Skip to content

Try, Try Again: Fiat Chrysler Enters Into a New Merger Pact

Bill Koenig
By Bill Koenig Senior Editor, SME Media

COMMENTARY

If at first you don’t succeed….

Fiat Chrysler Automobiles said Thursday it wants to go to the merger altar again. This time, it’s with Paris-based PSA Group. The move comes months after it attempted a merger with another French automaker, Renault, that didn’t work out.

FCA, under former CEO Sergio Marchionne, always sought a big transaction. Marchionne long felt Fiat Chrysler needed to combine with another automaker because an era of consolidation was coming.

Marchionne died in July 2018. He didn’t live to see Fiat Chrysler’s first attempt with Renault earlier this year, much less the new attempt with PSA, parent firm of Peugeot. But Marchionne’s successors clearly never gave up on the idea.

Meanwhile, PSA also has been preparing for a new era. The company two years ago acquired the former European operations of General Motors Co.

PSA and FCA said in a joint statement they’ve agreed “to work towards a full combination.” The companies intend to reach a binding accord “in the coming weeks.” The two said they can be more efficient without plant closings.

The PSA-FCA combination would be the world’s fourth-largest automaker, based on annual vehicle deliveries of 8.7 million. Shareholders of each company would own half of the merged entity.

John Elkann, chairman of FCA, would be chairman of the merged company. Carlos Tavares, CEO of PSA, would be the top executive of the merged automaker.

FCA includes the former Chrysler Corp. Since 1998, Chrysler was acquired by Daimler AG, sold to a U.S. private equity company and, finally, merged with Italy’s Fiat as part of a U.S.-backed bailout. (Elkann is a member of the Agnelli family that founded Fiat.) Chrysler veterans, by now, aren’t fazed by this sort of thing.

Profit Machine

The Chrysler portion of FCA is a profit engine, including Jeep sport-utility vehicles and Ram-brand trucks. FCA is building a new plant in Detroit to increase output of those models. That project is part of $4.5 billion in company investments.

The new merger is billed as a merger of equals. The 1998 deal between Daimler and Chrysler was supposed to be that. It quickly emerged as an acquisition of Chrysler by Daimler. The failed merger with Renault was also supposed to be a 50-50 merger. In any case, making mergers work is difficult.

Industry shifts pushed the companies to seek a merger. The industry faces the prospect of major investments in self-driving vehicles and electric vehicles. Self-driving vehicles are supposed to be the next big thing, but there are many uncertainties about how that will play out. Regulators in China and Europe want to pare emissions, putting pressure for more EVs. All of that will require a lot of resources.

Of course, those industry conditions already existed when FCA unsuccessfully attempted a merger with Renault. It remains to be seen whether this try will be more successful

Related Articles

  • Expert Opinion

    U.S. on Verge of New Status as a Net Energy Exporter

    November 7, 2019
    The United States is about to begin a new era as a net energy exporter, according to U.S. Energy Department projections. The shift will snap a 67-year streak of being a net energy importer, going back to 1953.
    By SME Media Staff
  • Expert Opinion

    Barriers to Industry 4.0 Are Falling Fast

    November 5, 2019
    For years, manufacturers of all sizes and across every industrial segment have heard about Industry 4.0. The definition changes depending on the speaker or publication, but the essential idea remains the same.
    By Michael Ruppenthal - General Manager, OMAX Corp.
  • Alan Rooks
    Expert Opinion

    FABTECH Keeps the Heat On

    October 31, 2019
    FABTECH is coming to my home town, Chicago, and I’m looking forward to it. Along with IMTS and EMO, it’s one of the top-shelf manufacturing trade shows and it’s big enough to keep people coming back every year to see new technology, get educated and network with their peers.
    By Alan Rooks - Editor in Chief, Manufacturing Engineering
  • Latest Videos

  • Connect With SME Media

Webinars, White Papers and More!

SME's Manufacturing Resource Center keeps you updated on all of the latest industry trends and information. Access unlimited FREE webinars, white papers, eBooks, case studies and reports now!