Daily Management Review

EU Set To Approve Fiat-PSA Merger Worth $38 Billion: Reports


EU Set To Approve Fiat-PSA Merger Worth $38 Billion: Reports
The antitrust regulators of the European Union are set to grant approval of the merger of car makers Fiat Chrysler and PSA in a deal worth $38 billion which will create the fourth largest car making company of the world, according to reports quoting sources with knowledge of the matter. 
This merger will help the companies to address the dual challenges of the auto industry – arranging for finances for funding development of cleaner vehicles and the novel coronavirus pandemic.
Creating of Stellantis will be formalised by the green light from the European Commission on the deal. The new company could take benefit from the hefty profits of selling of Ram pickup trucks and Jeep SUVs in the United States market which is crucial for arranging for the huge funds required for the expensive development of zero-emission vehicles which it targets to sell in the European and Chinese markets.
Following the merger of the two companies will bring together brands such as Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel and DS. The two companies target to achieve a annual savings of 5 billion euros ($6 billion) without closing factories because of the merger which was announced late last year.
No comments on the issue were available form eh European Commission and Italian-American group Fiat Chrysler Automobiles and France's PSA.
As a part of the concessions for the deal as proposed to the EU antitrust regulators, PSA has pledged to further strengthen the Japanese rival Toyota Motor Corp with which the French company has a van joint venture,  by increasing production capacity and selling its vehicles close to cost price, said the reports quoting sources.
The two companies have also promised to allow their dealers in some cities to repair rival brands.
The sources reportedly said that based on the feedback to the Commission from rivals and customers, the two merging companies only had to make some small changes to the wording of their concessions and no major change being required for the substance of the concessions.
The use of the Covid-19 pandemic as one of the reasons for allowing the merger was laos not made by the two companies.
It is hoped that the merger will be completed in the first quarter of 2021, FCA and PSA have said.
The Covid-19 pandemic has further complicated the challenge for companies to switch to making electric cars.
The terms of their deal were restructured by FCA and PSA just last month which include targets to conserve cash. The two companies also raised their targeted cost savings prompted by the economic impact of the pandemic crisis.
Product related expenses will account for 40 per cent of the savings while purchasing changes will account for another 40 per cent savings and the rest 20 per cent savings will come from other areas, such as marketing, IT and logistics, the two companies have said previously.