Times are tough for the automobile majors around the globe. If folklore wisdom is anything to go by, whenever the going gets tough, that¡¯s exactly when it is important to stick together. Fiat Chrysler and Peugeot owner PSA Group are now following the motto, having announced a merger on Thursday.
Jokes apart, what is about to unfold can easily be considered as one of the biggest mergers in the history of the automobile world. With both the makers having a legacy of their own, their combined prowess is set to overshadow most in the industry. To give you the numbers, know that the combined revenue of the conglomerate will stand around $190 billion, employing around 410,000 employees globally, as per a CNN report.
Following the announcement, the binding agreements for the merger will be out within weeks. Following that, both the companies¡¯ shareholders will own ¡°50% of the combined operations¡±, the report mentions.
Once the merger is complete, the union will work out of Fiat Chrysler¡¯s current headquarters in the Netherlands. As for the roles to be played in the conglomerate, John Elkann - current chairman of Fiat Chrysler (FCAU) will continue to be in his present designation, while PSA Group chief executive Carlos Tavares will be the CEO.
(Representative Image: Reuters)
Pedro Pacheco, Senior Research Director with Gartner (Germany) highlights the need for the merger, "I see this merger as a consequence of the mobility transformation taking place in the industry right now, the well-known CASE (Connected, Autonomous, Mobility, Electric). This move involves large investments and compressed timelines that force carmakers to cooperate in different ways to succeed - this merger is just one more of these forms of collaboration."
CNN reports that the new entity will be amongst the top auto makers in the world. Looking at their past sales records, Fiat Chrysler and PSA sold a total of 8.7 million vehicles combined last year. That puts them right above GM, which managed to sell 8.3 million units in the same time frame. The total is also close to the toppers Volkswagen and Toyota, both of which sold over 10 million.
With a new-formed pool of resources, both the firms can stand tall in the race to the disruptive technologies looming over the prevalent production methods in the industry. As the pursuit for electric and hybrid vehicles as well as autonomous vehicles picks up steam amidst a global slowdown of sales, having a shared financial backup for the same will help both Fiat Chrysler and PSA Group get through the tough times. At least, that is what both the firms are hoping here.
"As such, this means both companies can play a role in each other¡¯s mobility projects," adds Pacheco. "For instance, it would enable FCA to tap into PSA¡¯s MaaS platform (Free2Move), as PSA could tap into other projects FCA is developing in US. The effort of electrification will also be easier to overcome by exploring greater synergies."
Present conditions have pushed many auto makers towards a collaboration with what was termed as a competition before. Indian arms of Volkswagen and Skoda announced a merger in the country recently. Read all about the new formed partnership here.