12/12/2019 | 1 MINUTE READ

Fiat Chrysler, PSA Ready to Sign Merger Pledge

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It will be a very big deal, literally, when PSA Group and Fiat Chrysler Automobiles formalize their plan next week to merge.

It will be a very big deal, literally, when PSA Group and Fiat Chrysler Automobiles formalize their plan next week to merge.

The $50 billion combo would be the world’s fourth-largest carmaker in terms of unit sales, just ahead of General Motors. The industry’s top three are the Volkswagen Group, Toyota and the Renault-Nissan-Mitsubishi Motors alliance.

Details, Details

Sources tell Bloomberg News that PSA and FCA intend to sign a memorandum of understanding next week, even though some issues remain to be resolved. One of the big ones is the potential liability represented by the racketeering lawsuit GM filed against FCA late last month.

GM claims that top FCA executives, including CEO Sergio Marchionne, who died in July 2018, colluded for years with the United Auto Workers in a bribery and payoff scheme to secure more competitive labor deals than the ones set between GM and the UAW. FCA has described the charges as groundless and their timing “astonishing.”

A Better Deal?

Pundits say an FCA marriage with PSA, the maker of Peugeot and Citroen cars, makes more sense than the one FCA proposed with Renault in May. That deal collapsed in days for two reasons: French government meddling and a profound reluctance by Renault alliance partner Nissan to endorse the deal.

If the new deal goes through, its CEO will be cost-cutting and efficiency whiz Carlos Tavares, currently CEO of PSA. His biggest challenge will be to wring out waste in Fiat operations in Italy. Tavares already has successfully revived PSA itself. Then he bought GM’s money-losing Opel business in Europe and made it profitable too.

Tavares is excited about tying up with FCA in part because that company’s extensive U.S. dealer network will help him with a pet project: reintroducing PSA’s brands to the American market it abandoned in 1991. 

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