"The Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles N.V. have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger," the companies said in a joint statement.
The management teams of FCA and PSA will seek to finalize the discussions in the coming weeks to create a group with 8.7 million in annual vehicle sales and make savings of 3.7 billion euros ($4.1 billion), even without plant closures, they said.
Unifor President Jerry Dias said he does not believe the merger will have much of an impact on FCA’s Canadian assembly plants in Windsor, Ont., and Brampton, Ont. He said the companies’ vehicle portfolios complement each other, making plant closures in North America less likely than if the companies made similar vehicles for the same markets.
“This isn’t like the DaimlerChrysler merger, which they kept trying to spin as a merger of equals when we knew it [wasn’t],” Dias said. “Peugeot’s weaknesses are Fiat Chrysler’s strengths, and Fiat Chrysler’s strengths are Peugeot’s weaknesses.”
Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research in Ann Arbor, Mich., said the merger could eventually open the door for new PSA production at FCA’s plants in North America and could have an impact on the 2020 labour negotiations between Unifor and FCA.
“But it’s going to take a long time for that to all work out,” she said. “The North American footprint is probably the lowest thing on the priority list at the moment.”
The group will include the Fiat, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, Citroen, DS, Opel and Vauxhall brands, allowing it to serve mass and premium passenger car markets as well as trucks and light commercial vehicles.
About 80 per cent of potential synergies could be achieved within four years, at a cost of 2.8 billion euros ($3.1 billion), the companies said.
"In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global r&d footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency," FCA and PSA said.
RISING COSTS, MORE MERGERS
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, said partnerships and mergers are becoming necessary as automakers and suppliers as costs related to autonomous-vehicle and EV r&d rise. The CVMA represents the Detroit Three manufacturers in Canada.
“What we’re seeing here is a reflection of what it’s going to take to participate in the future of vehicle manufacturing and the transportation industry,” he said.
French Finance Minister Bruno Le Maire welcomed the deal, saying it would give the two companies the critical mass needed to thrive in a fast changing industry.
Paris, which has a 12 per cent stake in PSA, was blamed for the collapse of FCA's merger talks with Renault as it urged the French firm to focus on its existing alliance with Japan's Nissan. The French government also owns 15 per cent of Renault.
The combined group will have an 11-person board, with six members coming from PSA and five from FCA.
As part of the deal, FCA will pay its shareholders a 5.5 billion euro ($6.1 billion) special dividend and hand them shares in its robot-making unit Comau, they said.
Jefferies analyst Philippe Houchois said PSA was effectively paying a 32 per cent premium to take control of FCA. "We continue to see FCA-PSA as the most logical and attractive combination in autos," he said.
FCA shares jumped more than 8 per cent in early trade, while PSA's dropped about 7 per cent.
Stricter EU anti-pollution rules that take full effect in 2021 have triggered heavy investments into electric and hybrid vehicles as European lawmakers forced a 37.5 per cent cut in CO2 emissions between 2021 and 2030, after a 40 per cent emissions cut between 2007 and 2021.
A combination with PSA would give FCA access to the French group's more modern and more flexible vehicle technologies, including the CMP modular platform, which was launched in 2019 for Peugeot's e-208 subcompact, and donated the technology which allowed Opel to build a sibling model, the Corsa-e.
Strategy firm PA Consulting has forecast FCA faces a fine of 700 million euros ($777 million) unless it radically changes its emissions profile to sell more electric and hybrid cars.
Meanwhile, the deal would give PSA a stronger position in North America, where FCA makes the vast bulk of its profits.
PSA has already integrated Opel and Vauxhall, which it bought from General Motors in 2017, shifting them from nine GM platforms to just two, a step which helped Opel to return to profit after more than a decade of losses.
Toronto Bureau Reporter John Irwin contributed to this report.