An advanced plan hatched between Groupe PSA (owner of the Peugeot, Citroen and Opel brands) and Fiat Chrysler Automobiles (FCA) to join forces would create the world's fourth largest global automotive OEM by scale.
The proposed super-merger between the keen French and Italian-American giants, with a combined 410,000 direct employees, would create a new group half-owned by each party with equal board representation.
It would push the PSA-FCA conglomerate into the highest echelons of vehicle production alongside Toyota Motor, the Volkswagen Group, Ford Motor, General Motors, Hyundai-Kia, and the troubled Renault-Nissan-Mitsubishi Alliance, with all the cost-saving scale that affords.
"In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency," a statement says.
"...Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility."
Fiat Chrysler currently controls eight brands: Fiat, Alfa Romeo, Lancia, Maserati, Chrysler, Jeep, Dodge and Ram. While it has a strong presence in Italy and South America, most of its profit come from Jeep's SUVs and Ram's fleet of pickup trucks.
The PSA Group enjoys healthy market shares in Europe, Latin America and parts of Africa, but has no presence in the North American market. Along with its well-established Peugeot and Citroen marques, it also busy establishing DS as a luxury brand, and turning around Opel and Vauxhall, which it bought from GM in 2017.
The current plan
Both the PSA and FCA boards have given the mandate to their respective teams to finalise "intensive" discussions, to reach a binding Memorandum of Understanding in the coming weeks. Then come all the approval hurdles.
A proposed Dutch parent company board will have balanced representation and a majority of independent directors. FCA head John Elkann as chairman, and PSA's CEO (who drove the Opel purchase from GM, and was instrumental in the governance of Renault-Nissan) Carlos Tavares as CEO for five years, and member of the board.
The shareholders of each company would own 50 per cent of the equity of the newly combined group. The governance structure of the new company would be balanced between the contributing shareholders. The proposed board would be composed of 11 members, five nominated by PSA and five by FCA, with one more added for deadlocks.
The new group’s Dutch parent company would be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and would continue to maintain "significant presences" in the current operating head-office locations in France, Italy and the US.
What it could mean
"The proposed combination would create the fourth-largest global OEM in terms of unit sales (8.7 million vehicles), with claimed combined revenues of nearly €170 billion and recurring operating profit of over €11 billion on a simple aggregated basis of 2018 results," the partners claim.
Approximately €3.7 billion in annual run-rate synergies (cost savings) could be derived, they claim. This would come principally from joint-funding of shared vehicle platforms, powertrains and infotainment/self-driving technology, and from the enhanced parts purchasing capability.
Importantly, and addressing an obvious question, the statement claims that "these synergy estimates are not based on any plant closures", though clearly any manufacturing reductions could be on the table.
The proposed group projects that 80 per cent of these "synergies" would be achieved after four years, and claims the total "one-time cost" of achieving them is estimated at €2.8 billion.
“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together," said PSA CEO Carlos Tavares.
"I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company," said FCA CEO Mike Manley.
Manley's successor, the iconic and recently deceased Sergio Marchionne, long proposed mergers as vital to attain scale, to remain competitive while funding BEVs and driverless cars. He once tried to join FCA with GM, but was rejected.
We'll bring you additional coverage once more details start getting out there.