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FCA, PSA (Peugeot) to merge

by David Zatz on

CNBC just reported that the Peugeot/Citroën (PSA) board of directors has agreed to merge in a deal which puts Fiat Chrysler in the passenger seat—though the Fiat founding family, the Agnellis, may hold the balance of power.

The deal, according to CNBC, has already been approved by PSA, and will come up before the FCA board “Wednesday” (presumably next Wednesday, but possibly today).

Former Chrysler vehicles were renamed “Talbot” after Peugeot purchased Chrysler Europe. The Matra Rancho was based on a Chrysler-Europe SIMCA chassis, breaking new ground even if few noticed it at the time.

John Elkann will be chair of the new board, which will have six seats from PSA and five from FCA.  The French government owns 13.7% of PSA, which may be one obstacle.  FCA had tried to do a deal with Renault earlier this year, but it fell through.

The deal would not do much for FCA’s exposure to new markets, particularly China, but would help both companies to flesh out their offerings. PSA mostly does compact and midsize cars and crossovers in the EU, while FCA mostly does subcompact cars and crossovers in the EU, as well as commercial vans and large luxury cars (Maserati). PSA has no presence in the United States, and does not compete with Jeep or Ram. Both companies sell electric cars, but PSA appears to be more advanced in their battery-electric expertise.

Both companies have had issues of size; together, they would not be in the top three, but they would have more power of scale and a full range of vehicles. In addition, FCA would benefit from PSA’s newer platforms while PSA would be the latest to benefit from Jeep.

Ironically, Peugeot and Chrysler go way back; Peugeot bought the former Chrysler Europe, consisting of Rootes Group in the UK, SIMCA in France, and Barreiros in Spain. Of these, only Rootes was losing money; SIMCA was not only profitable but had given Chrysler a major boost in engineering its front wheel drive cars.

Allpar member Thom Paré added,

Bringing PSA brands into the fold doesn’t necessarily mean that the US will see PSA brands. It makes sense to leverage strong regional brands (google “Hindustan”) and share engineering, certification, and manufacturing to support those brands.

North America is not issue; sales of Jeep and Ram are strong and Dodge is a solid niche player. Chrysler is a wild card when it comes to the “strong regional brand” concept and it could technically go away since its reputation, as a brand, has not been able to dig itself out of a negative perception hole for decades now. However, a strong volume brand is still required here. It’s still yet to be seen if the Chrysler brand will add to that or be replaced with a French brand or possibly even Opel, which could make sense.

Changes would be most visible in the EU market and hopefully allow for a bigger push into the Chinese and other emerging markets. The biggest change you’ll probably see here, aside from the possibility I stated about the Chrysler brand, will be the implementation of the already strong electric vehicle platform and technologies sourced from PSA and employed by the current crop of FCA brands available in North America.

I’m not worried about the 13.6% ownership by Dongfeng or the French government. This would be diluted enough to become barely relevant among an 11-seat board. My real worry is that, with a volatile political climate and strong sanctions against Iran, if the combined company would be forced to divest its ownership of its partnership with Khodro; and how its partnership will be perceived by some.

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