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Fiat Chrysler Joins with Peugeot to Save on Technology Costs
Two of the world’s largest car makers are joining their businesses so they can move production to electric vehicles more effectively.
Fiat Chrysler Automobiles and PSA Peugeot agreed Wednesday on a merger to form the world’s fourth largest car manufacturer.
Officials say the combined companies will be better able to deal with tighter pollution rules and the development of new driving technologies.
The companies said in a joint statement that the new group will be led by PSA’s Chief Executive Officer Carlos Tavares. Fiat Chrysler’s chairman John Elkann will become head of the board of directors.
The combined company, however, lacks one important thing after the merger announcement: a name.
Top company officials say the deal is expected to take 12 to 15 months to complete. The combined company will have a yearly revenue of nearly $190 billion. It will produce 8.7 million cars.
The company would be smaller than only Germany’s Volkswagen, the Renault-Nissan alliance and Japan’s Toyota.
The merger also is expected to save billions of dollars a year company officials said in a statement. The savings would come from sharing vehicle designs, parts and technology. Those savings, the companies said, would be invested in products including “new energy vehicles,” “autonomous driving” and “connectivity.”
The companies also said that no factories would be closed under the deal. But officials said cost-cutting would take place.
Both Peugeot and Fiat build a lot of small car models which compete with each other in the European market. Mike Manley, CEO of Fiat Chrysler Automobiles said that could be “an early target” of measures to combine efforts and save on costs.
Mike Oliver is a professor at the University of Edinburgh Business School. He said it is not clear how the merged company will increase sales.
“Neither partner has products that can easily be sold under the others’ brands in new or existing markets,” he said. Oliver also noted that the combined companies are weak in China, the world’s largest car market.
Fiat Chrysler Automobiles is itself the product of a successful merger between Italy’s Fiat and America’s Chrysler. The French government rescued PSA Peugeot in 2014 and still owns 12 percent of the company.
PSA Peugeot chief Tavares spoke about the new company’s lack of presence in a major market saying, “We think we should be doing better in China.” He said the deal has the support of Chinese partner Dongfeng Motor Corporation, which is expected to have a 4.5 percent share of the company.
Fiat has been looking for an industrial partner to help with the cost of developing electric vehicles. Earlier talks with France’s Renault failed because of the French government’s concern over Renault’s Japanese partner Nissan.
The deal was first announced in October. At the time, it was called an equal merger. PSA Peugeot will have one more seat on the board of directors than Fiat Chrysler.
The new company will be based in the Netherlands while its stock will be traded in Paris, Milan and New York.
I’m Mario Ritter, Jr.
Colleen Barry and Angela Charlton reported this story for AP News. Mario Ritter Jr. adapted it for VOA Learning English. Caty Weaver was the editor.
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Words in This Story
merger –n. the act or process of combing two or more businesses into one
revenue –n. money that is made or paid to a business or organization
autonomous –n. the power to do something such as driving by oneself, (example: a car that can drive without the assistance of a person)
connectivity –n. the state of being connected, especially connected through a computer network
brand –n. a kind of product made by a certain company under a certain name