Stars in their eyes: PSA and Fiat shareholders approve mega-merger
Shareholders in Peugeot-owner PSA and Fiat Chrysler (FCA) have today approved the mega-merger of the two firms, a deal which will create the world’s fourth-largest auto firm.
The new entity, called Stellantis, will comprise 14 different brands, including FCA’s Fiat, Maserati and US-focused Jeep, Dodge and Ram to PSA’s Peugeot, Citroen, Opel and DS.
Stellantis derives from the Latin “stello”, which means “to brighten with stars”.
The $52bn deal, which was first agreed back in 2019, is in its final stages, with a completion date due to be set when both firm’s shareholders have signed it off.
Both PSA’s investors with double voting rights – including the Peugeot family, China’s Dongfeng, and French state bank Bpifrance – and normal investors approved the deal.
And this afternoon FCA chairman John Elkann said 99.15 per cent of FCA’s shareholders had voted for the merger at a virtual meeting.
The juggernaut will be helmed by current PSA chief exec Chris Tavares, who this morning told investors that the firm was ready for the merger.
Once the deal is completed, only Volkswagen, the Renault-Nissan-Mitsubishi alliance and Toyota will surpass the firm in production capacity.
Arushi Kotecha, research analyst at the Economist Intelligence Unit, told City PM: “Shareholders of PSA and FCA are voting today to approve a merger that was agreed in very different times.
“While the coronavirus catastrophe has certainly emaciated corporate balance sheets and increased the need to pool resources through mergers and acquisitions, PSA and FCA are still keeping to most of their pre-Covid merger terms.
“To be sure, PSA and FCA reduced the cash dividend to be paid in 2020-21 in order to conserve cash of about €3.6bn in late 2020, but that may not be enough firepower to survive through the dismal outlook for the global automotive industry in the near term.”
But despite Stellantis’ newly acquired heft, Tavares and his fellow executives will face a number of challenges over the coming years.
One of these is improving performance in China, the world’s largest auto market. Both firms operated just eight per cent of their capacity in the region.
Tavares has previously flagged plans to reboot its presence in the 21m vehicle-a-year market, saying: “No global car company can afford not to be in the largest car market in the world”.
In addition, execs will have to work hard to keep Stellantis’ huge portfolio of brands from eating into each other’s sales.
Then there is the question of capacity. According to auto analysts LMC, in combination Fiat and PSA could produce 7m more vehicles than they sell, raising the prospect that the new firm could shut down some factories to reduce production.
Finally, as with all other carmakers, Stellantis will have to accelerate progress towards electrifying its fleet of vehicles – though the merger should provide the firm with plenty of revenue streams from which to fund the expansion.