PSA, Fiat Chrysler investors approve $52B merger

Shareholders of the carmakers PSA and Fiat Chrysler have given their blessing to a merger that catapults the new company, "Stellantis," into fourth place as the auto industry races to make the transition to cleaner cars.

Approval for three merger resolutions tabled at PSA's annual shareholder meeting, held online, was nearly unanimous, PSA chief Carlos Tavares said on Monday.

Fiat Chrysler shareholders later followed suit in their virtual vote, and a date for making the merger operational will be announced "very soon," said Tavares, who will lead the new company.

'A challenging era'

John Elkann, Fiat chairman and scion of Italy's storied Agnelli family, will retain his role at Stellantis in what he called "a challenging era."

"The coming decade will redefine mobility: we are intent on playing a leading role in building this new future," Elkann said after the vote.

The green light from shareholders had been widely considered a given, coming two weeks after the European Commission gave conditional approval to the deal announced in late 2019.

Matter of survival for both companies

The 50/50 tie-up, which was delayed by the Covid-19 pandemic, is seen as crucial for the two groups to afford the massive investments needed in clean car technology.

It also allows Fiat to strengthen its presence in its key European markets, while the French group will gain a foothold in the US.

"This merger is a matter of survival for both Fiat and PSA," said Giuliano Noci, a professor of strategy at Milan Business School, citing "enormous technological and strategic challenges" faced by both as well as damage wrought by the pandemic.

The accord combines PSA's Peugeot, Citroen, Opel, and other brands with Fiat Chrysler's stable that includes their namesake brands as well as Jeep, Alfa Romeo, and Maserati.

By the number of cars sold, Stellantis and its workforce of over 400,000 will now rank behind Volkswagen, the Renault-Nissan-Mitsubishi alliance, and Toyota – though it is to be the third-largest automaker by revenue.

PSA and Fiat expect the merger to allow them to achieve billions of euros in savings each year.

READ MORE: Fiat Chrysler and Peugeot sign deal for 50-50 merger

Weathering Covid

"Only the most agile, with a Darwinian spirit, will survive," PSA chief Tavares warned last November.

The European Commission had been worried the merger could affect competition in Europe's lucrative van market, with PSA and Fiat Chrysler together accounting for 34 percent of the market share.

To assuage those concerns, the commission said PSA would continue an agreement with Toyota to manufacture vans to be sold under the Japanese brand in Europe.

The disruptions wrought by Covid-19, which ground manufacturing to a halt for several weeks in early 2020, forced PSA and Fiat to change the terms of their tie-up to ensure it remained a merger of equals.

FCA agreed to lower an exceptional dividend for its shareholders, while PSA agreed to share its 46 percent stake in the French automotive equipment maker Faurecia with all shareholders of the new company, rather than just its own as agreed previously.

The two companies have shown relative resilience in the face of the pandemic.

Fiat Chrysler posted a net profit of $1.5 billion (1.2 billion euros) for the third quarter, compared with losses of $1.2 billion (1.04 billion euros) in the second quarter — when auto sales plummeted as much of the world was in coronavirus lockdown.

French union concerns

PSA sold 589,000 fewer vehicles in the third quarter but sold them for more money as part of a strategy to maximise profitability and cash flow, which lifted turnover by 1.2 percent.

When the merger was announced, Tavares assured no plant would be closed, but unions in France remain sceptical.

"On the whole it's a good insurance policy for the future of our group. Those who don't make the shift risk being left by the wayside," a representative for the CFTC union at PSA, Franck Don, said.

But he wondered, "What synergies will they find and what consequences will that have for sites in France?"