Economy & Politics

The pandemic changes the PSA-Fiat Chrysler alliance

In order for their union to remain a marriage of equals, the French and Italian-American car manufacturers have changed the terms of their contract a little in order to take into account the impact of the pandemic on their respective accounts.

In order for their union to remain a marriage of equals, the French and Italian-American car manufacturers have changed the terms of their contract a little in order to take into account the impact of the pandemic on their respective accounts.

(AFP) – Fiat Chrysler (FCA) has notably agreed to lower the exceptional dividend it wishes to distribute to its shareholders before the final signing of the merger to 2.9 billion euros, against 5.5 billion euros previously . The PSA group, for its part, plans to distribute its 46% stake in the capital of the French equipment manufacturer Faurecia to all the shareholders of the new company, called Stellantis, and not to its sole shareholders as provided for in the initial agreement.

These changes “preserve the original balance of the merger agreement,” said the two companies in a joint statement. Their union, announced at the end of 2019, should give birth to the world’s fourth largest automotive group in terms of volume and third in terms of turnover, housing iconic brands such as Peugeot, Citroën, Opel, Jeep, Alfa Romeo and Maserati under the same roof.


(COMBO) This combination of file pictures created on October 31, 2019 shows the logo of Italian auto maker Fiat (L) in a cars dealer on January 12, 2017 in Saluzzo, near Turin, and the Peugeot logo pictured at the 2014 Paris Auto Show on October 3, 2014 in Paris. - French carmaker PSA and US-Italian rival Fiat Chrysler have signed an agreement to create the world's fourth largest automaker, they said in a joint statement on December 12, 2019. (Photos by MARCO BERTORELLO and Jo l SAGET / AFP)

French and Italian-American car manufacturers have signed “a binding merger agreement” with a view to a merger “to form the world’s fourth largest car manufacturer,” the two groups announced on Wednesday in a joint statement.


But since then, the pandemic has struck and has had an impact on the finances of the automotive industry, between dealer closures and containment measures. Doubts had been expressed in recent months on the balance of the financial package. PSA and Fiat had already announced in May that they were waiving the payment of an ordinary dividend of 1.1 billion euros each expected as part of their marriage, due to the health crisis.

But the amount of the exceptional dividend of 5.5 billion euros that FCA was to distribute to its shareholders as well as the distribution of Faurecia shares were still ticking because Faurecia’s market capitalization has melted since the announcement of the engagement in December. This mechanically played against the shareholders of the French manufacturer.

More savings

With the changes announced on Monday, “the respective shareholders of FCA and Groupe PSA will receive the equivalent of 23% of Faurecia’s capital (…), while their 50/50 stake in Stellantis – a group which will now have 2.6 billion euros of additional liquidity on its balance sheet – will remain unchanged, ”details the press release.

“In addition, it was also agreed that the boards of the PSA and FCA groups may consider a distribution of 500 million euros to the shareholders of each company before the final signature or, alternatively, a distribution of 1 billion euros to all Stellantis shareholders after the final signing, ”adds the document.


(FILES) In this file photo taken on August 28, 2019, a man works on the assembling of an Opel

The French automotive group (Peugeot, Citroën, DS, Opel, Vauxhall) nonetheless attracted 3.49 million buyers last year. A fall in the market which comes at a time when the industrialist wants to merge with Fiat Chrysler.


These possible gifts to shareholders will depend on the respective performance of the manufacturers as well as on market conditions. The changes were approved “unanimously” by the boards of directors of the two companies “with the strong support of their reference shareholders”. They say they are “more convinced than ever of the merits of this merger and of the potential for value creation”.

The groups now estimate that their merger should save 5 billion euros per year, against 3.7 billion initially. “Stellantis ‘revised upward prospects for synergies and long-term value creation now allow reference shareholders to modify certain financial terms to further strengthen Stellantis’ balance sheet at its start-up, all in a Covid context” , said a spokesperson for PSA. Finally, PSA and Fiat Chrysler still plan to seal their union by “the end of the first quarter of 2021”.


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