Fiat Chrysler in merger talks with Peugeot

Peugeot e Legend ConceptPeugeot

In the fast changing automotive industry, collaboration seems to be the preferred strategy for sustainability and growth.

Fiat Chrysler and Peugeot owner PSA Group have announced the terms of a merger that would create a new trans-Atlantic automaking giant with roughly 410,000 employees and combined revenues of $190 billion.

However, it warned the French government "will remain particularly vigilant on the industrial footprint in France, where decision making will be located and promises by the new group to create in Europe the infrastructure to build electric batteries" needed for the shift to new vehicles. The merger could lead to the formation of a conglomerate valued at $46 billion (Rs 325,266 crore).

Well, according to a report Tuesday by the Wall Street Journal, we may be coming to the end of that particular movie.

The proposed all-stock deal would make Peugeot chief Carlos Tavares head of the newly formed company while Fiat Chrysler Chairman John Elkann would keep his role, the WSJ said.

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The statement Wednesday didn't say whether the talks were aimed at a full merger or a looser alliance.

Fiat Chrysler has always been looking for a partner to help shoulder investments in the capital-heavy industry, under the view that companies that fail to consolidate would inevitably struggle. But, with the stake being rather modest, they also expect it not to be much of an issue.

Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate. The two firms projected that 80% of the synergies would be achieved after 4 years.

Morningstar senior equity analyst Richard Hilgert said in a note that total volumes of FCA and Peugeot, including China joint venture partners, amounted to 8.7 million vehicles past year, ranking the eventual combined group fourth behind Volkswagen, Toyota and the Renault/Nissan Alliance, each at more than 10 million units. However, the front-runners would still be ahead by some margin with Volkswagen leading globally with 10.8 million units, Renault-Nissan-Mitsubishi (10.8 million units) and Toyota (10.6 million units).

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