Consolidation in the auto industry continues with the announcement that Fiat Chrysler (FCA) intends to merge with Groupe PSA, best known for its Peugeot brand.
The merger would create the fourth largest automaker in the world in terms of unit sales and expand both companies’ product line-up. For example, the combined company would offer vehicles across the luxury, premium, mainstream passenger car, SUV, and truck and light commercial product lines.
Both brands would increase their international reach since FCA is strong in North and South America and Groupe PSA has a foothold in Europe. When it comes to specific brands, the new auto company will offer FCA’s line-up of Jeep, Chrysler, Dodge, and Ram trucks, along with Maserati, Alfa Romeo, and Fiat.
PSA brings to the table its full line-up of brands of Opel, Citroen, Vauxhall, and DS cars, along with Peugeot.
Unsuccessful merger with Renault
Earlier this year, FCA made an unsuccessful bid to expand into Europe by failing to merge with French automaker Renault. Before the deal fell through, FCA said the mergerl would help both companies increase their expertise in electric vehicles.
Negotiations broke down a month later. FCA reportedly backed away from the deal because it was concerned about alleged “meddling” by the French government, which owns a stake in Renault.
Automakers appear fixated on getting bigger through mergers and acquisitions. The Financial Times reports that emerging technologies make these deals even more important since one company may lack the necessary resources to make needed investments.
Another factor pushing competing carmakers into the same camp is declining auto sales. Sales in North America peaked in 2017 and have leveled off since then, though there has been no dramatic fall-off.
The popularity of ride-sharing services could be one factor that is depressing sales, but it’s also a fact that many younger consumers simply can’t afford the average transaction price (ATP) of a new car, which is now around $37,000.
FCA and Groupe PSA apparently hope a merger will put them in a better position to compete in the changing automotive landscape. The “merger of equals” would give shareholders of both companies 50 percent of the new entity.
According to the Detroit Free Press, the combined companies would have revenues of $189 billion and profits of more than $12 billion.
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