Merger Peugeot and Fiat creates fourth automaker in the world

With the completion of a merger between the French automaker PSA, the parent company of Peugeot, Citroën and the German Opel, and the Italian-American Fiat Chrysler, the fourth automaker in the world was formed on Saturday.

The fourteen brands of the new Stellantis group account for around 9 percent of car sales worldwide. Only Volkswagen, the alliance Renault-Nissan-Mitsubishi and Toyota are even bigger.

The merger of the two companies, each representing 50% of the new company, was a lengthy process. The coronacrisis caused some extra delay. After the approval of regulators and their own shareholders, the two automakers will officially merge into Stellantis, worth 52 billion dollars on Saturday.

On Monday, the company will debut at the Paris (PSA) and Milan (Fiat Chrysler) fairs. On Tuesday, Stellantis will also take over Fiat Chryslers US listing when the stock exchanges start the week a day later after a long weekend due to Martin Luther King day.

Stellantis will be headquartered in Amsterdam and will be led by PSA top man Carlos Tavares. John Elkann, now President Commissioner at Fiat Chrysler and a member of the Agnelli family who owns the Italian automaker, becomes president of the new combination.

Electric

PSA, which includes DS and Vauxhall in addition to the big three brands, and Fiat Chrysler, which also carries brands such as Jeep, Ram, Dodge, Maserati, Alfa Romeo and Lancia, are behind many other brands in the field of electric cars.

The merger was therefore considered necessary in the automotive sector to enable the high investment and research costs associated with the switch to electric driving. Both companies think they can save up to EUR 5 billion on these development costs, but also on production.

Overcapacity

That Fiat Chrysler, in particular, recognized the need for economies of scale was already clear before. This company already flirted with PSA before and then came to a merger agreement with Renault, which came up with resistance from the French government. After that the road was open again for a new romance with PSA and this time it came to an agreement.

By the way, electric driving is not the only problem Stellantis faces. PSA is particularly large in Europe and is also doing well in the Middle East, Africa and Latin America. Fiat Chrysler is a major player in Europe and the United States. Both companies are not doing great in China, the largest car market in the world. Furthermore, due to the coronacrisis, there is enormous overcapacity in the automotive industry.