The marriage between PSA and Fiat-Chrysler has been officially signed since Thursday, October 31, towards the creation of a new global automotive giant. This new entity, which would be based in the Netherlands, would join the automotive giants, becoming the No. 4 worldwide and will weigh 50 billion dollars on the stock market. The distribution of activities within this new automotive mastodon will be "50-50" and the shareholders of the two groups will each hold half of the capital.
For years, Fiat-Chrysler has been seeking to form an alliance with another automotive group. Last April, the marriage with Renault-Nissan was well underway, but the procedure had failed at the last moment, because the company Nissan and the French State were reluctant.
The outlook is primarily industrial for FCA and more strategic for Peugeot, which is seeking to develop its skills in the manufacture of electric cars.
The Fiat-Chrysler company was in a dead end. The Agnelli family, which still holds 28% of FCA, has let the group's Italian brands: Maserati, Lancia, Alfa Romeo to decline; and Fiat's market share in Europe (5%) has been halved in thirty years. The Agnellis never wanted to restructure the company, nor to invest in new models and even less in electricity. Their engines pollute, which explain why they had to buy 1.8 billion euros in pollution rights from Tesla in order to avoid fines. This strategy allows it to count the electric cars produced by the American brand in its own fleet and thus avoid very heavy penalties.
FCA exists almost exclusively through its American branch, thanks in particular to Jeep and RAM, which produces the pick-ups. For example, they sell more than 600,000 Dodge Rams per year, and since these vehicles do not shine by their technology, they have the advantage of being very profitable for FCA. Indeed, it ensures most of the group's results, which explains why FCA's management is overwhelmingly American.
PSA, on the other hand, has a strong position in Europe. The European market is mature, should no longer grow in volume and will be disrupted by the new hybrid and electric vehicles that require heavy investment. PSA sought to expand in China, but without success. It then remains the other major world market, where it cannot invest alone: America. This explains the interest of the transaction with FCA which would open up this market for it. The future group would have a solid presence, with the Dodge and Jeep brands in particular.
But other criteria are also taken into account, in particular the need to reach a critical size to be able to compete on a global scale. Together, they can become serious competitors of Toyota, General Motors and Volkswagen. In terms of production volume, the FCA-PSA group would therefore rank fourth in the world. FCA sold 4.8 million vehicles in 2018 and PSA sold 3.9 million, for a total of 8.7 million. This group would also become the second largest in the European market, dominated by the Volkswagen group.
The portfolio of brands of the future world number 4 in the automotive sector should not be reduced and would be very extensive: Alfa Romeo, Chrysler, Citroën, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot, Ram Trucks and Vauxhall. With this large number of brands, the challenges would be "to manage their complementarity well" according to Carlos Tavares, head of PSA.
Another reason for this alliance is that PSA will also be able to provide some expertise in terms of vehicle electrification (where FCA has fallen behind), while FCA can offer high-end cars with its Alfa Romeo or Maserati brands.
FCA has strong positions in segment A ("mini city" cars or "small city" cars), but also in American trucks (big pickup), while PSA shines in the European mainstream and can leverage the CMP (Common Modular Platform) platform, and would represent a shortcut for electrification.
For a very long time, FCA has been a financially managed company and there is chronic underinvestment in R&D. Unlike PSA, which is one of the largest investors in R&D in Europe. Fiat-Chrysler must react quickly because next year, manufacturers will have to achieve an average CO2 emission of 95 grams per kilometre per vehicle. The group must quickly produce vehicles that emit less CO2 (electric cars or other technology).
The two manufacturers also keep in mind the Chinese market, which is dominated by the local brands Volkswagen and Toyota. For PSA, the failure is even total in this country with about 200,000 vehicles produced per year for a capacity of one million...
The first objective of this merger remains clear: to meet together the challenges of tomorrow's mobility, and in particular the transition to the engine.
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