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Fiat Chrysler and Peugeot Citroen reach an agreement to merge

This morning, Wednesday, October 30, Fiat Chrysler (FCA) and Peugeot Citroen (PSA) announced they were in talks about a possible merger that would create the fourth-largest automaker by volume in the world. Several hours later the story was updated on the Wall Street Journal website with a report that the two sides had come to terms, pending ratification by both corporate boards.

By the terms of the agreement, Peugeot’s CEO Carlos Tavares would become CEO of the merged company, and FCA chairman John Elkann would become chairman. Together they would oversee an entity with $48.4 billion in market share. The Peugeot board was the first to agree in principle with the merger Wednesday morning. Exor, the Agnelli family holding company that controls FCA, later agreed to complete the merger, subject to board approval.

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Currently FCA is Detroit’s third-largest car maker while PSA is Europe’s second-largest. This merger would make the combined company a rival to Volkswagen AG and shakeup the global industry. In a Detroit News article Karl Brauer, executive publisher of Cox Automotive said in a statement,  “Neither FCA nor PSA, independently, are in a position to lead the industry in vehicle sales and product development, but as a united front they are immediately back in the fight to compete for volume, market share, and advanced technology with today’s more powerful automakers.”

Just this last June, FCA revoked its offer to merge with Renault over concerns about the French government accepting the merger. The French government owns a 15% stake in Renault. and it has been no industry secret that FCA has been looking for a merger to help the automaker compete in a global market that is increasingly dependent on scale.

PSA has a history of taking American car companies and getting them turned around, starting back in 1978 when it took over Chrysler Europe and assumed its debt, taking the burden off the struggling Chrysler company at the time. Then in 2017 PSA again came to the rescue, this time for GM Europe by taking over both the Opel and Vauxhall brands for $2.33 billion, making it Europe’s No. 2 automaker after Volkswagen.

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