Stellantis merger to close on Jan. 16 after PSA, FCA shareholders approve
Fiat Chrysler Automobiles NV and French automaker Groupe PSA say they will combine on Jan. 16 to become Stellantis NV, creating the fourth-largest automaker in the world by volume with the resources to compete in an industry undergoing a historic transformation.
Shareholders of both companies on Monday overwhelmingly approved the 50-50 all-stock tie-up. The votes represent one of the final milestones needed in the more-than year-long process before the closure of the merger that will be known as Stellantis NV, a transatlantic company with the scale and geographic diversity that executives say will be able to compete in the long-term and invest in autonomous, connected and electrified vehicles.
"What we have in front of us, of course, is a significant challenge," PSA CEO Carlos Tavares, who will lead the combined entity, said Monday during one of the shareholders' meetings. "This is a challenge, which consists of protecting the freedom of movement for our citizens, offering them that freedom of movement, a mobility that is safe, affordable, and clean. ... As a consequence because of the side effects, this will ensure the long-lasting survival of our companies."
Both companies' shareholders approved the resolution with more than 99% support. For each share of PSA, shareholders will receive 1.742 shares in FCA stock.
This is the third international marriage in as many decades witnessed by FCA employees based in Auburn Hills. The one with Mercedes-Benz parent Daimler-Benz AG ended in divorce after failing to achieve the promised cost savings. The partnership between Fiat SpA and Chrysler took the eponymous Italian brand global and moved the American side out of bankruptcy and into a present where it reports one of the largest operating margins in the industry.
"Stellantis is a union of two like-minded partners to build something unique, something great by providing our customers with distinctive, safe, convenient, innovative and sustainable vehicles and mobility services," said FCA chairman John Elkann, scion of Fiat's Agnelli family who will continue his role at the combined company.
Stellantis and its 14 brands ranging from Ram pickups and Jeep SUVs to Peugeot and Citroën cars and crossovers will be domiciled in Amsterdam, but retain major operations in Michigan, Italy and France. Shares will begin trading in Milan and Paris starting Jan. 18 and on the New York Stock Exchange on Jan. 19 due to Martin Luther King Jr. Day.
The French will have the governing advantage, appointing six of the 11 board members, including Tavares. FCA CEO Mike Manley will lead Stellantis' operations in North and South America, but not serve on the newly combined company's board.
The automakers estimate annual cost savings from the combination to be $5.9 billion and repeatedly have insisted there will be no plant closures as a result of the merger.
But Stellantis would boast roughly 400,000 employees producing 8.7 million vehicles annually. By comparison, General Motors Co. employs 180,000 people to produce 8.4 million units.
Tavares, a native of Portugal who speaks four languages, has a reputation for being frugal and a cost-cutter. He turned around the struggling PSA when he took over in 2014. After PSA acquired in 2017 GM's Opel and Vauxhall brands that for decades had lost money in Europe, they were profitable again under Tavares in just 18 months. That effort included nearly 8,000 job cuts through early retirements and voluntary layoffs.
Industry observers and those who have worked with him say he is demanding and expects results yet is fair. He holds a Darwinian mindset that only the strongest automakers will survive the transition toward self-driving and electrified vehicles.
Stellantis may have more than 10,000 excess employees, the Center for Automotive Research at the University of Duisburg-Essen in Germany has estimated. The most excess capacities are in design and engineering with facilities in Auburn Hills; Paris; Rüsselsheim, Germany; and Turin, Italy. Executives have said just two platforms — a vehicle's underpinnings and powertrain — will support two-thirds of total volume.
"They will close something of this," Ferdinand Dudenhöffer, a professor of automotive economics at the German research center, said of Stellantis' operations. "They have too many overcapacities. We don't see a strong European car market in the next five years. In the next five years, there will be big cost reductions."
Seventy-five percent of cost savings is expected to come from platform convergence, manufacturing processes, combining research efforts and bulk purchasing, Manley said Monday. The remainder will come from the integration of marketing and sales and redundancies in logistics, supply chain and quality.
Experts expect Tavares' focus first will be on Europe, a competitive and stagnant market where FCA has been losing money and where Italian plants are running under capacity. Meanwhile, FCA reported record pre-tax earnings in the third quarter of 2020 from the booming popularity of Rams and Jeeps in North America — a market where PSA currently does not sell. Europeans, on the other hand, tend to favor more compact vehicles.
China, the world's largest autos market, also is expected to be a place of focus as neither company holds a strong share there. Tavares has said all global automakers must be able to compete in China. The combined company is weak in the luxury segment and has work to do in autonomy and electrification — all significant components of the Chinese market.
"They have preserved themselves for the next five years," Dudenhöffer said. "There will be reduced costs in Europe and the U.S., and they'll be in a better position due to economies of scale. After five years, though, the Koreans and the Chinese will be coming into Europe and the U.S. In five to 10 years, the scales will come from China and the Asia market."
Tavares, however, said Monday he is up for the challenge: "We are ready to implement these synergies. We are ready to start the next chapter of our two companies. These two companies have carried out their strategic plans in the past. These two companies have no problem with execution."