PSA and Fiat Chrysler merger threatened

  •   25/03/2020 - 13h37
  •   HARMANT Adeline

Because of the very important impact of the coronavirus epidemic on the automobile sector, the merger between the companies PSA and Fiat Chrysler seems to be in jeopardy. We invite you to learn more about this important information and its consequences.

PSA and Fiat Chrysler merger threatened
Image copyright: Ming-yen Hsu - Flickr

Will the merger between PSA and Fiat Chrysler take place?

It is therefore the current pandemic which is hitting the world economy, and more particularly the automobile sector, hardest, which calls into question the planned merger between the PSA and Fiat Chrysler groups.

Doubts have indeed seized the market with regard to the announced marriage of these two European manufacturers at a time when the health crisis is increasingly weakening companies and thus endangering the balance of this operation.

The merger between these two companies was announced in October 2019 and was due to be finalised early next year to create the fourth largest global player in the automotive sector by combining the Peugeot, Citröen, Jeep, Alfa Romeo and Maserati brands.

 

Production stopped at both manufacturers :

Although measures by governments and central banks are being implemented and are multiplying to save the economy and certain sectors in particular, including the automotive sector, the coronavirus pandemic continues to wreak havoc and is causing a vertiginous fall in financial markets. The world economy is therefore plunging into recession and many production sites have been shut down in Europe, including the PSA and Fiat Chrysler sites. It is therefore the financial terms of this merger that are currently being called into question.

Now, the two companies need this union in view of the important investments to be made in the electricity segment but this merger will undoubtedly require a review of the financial terms announced at the outset. Indeed, it will be necessary to re-evaluate the assumptions on the value of these companies and the revenue and sales projections that were made during the initial discussions. As a result, the two companies no longer have the same certainty as they did less than a month ago regarding their sales, revenues and market shares for 2020.

 

A historic crisis in the automotive sector:

ACEA, the European Automobile Manufacturers Association, argued that 14 million jobs are threatened in Europe and called for financial support for this sector which is going through the worst crisis ever.

It would therefore be unlikely that the PSA and Fiat Chrysler groups would call for state aid and therefore for taxpayers' money and at the same time return money to their shareholders.

According to the various sources questioned on this issue, only the PSA spokesman indicated that the merger timetable remained unchanged for the time being.