announced back in October, include selling 8.7 million vehicles annually, with revenues of approximately $189 billion, a recurring operating profit of over approximately $14 billion and an operating profit margin of 6.6%.
All monetary predictions provided were based on an aggregation of 2018 results, excluding French auto-parts supplier Faurecia (PSA is divesting its 46% stake in the company) and Italian automotive tech developer Magneti Marelli (which FCA sold in May 2019).
The merger’s profits won’t come in for a while—completion of the transaction is expected to take place in 12-15 months and is subject to approval from shareholders and the satisfaction of antitrust and other regulatory requirements.