Fiat Chrysler and PSA Peugeot to announce binding merger memo Wednesday

Alan Derringer
The Detroit News

Milan – Fiat Chrysler Automobiles and PSA Peugeot are planning to announce a binding memorandum of understanding that will merge the two carmakers, a person briefed on the announcement said Monday.

A prepared statement on the agreement will be released early Wednesday in Europe, according to the person who requested anonymity due to a lack of authorization to speak before the announcement. 

The two companies announced a merger in October that would create the world’s fourth-largest auto company worth $50 billion and producing 8.7 million cars a year – just behind Toyota, Volkswagen and the Renault-Nissan alliance.

PSA CEO Carlos Tavares.

While the deal has been touted as a 50-50 merger, French carmaker PSA is expected to have the upper hand, with its cost-cutting CEO Carlos Tavares in charge and PSA controlling the new company’s board. 

Fiat Chrysler chairman John Elkann, whose family founded Italian carmaker Fiat in 1899, is expected to remain chairman of the merged company. The role of Fiat Chrysler CEO Mike Manley remains unclear. 

Fiat Chrysler has long been looking for an industrial partner to shoulder investment costs as the industry faces a transition to electrified power trains and autonomous driving. A previous deal with French rival Renault last spring fell apart over French government concerns over the role of Renault’s Japanese partner, Nissan. 

PSA has secured the backing of one of its major shareholders, the French government, for its plan to merge, according to people familiar with the matter.

The French state, which owns roughly 12% of PSA and has board representation, is supporting a binding memorandum of understanding that reflects minor changes to an accord unveiled on Oct. 31, said the people, who asked not to be named because the deliberations are private.

The combination “makes sense in order to build a new champion with global scale to take on the challenges of sustainable mobility,” a French finance ministry official said in a statement Monday. Representatives at PSA and Fiat declined to comment. 

The French government remains concerned about job cuts following any deal, as there is considerable overlap between the Fiat brand’s small cars and Peugeot’s product lineup. But it has not shown resistance to a merger. Both companies have promised not to close any plants. 

Tavares, who used to run Nissan in the Americas and knows the U.S. market well, will not shy away from trimming unprofitable models and brands. He’s credited with turning around the Opel and Vauxhall brands in Europe, perennial money losers which PSA acquired from General Motors two years ago.

Both companies had promised a deal by the end of the year. 

The Associated Press and Bloomberg contributed.