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NowCar FCA PSA Merger

Update on FCA and PSA Merger

Written By, Jordan R

At the end of March 2020, things were looking a bit grim for the Fiat Chrysler Automobiles (FCA) and PSA Group merger. There were talks of the merger dissolving before it became official, with the two automobile groups talking finances over the 12-to-15 months with the goal to make everything official by 2022. With the Coronavirus thrashing the economy and the automotive industry on hold, the merger was all but cancelled. After some discussion, it would seem that the PSA Group has laid out some possible revisions to the terms of the merger to help balance losses during the pandemic, but both companies are tight-lipped about any changes.

The plans for a merger aren’t too grim. At the end of March, according to French media reports, the PSA Group remained committed to a merger with FCA to create the world’s fourth-largest automaker, and at the moment, still is. With PSA handling a 16 percent slump in first-quarter sales, the French automaker is currently focused on protecting their employees and their company, as any company should, but does that mean the merger is a goner? Not necessarily.

Although the plans for the merger remain open-ended, the FCA and PSA Group are in constant communication, and any changes going forward would have to be agreed upon by both PSA and FCA as specified in the merger deal. As previously reported, the merger is a 50/50 deal, with both companies having equal power in the decisions for what could become a multibillion-dollar company. Philippe de Rovira, PSA Chief Financial Officer has commented on the merger deal still ongoing but has refused to comment on any change to the financial terms of the agreement, and Fiat Chrysler was also quick to decline any comment.

So, where does this leave things? Timing is a funny thing. The merger between Fiat Chrysler and PSA was negotiated before the Coronavirus pandemic put a pause to car production and throttled sales. Now, a new factor has popped up that could blow everything up. One of the reasons FCA pulled out of the initial merger with Renault, another French car automaker, was how involved the government was with the company.

Wishing to be able to act independently, FCA decided to go with an automobile group wherein the French government holds fewer shares, and therefore won’t be too involved in larger decisions. With France and Germany offering aid packages in the form of state-backed loans or bailouts, PSA is currently trying to avoid taking such loans and complicate the merger, but car sales in Europe have fallen 52-percent, with estimates of an 80-percent drop by the summer.

"We have not taken any loan guaranteed by any state…We want the company to be as free as possible of public dependence." - Philippe de Rovira

Is this good news or bad news? The good news is that the merger is still going on, despite the global crisis. In addition, the two companies are working together to survive the financial burdens while still keeping plans to eventually merge by December 2022. The Coronavirus pandemic has thrown a lot of balls into the air. Where they drop, no one knows. You can keep up with the latest updates about the auto industry when you follow NowCar social media.

Photo Source/Copyright: TopGear