COVID 19: FCA And Groupe PSA Carmakers Unite to Form Stellantis Auto Company , As Shareholders Approve The Merger
By Stephen Ubanna
For much of 2018 and last year, there have been rumours making the rounds that the US-Italian auto Company, Fiat Chrysler Automobile, FCA, and Groupe PSA of France, makers of Peugeot, Cittroen, Vauxhall and DS, have agreed to the terms of merger of the European Union, EU, to form a new auto group that would be called Stellantis expected to be the world’s third largest auto market.
The rumour became pronounced with the signing of the binding agreement formermalising the merger deal last December 2019 by the two parties. The agreement was said to have been amended in September 2020 , to reflect a change in industry conditions following outbreak of the Asian country of China emerged coronavirus.
As a prelude to getting the new auto firm started, Groupe PSA Peugeot shareholders on Monday, January 1, 2021,overwhelmly approved the deal to create Stellantis, auto Company, with a capacity to produce 8.7 million cars a year behind Volkswagen, Toyota and Renault Nissan and create 5 billion euros in annual synergies. Fia Chrysler shareholders were said to have also voted in support of the merger between the two Companies .
The new auto Company, according to informed sources, will have an annual production volume of 8.7 units , that would unite brands such as Fiat, Jeep, Dodge, Ram Alfa Romeo and Maserati with the likes of Peugot Citreon, DS, and OPEL which places it behind the Volkswagen Group, Toyota and the Renault –Nissan Alliance. Already, the two auto firms were said to have gotten the EU, anti-Trust approval for their $38 billion merger deal to create Stellantis, believed to be the world’s fourth largest carmaker.
Carlos Tavares, the PSA, Chief Executive Officer, CEO, had said that the new auto firm will put together under one roof French mass –market carmakers Peugeot and Ctroen, top-selling Jeep , Italian luxury and sports brands Maserati and Alfa Romeo pooling Companies that was said to have helped defined the auto industry in the US, France and Italy.
An elated Tavares had said that while ‘’the tie-up is billed to be a merger of equals , the power advantage goes to his Company, Groupe PSA, with him, running the new auto firm, Stellantis, which his a fallout of the merger deal and holding the tie- breaking vote on the 11-mam Board. The Groupe PSA, is expected to take over the running of the affairs of the Company early this year or the end of January 2021 as being speculated in certain quarters.
John Elkann, Fiat Chrisller’s Chairman, and the heir to the Fiat –founding Agnelili family and the Company’s largest shareholder, has been tipped as the new auto Company Chairman while Mike Manley, the CEO, will head the North American Operations, described as key to Tavares long time –time goal of getting a US. Foothold for the French carmaker he has run since 2014. And the clear money-maker for Fiat Chrysler.
Tavares may be stepping into the Stellantis shoes with a reputation as a cost-cutter and skilled manager, qualities, he was said to have put together as head of NISSAN North American Operations from 2009 and 2011 and in integrating OPEL and Vauxhall into Peugeot family after buying them in 2017. Contrary to news making the rounds that the two Companies were in good health, before going into the merger, Tavares, may have shocked shareholders when he said that the two Companies entered into the union with poor records and infrastructure in China , noting that that both are lagging behind in electrified powertrains, requiring investments that will off-set some of the savings.
Being a restructuring expert, the former Groupe PSA, CEO, is expected to bring his experience into Stellantis to grow.
A a prelude to the shareholders of the Companies in the merger deal throwing their weight behind the union, he Companies were said to have got the anti-Trust approval last December from the EU, after pledging to help boost the Japanese rival, Toyota Motors. The Companies may have agreed to do so as Groupe PSA Peugeot had agreed to extend its small van agreement with Toyota Motors.
Going by their calculations, the new auto firm, would also rank as the world’s fourth largest carmaker by revenue , with an annual sales of 7.9 million vehicles and generating recurring operating profit of 10 billion euros or $11.8 billion on turnover of 170 billion euros or $4.3 billion based on aggregated 2019 results.
. The merger between the two Companies became pronounced because of the Asian country of China emerged coronavirus, popular, COVID 19, crisis which was said to have adversely affected their Balance Sheet structure . Perhaps to reinforce the balance of sheet of the Companies after the COVID 19 might have ended, may have informed why the shareholders had made all the necessary efforts to ensure that the merger is concluded within the first quarter of 2021.
The accord, between the two auto companies, according to industry sources will force FCA, to cut N2.9 billion euros or $3.4 billion , of its cash portion of 5.5 billion euro special cash dividend which its shareholders will receive under the terms of the accord that had already been signed.
The Value News findings shows that the France Groupe PSA which brand portfolio also includes cittroen and Opel, would in turn also postpone the planned payoff of its 46% stake in parts maker to Fraurecia which has a market Capitalisation of about 5.9 billion , until after the closing of the merger and also extend it to all shareholders of the new auto Company. There are indications that the ownership of the new auto group would still be split 50/50 between the two Companies , PSA/FCA shareholders.
There are fears in auto industry circles that the payout of 2.9 billion euros or $3.4 billion to shareholders led by controlling investor, EXOR, the holding Company of Italy’s Agnelli family, may weaken the new auto giant finances, as the world auto industry is paying the high price for the coronavirus outbreak.
The Companies may have gladdened the heart of shareholders when they said that the annual estimated synergies from the merger arrangement would be more than 5 billion euros, compared to the initial estimate of 3.7 billion euros. Recall that last year, the two carmakers scrapped dividend payment on 2019 results to shareholders , which was worth 1.1 billion euros.
Prior to the merger plan, Groupe PSA, had proposed to enter the north American country of the United States market but it was said to have been put on hold because FCA, already has a strong presence in the country. Hear him: we see the strength of the FCA in North American country a as very outstanding and we have 12 months ahead for the merger process to be concluded, noting that the new auto firm will think about it. He believes that,’’ , an indication that the Company brands would launched into the American market under Stellantis.