The Fiat and PSA merger creates Stellantis.
Photographer: Christopher Pike / Bloomberg
Photographer: Christopher Pike / Bloomberg
Fiat Chrysler Automobiles NV and PSA Group is poised to get shareholders ’signatures on a two-year-long combination of incredible drama, marked by repeated talks, the transformation of their industry and a global pandemic.
At two separate meetings on Monday, investors will be asked to put together a deal that will be Stellantis, the world’s fourth-largest automaker. The obstacles the two faced over this point were plentiful and precious, with Fiat even getting caught up in issues after a brief attempt to merge with the PSA archive. Renault SA.
Fiat Chrysler and PSA officials believe they will reverse the rise with a more likely scale Volkswagen AG and Toyota Motor Corp., and has more facilities to compete with electric car builders and tech-industry interconnectors. But many challenges remain once the agreement is reached. Stellantis will be an amalgam of model lines with enviable roles in certain areas and parts of the world, but not every company in the luxury car industry has many of the foundations China’s vast automotive market.
“Stellantis will be a kind of supermarket of some brands, some good and some not so good and very regional,” said Jefferies analyst Philippe Houchois. “The merger will be a great opportunity for reintegration.”
Strengths, weaknesses
The company will have an impressive combined presence in North American forklift truck and SUV segments, thanks to Fiat Chrysler’s Ram and Jeep divisions. And the PSA-regenerated Peugeot and Citroen brands have been excellent in Europe and are the envy of the mind-blowing French enemy, Renault.
Photographer: Marlene Awaad / Bloomberg
But they also have their weaknesses. Fiat’s union with Chrysler did little to make the fortune Alfa Romeo and Maserati luxury lines, while PSA’s Opel’s purchase only bought the company more dependent on a crowded market and the collapse of Europe.
The task of shaking the Stellantis suitcase falls to PSA CEO Carlos Tavares, an ultra-competitive amateur rally driver who claims to be a “Performance psychopath.” He takes a Darwinian view of the industry, arguing that only the strongest carmakers will survive the pivot to electric drivers and seek autonomous driving.
Regulatory Issues
Tavares has a strong history of “in M&A and operational restructuring,” analysts at the Institute’s Shareholder Services said in a report last month. Although the adviser suggested a proxy for investors to vote for the merger based on its strong strategic and financial philosophy, it raised concerns about Stellantis ’governance.
ISS raised an issue with a loyalty voting structure that will give greater impact to investors with at least three-year shares, a binding nomination process in which only the board will be able to nominate a new addition, and a move away from the annual director of elections .
However, these credentials outweigh Fiat Chrysler shareholders receiving a pre-union share of 2.9 billion euros ($ 3.6 billion). The boards of both companies are also considering a potential disbursement of 500 million euros to each company before closing the deal, or 1 billion euros thereafter to shareholders of the connected entity.
Photographer: Francesca Volpi / Bloomberg
The Agnelli family who control Fiat Chrysler, led by Chairman John Elkann, agreed in September to take 2.6 billion euros off the first split the shareholders will receive from the seller to give Tavares more money to work with when it takes over Stellantis.
At the same time, Fiat Chrysler and PSA raised their estimate for the annual synergies that Stellantis achieves to 5 billion euros, putting more pressure on Tavares to eliminate efficiency. The companies had previously said they would be able to extract 3.7 billion euros in annual savings without closing any plants.
The pandemic may have altered that calculus, although cuts will be difficult to get through. Tavares has to cross the political crossroads in France, Italy and the USA, where the manufacturers have deep national roots. He has dealt with difficult tasks in the past, leading the French gardener back from the hillside after taking over as Chief Executive in 2014 and reviving Opel after its acquisition General Motors Co. in 2017.
Like other officials across the industry, Tavares and Elkann are responding to growing pressure to invest resources in product development, manufacturing and purchasing to free up money for a big bet on electric cars and systems. self-driving.
But no more getting rewards. Tesla Inc. has a much richer value. the VW, which holds the greatest effort among the owners to electrify its large fleet. GM has returned from multiple markets to focus on North America and China, while Renault and its ally partner Tha Nissan Motor Co. restructuring after discovering a major loss.
“The car industry has been running in size and consolidation for years, but it has been slower to come than many would expect,” said Houchois. “The question is whether GM, Toyota and Renault-Nissan provided evidence that there may be limits to this strategy. “