PSA announced the official merger with FCA world’s fourth-carts companies both opportunities and challenges

going around in circles, PSA Peugeot Citroen Group (hereinafter referred to as PSA) and Fiat Chrysler Group (hereinafter referred to as FCA) finally came together.

October 31, buying a car has learned, PSA FCA Board of Supervisors and the two sides agreed to set up a 50:50 joint venture company, and efforts to achieve a full merger of the business with each other . As one of the conditions of the merger, FCA will pay a special dividend of 5 billion euros, PSA will share in the automotive supplier Faurecia sale.

the world’s fourth largest auto company will be born

With the approval of the merger plan of the two groups, with an annual sales volume of 870 million units of the new company also will be born, the new company will also be ranked Volkswagen, Toyota Motor, the world’s fourth largest auto company after the Renault-Nissan alliance.

FCA official said that after the merger, the two groups in the luxury, mainstream passenger car, SUV, truck and light commercial vehicles in areas such as joint brand will be. And its inception, the new combined company will rely on FCA strength in the North American and Latin American markets, as well as PSA strength in the European market, to achieve the highest profit margins in the market.

If the 2018 does not contain Magneti Marelli and the performance of the two sides Faurecia simple addition, the new company’s combined total revenues of nearly 170 billion euros, operating profit more than 11 billion euros. It is estimated that the merger of the two groups synergies of approximately 3.7 billion euros, mainly from the automotive platform, more efficient allocation of resources and power system large-scale technology investments, and the combined company has a stronger purchasing power .

At the same time, FCA official said, according to estimates 80 percent synergies will be achieved in the four years after the merger, is expected to achieve synergies of lump-sum cost of 2.8 billion euros.

It is worth mentioning that the two groups of the transaction will be achieved through the merger carried out under a Dutch parent company, and the new company’s governance structure will maintain a balance between investment shareholders, the majority directors will be independent directors. Director

reported that the new company.It will be composed of 11 members. Among them, five members of the board of directors nominated by the FCA, five members nominated by the PSA. In addition, FCA chairman John middot; Elkann will serve as chairman of the new company, PSA chairman Tang Wei solid chief executive officer and board member, will serve as the new company’s initial five-year term.

Also note that the PSA is currently the largest shareholder of China Dongfeng Group will hold shares in the new company. Currently, Dongfeng Peugeot Citroen Group holds a stake of about 12.2 percent, worth $ 3 billion, but after the completion of the merger, the new company Dongfeng Group represented about 6 percent of the shares.

for the merger, PSA, FCA senior management of both parties are convinced that: “the merger is a bold and decisive move, the two sides will create one in size, capability and resources leader to successfully seize the opportunity to effectively manage and respond to new challenges of the new era of mobile travel field. “

opportunities and challenges

Indeed, in the automobile market as well as winter car,” the new four under “of the background, car firms want to single-handedly create a product to meet market demand more and more difficult. It is precisely because the auto industry is run up barriers to open sharing. Prior to this, Volkswagen and Ford, Daimler and BMW, Toyota and BYD and so have a close relationship.

In this regard, passenger car joint Secretary General Choi Dong-tree that the current automotive industry is facing electrification, intelligent change, we are faced with high car prices new technology, new product development costs. More importantly, because the outlook is not clear, as the huge cost car prices electrification, intelligent transformation invested temporarily harder to get a return, and therefore not difficult to understand the behavior of a close relationship between the parties.

In addition to supporting mixed with each other to face the wave of cost-saving “new four modernizations” outside, PSA, FCA merger can also achieve the integration of existing resources, and learn from each other . Currently, FCA with Jeep and Dodge brand despite strong performance in North America, but it was losing ground in Europe. In addition, the US auto market is weakening, continue to squeeze profit margins were also forced it began to focus on other markets.

In contrast, PSA, though they have a strong share of the European mainland, butIt has almost no presence in the North American sense at all. It is worth mentioning that the only real Tang announced earlier this year, after a lapse of nearly 30 years, PSA will return to the US market. And because of these problems between each other, we contributed to the merger between PSA and FCA.

Although the merger of the two groups are each seeking needed, for one another is a good opportunity. However, it should be noted that while still a weak weak joint on the nature of the merger, and after the merger, PSA and FCA sides will face multiple challenges.

PSA has just released the latest results in the third quarter of this year achieved a total revenue of 15.6 billion euros, an increase of 1 percentage. Among them, the business quarter revenue 11.8 billion yuan, an increase of only 0.1 percentage. The FCA published data show, down 3 percent to 26.7 billion euros the group’s second quarter year on year, net profit of 793 million euros. As can be seen, for PSA and FCA, the current development of both can be described as tepid.

compared to the overall performance of tepid, the two Group is currently in China, the world’s largest auto market performance is not satisfactory can be used to describe, and how to get rid of the dilemma in China will be the focus of the new company after the merger issue to be resolved.

In addition, there are people in the industry believe that the merger of the two sides will face a number of uncertainties from the government. The industry also said, PSA, FCA Group’s two brands from Italy, France, the United States and three, which means different brand of cultural environment, and in this context, whether the new company well enough fusion is not clear.

is easy to see summary, although both the PSA and the FCA approved a merger plan, but there are a lot of work to do in the future. It is reported that, PSA Board of Supervisors and the FCA has its own team assigning tasks, discussions reached a binding memorandum of understanding in the coming weeks, but the two sides on the progress of the merger, to buy a car network will continue to focus.

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