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COVID 19 Forces FCA And Groupe PSA, Carmakers To Establish Stellantis Auto Company As Shareholders Approve the Merger

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.

Tavares: CEO, Stellantis

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.

Manley: Head, Stellantis, US, Operations

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.   

Stephen Ubanna

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