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Cox Automotive Commentary: FCA-PSA Sign Binding Merger Agreement

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UPDATE, Dec. 18, 2019 – Fiat Chrysler Automobiles NV and PSA Group signed a binding agreement outlining a 50/50 merger of their businesses to create the fourth largest global automotive OEM and the third largest by revenue, according to a company statement.

Michelle Krebs, executive analyst for Autotrader, provides her thoughts on the merger:

The FCA and PSA merger is intended largely to achieve economies of scale, to create a more expansive geographical footprint and to share costs of very expensive product development and future technologies such as electric vehicles. In Europe, the combined company should be better able to meet stricter emissions regulations. The new entity will have broader product lines, including FCA’s profit-rich Jeep SUVs and Ram pickup trucks – and will have access to established retailing networks for both companies.

While these deals often look ideal on paper, there are always challenges and risks – no one knows that better than FCA, which has been through quite a few of these. Most notably, the Daimler-Chrysler deal looked great on paper. It was a failure in the execution. Meshing the people and cultures is key to success along with strong leadership and clear vision.

In these merger deals, the parties put out a number of saved costs from synergies. Often those are not achieved as the costs associated with integrating large, established companies is greatly underestimated.

If you would like to speak with one of the expert analysts from Autotrader, Kelley Blue Book or any member of the Cox Automotive Industry Insights team, please contact us.

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Oct. 29, 2019 – Fiat Chrysler Automobiles NV and PSA Group are in merger talks, according to The Wall Street Journal. The deal could create a $50 billion trans-Atlantic “merger of equals.”

Based on the initial information reported and familiarity with both companies, analysts from Cox Automotive share some of their insights on what a merger of this magnitude entails, some of the challenges that it could face, and what it might mean to the global automotive business.

From Akshay Anand, executive analyst for Kelley Blue Book
The automotive industry continues to realize partnership is a must in this rapidly changing environment. An FCA and PSA merger could benefit both parties. PSA is a big global automaker with a good European foothold and technologies FCA could benefit from. FCA has a big imprint in the U.S., a market PSA is trying to get into. On the surface, it makes sense.

From Karl Brauer, executive publisher at Kelley Blue Book and Autotrader
Staying competitive as a global automaker requires ever-increasing scale, and the quickest route to scale is a merger. Neither FCA nor PSA, independently, are in a position to lead the industry in vehicle sales and product development. But as a united front they are immediately back in the fight to compete for volume, market share and advanced technology with today’s more powerful automakers.

From Michelle Krebs, executive analyst for Autotrader
Automakers are performing a tricky balancing act of maintaining current business as global vehicle sales decline while investing in future technologies, which no one knows will gain traction or, more importantly, make money. Partnering in some way makes sense to spread the cost and risk. FCA has long been searching for the right partner, and reportedly talked with PSA before it turned to Renault. While there may be great benefits to partnering, time will tell if this deal sticks.

From Brian Moody, executive editor for Autotrader
Each company has something the other wants. Fiat Chrysler could surely use some of Peugeot’s cash and/or existing platforms to help build out a fleet of fresh new cars, including electric and hybrid vehicles. On the other hand, Peugeot would love to have access to a vast dealership network as well as a way to capitalize on the success of brands and vehicles like Ram and Jeep.

If you would like to speak with one of the expert analysts from Autotrader, Kelley Blue Book or any member of the Cox Automotive Industry Insights team, please contact us.

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