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Fiat Chrysler and Peugeot Owner PSA Agree to Merge

The Wall Street Journal. logo The Wall Street Journal. 10/31/2019 Eric Sylvers, Ben Dummett, Nick Kostov
a car parked in a parking lot © Balint Porneczi/Bloomberg News

MILAN—Fiat Chrysler Automobiles NV and Peugeot maker PSA Group of France agreed to merge in a deal that creates one of the world’s largest auto makers by volume with a market value of $48.4 billion.

Fiat Chrysler and PSA shareholders will each initially own 50% of the new entity, both companies said Thursday in a joint statement.

John Elkann, Fiat Chrysler’s chairman, will become chairman of the newly merged company, while Peugeot Chief Executive Carlos Tavares will be CEO with an initial five-year term.

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By negotiating the deal, Mr. Elkann is acting on a lesson passed on from the Italian-American car maker’s longtime Chief Executive Sergio Marchionne, who died last year: Merge and grow, or fade into irrelevance. 

Five months after a failed merger attempt with Renault SA, Mr. Elkann, the U.S.-born heir of the Agnelli dynasty that founded Fiat, is once more front and center after personally negotiating with Mr. Tavares, people familiar with the situation said.

Fiat Chrysler and Peugeot had already discussed a potential merger earlier this year, and many of the specifics were hashed out at the time, according to people familiar with those discussions. Those talks were shelved in May when Fiat Chrysler sought a deal with Renault instead. But that deal fell through at the 11th hour after Mr. Elkann failed to get the full backing of the French government and Renault’s alliance partner Nissan Motor Co.

Mr. Elkann hired Mr. Marchionne as Fiat’s CEO in 2004 when the company was losing close to €1 million ($1.1 million) a day and shedding market share as its small cars fell out of favor. Mr. Marchionne nursed Fiat back to health, in part by engineering a takeover of bankrupt Chrysler in 2009. He focused on expanding the appeal of Jeep sport-utility vehicles and Ram trucks, which now account for the majority of Fiat Chrysler’s profit, helping to offset the struggling Fiat brand.

Until Mr. Marchionne’s death, Mr. Elkann was largely in the shadow of his larger-than-life CEO. Mr. Marchionne was the toast of the car industry thanks to his frankness on a host of topics, including the need for industry consolidation. In 2015, Mr. Marchionne pursued a deal with General Motors Co. After several advances were rebuffed, he went public with a presentation that set out his detailed arguments for why the industry needed to consolidate, including the high costs of developing technology for electric vehicles and autonomous driving.

Mr. Elkann preferred to concentrate on diversifying Exor’s holdings away from the car sector, in a plan that was long in the making with input from Mr. Marchionne, who was an Exor board member. Mr. Elkann’s biggest move came in 2015 when he bought reinsurance company PartnerRe. He was often directly involved in the contentious negotiations with PartnerRe that culminated in a hostile takeover of the company by Exor.

The collapse of the Renault deal in June could prove costly for Mr. Elkann and his family. Since those failed talks, Peugeot’s stock has risen sharply, and the French company has surpassed Fiat Chrysler in market value. 

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Before The Wall Street Journal reported the latest talks on the merger Tuesday, Fiat Chrysler had a market capitalization of about €18.5 billion and Peugeot €22.5 billion. Wednesday, Fiat Chrysler’s shares rose 9.5% and Peugeot’s 4.5%. Renault stock fell 4%.

Potentially complicating the merger, Fiat Chrysler is in the middle of contract talks with the North American labor union United Auto Workers. However, Peugeot has no presence in the U.S. so the merger plan is unlikely to threaten jobs there.

Mr. Elkann had long favored the Renault deal and continued to hold out hope for that merger to be revived. But some analysts argue that Peugeot is actually the better match. The two companies are complementary in most markets and already have several joint ventures, including one to produce commercial vehicles. While Fiat Chrysler has a large business in Brazil, the French company has concentrated its South American strategy on Argentina.

Both car makers have significant market shares in Europe providing the opportunity for cost cutting. Together they would have a market share of about 23% in the region, just behind Volkswagen AG.

As part of the deal, Peugeot would distribute its roughly €3 billion stake in auto parts maker Faurecia to its shareholders, according to people familiar with the matter. Fiat Chrysler, meanwhile, would pay its shareholders a dividend of €5 billion and would also distribute the proceeds from the sale of its Comau unit, which is valued at about €250 million.

The new company will be traded in New York, Milan and Paris on the Euronext exchange.

The shareholders of both companies would each have their stakes divided by two as part of the deal, the people said. That means that Exor would have 14.5% in the combined group, while the Peugeot family, the French state and China’s Dongfeng Motor Group Co. would own stakes of a little over 6% each.

The companies said they expect to generate €3.7 billion in annual synergies once the they are fully integrated. The savings will come from the more efficient allocation of resources for large-scale investments in vehicle platforms and other technology and from savings in purchasing the bigger company will be able to obtain from suppliers.

Write to Eric Sylvers at, Ben Dummett at and Nick Kostov at


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