The world’s eighth-largest automaker Fiat Chrysler Automobiles has finally merged with French multinational automobile manufacturer Peugeot S.A. (PSA) in a $52 billion deal to create the world’s fourth-largest automaker by volume known as Stellantis NV.
The Creation Of Stellantis
The automobile firms first announced their plans to merge in October 2019. The transaction was delayed due to the economic downturn caused by the pandemic. The merged firm, Stellantis has annual sales of around 8.1 million vehicles and revenues of over $203 billion. Executives hope that the enlarged global footprint and scale will allow Stellantis to invest enough resources to transition to electric vehicles and compete with rivals like Toyota and Volkswagen.
Portfolio
For Chrysler, this will be the third time that it will be merged into a new firm. Stellantis will have a wide portfolio of 14 brands under its umbrella starting from FCA’s Jeeps and Rams to Peugeot’s range of cars and SUVs. Stellantis itself isn’t a brand, it is just the name of the newly created holding company.
Shares
The merged firm will be domiciled in Amsterdam, even though the major operations in Auburn Hills, Paris, and Italy will continue. Shares will start trading on Monday in Milan and Paris, while in New York, they will start trading on Tuesday owing to the Martin Luther King Jr. holiday. They will be traded under the ticker symbol, “STLA”.
Board & Management
PSA CEO Carlos Tavares will take the reigns of Stellantis. Tavares, a Portugal native, is known for his skill of turning around distressed companies. In 2017, PSA purchased General Motors’ brands, Opel and Vauxhall, which were making losses for decades. Tavares made the brands profitable in just 18 months after acquisition. However, 9,000 early retirements and voluntary layoffs occurred during the process.
Investors and analysts will now keep an eye on how Tavares will plan to deal with the challenges faced by Stellantis which include a weak performance in China and excess production capacity. Tavares is set for his first press conference as CEO of Stellantis on Tuesday along with chairman John Elkann.
FCA chairman John Elkann will resume his position at Stellantis. For the board, PSA has appointed six out of eleven members, including CEO Tavares. FCA CEO Mike Manley will not be a part of the board of directors but will continue to steer operations in North and South America – a strong spot for Fiat Chrysler.
Synergies
FCA and PSA expect to realize synergies of around $6.1 billion annually, specifying that there will be no plant closures and investors will be interested to see how Stellantis achieves that. FCA CEO Manley said that 40% of the manufacturer’s estimated synergies will result from condensed platforms and powertrains and efficient R&D investments while 35% will come from savings on purchases and another 7% from sales operations and general expenses. Optimizing other functions including supply chain, logistics, quality, and after-market operations are expected to further contribute to synergies.
Regulatory Concerns
The European Commission has been concerned about the merger affecting competition in Europe’s van market, considering that PSA and FCA together own 34% of the market. Consequently, the commission has required PSA to continue its deal with Toyota to make vans to be sold under Toyota’s brand in Europe.
The Way Forward
PSA will have more access to the American market through the merger while FCA will now have access to PSA’s developed vehicle platforms designed for electric vehicles. The EV market has been growing exponentially recently – a factor Stellantis could capitalize on. Moreover, the shared resources of the two firms will help to deal with the economic downfall caused by Covid-19. PSA’s global sales dropped 27.8% last year.
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