Fiat Chrysler and PSA (Peugeot and Citroën) want to merge.

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Sébastien Salom-Gomis / Sipa

The marriage must still be validated this Monday by the shareholders of Peugeot and Fiat.

But the union of the French groups PSA and Italian-American FCA should give birth to the world's fourth automotive group in terms of vehicles sold, and the third in turnover behind the Japanese Toyota and the German Volkswagen.

The new entity, called Stellantis, will have more than 400,000 employees and will house in the same garage 14 emblematic brands such as Citroën and Maserati (already briefly married 50 years ago), Fiat and Opel, Peugeot and Alfa Romeo, Chrysler, Dodge or Jeep .

"This merger was a question of survival, and that goes for Fiat as for PSA", according to Giuliano Noci, professor of strategy at the Polytechnic business school in Milan.

The two groups are facing "enormous technological and strategic challenges" (electric vehicles, digitization, autonomous driving) and the devastating effects of the Covid-19 pandemic.

"Only the most agile, in a Darwinian spirit, will survive," said Carlos Tavares, chairman of the PSA board and future CEO of Stellantis, in November.

The group's brands will in particular reduce their development and construction costs, and complete their offer in all ranges.

“Thanks to its union with PSA, Fiat-Chrysler will be able to strengthen its presence in Europe,” adds Giuseppe Berta, professor at Bocconi University in Milan and Fiat specialist.

“Conversely, the French group will be able to regain a foothold in the United States thanks to its Italian-American ally.

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An amended merger

No great suspense in France on Monday: PSA shareholders have already voted in June 2020 by more than 99% in favor of four resolutions marking their support for the marriage of the Fiat 500 and the Peugeot 208. But their vote will seal this union planned since 2018, announced at the end of 2019, and whose preparation has been slowed down by the coronavirus crisis.

At the end of December, the European Commission gave the green light to the union, on condition that the two groups respect their commitments made to preserve competition in small utilities, where they hold large market shares.

The builders had previously amended their contract so that their union remains a marriage of equals, while the pandemic has affected their respective accounts.

FCA has notably agreed to lower the amount of an exceptional dividend paid to its shareholders.

For its part, PSA has decided to sell 7% of the French equipment manufacturer Faurecia before distributing the rest to the shareholders of Stellantis.

The participation of the Chinese group Dongfeng should also be reduced.

This is insufficient according to the Phitrust fund, which holds less than 1% of the capital of PSA, and criticizes, since the announcement of the merger, a lack of "balance between the parties" for the benefit of the Italo-Americans.

"FCA needs PSA more for the implementation of synergies than the reverse" and "PSA is more efficient than FCA on various key aspects", notably underlined the fund in a press release.

No factory shutdown?

In the documents provided to the financial authorities, PSA and Fiat estimate that their merger should cost 4 billion euros, and that the synergies will ultimately save up to 5 billion per year.

Carlos Tavares stressed at the end of 2019 that no plant closures were planned.

The unions allow themselves to doubt it.

“Overall, it's a good insurance for the future of our group.

Those who will not take this turn will risk being left behind, ”comments Franck Don, CFTC central union delegate at PSA.

"Today, the FCA group is a great unknown for us", however tempers the trade unionist.

“What synergies will be found?

What potential consequences for sites located in France?

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Christine Virassamy, CFDT central union delegate, expects a firm commitment from Stellantis on factories and research centers.

“It is the social and ethical aspect that will allow us to say whether this merger is a success or not,” she underlines.

Phitrust warns that Fiat has no room for maneuver in Italy, where it has taken out a state-guaranteed loan to the tune of 6 billion euros.

"The French factories of PSA could become the adjustment variable, causing heavy job losses", advances the fund.

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