PSA and Fiat Chrysler MERGER looks to be a GO

The boards of PSA and FCA have agreed to pursue the merger of the two companies, aiming to create the world’s fourth largest car manufacturing group.

Following the confirmation yesterday that PSA and FCA are in merger talks, things have moved on apace with both companies now approving the plan to merge, in the process creating the fourth largest automotive group in the world, behind VW, Toyota and Renault-Nissan.

The aim now is to thrash out the details ahead of a memorandum of understanding in the next few weeks, with a merger of equals creating a new group headquartered in Holland.

It’s seems like a very sensible and pragmatic move by both FCA and PSA in an era for car makers where technology shifts are weighing heavily on finances and resources.

The two companies say the merger will realise the highest margins in the markets they operate, with FCA’s strengths in the US and Latin America complimenting PSA’s in Europe, and bring added strength across a wide range of sectors including Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial.

The pair reckon there will be £3.7 billion of annual run-rate synergies without any plant closures, and that the board of the new company would have balanced representation and a majority of independent directors, with John Elkann as Chairman and Carlos Tavares as CEO.

It’s a step further than Ford’s tie-up with VW to use the VW Group’s MEB Platform for electric cars, but it’s not going to be the last major deal between car makers as they seek to survive challenging times.