The new technologies are very costly. And the global demand of Fiat Chrysler Automobiles ( FCA) and Peugeot (PSA) has slowed. To solve this issue, they seek to increase their scale. And for this, they came out with the plan to merge in 50-50 share. This shows them on the position of fourth largest automakers.
Aim of the venture
The joint venture of FCA and PSA aims at reaching the deal to create $50 billion groups listing in the Paris, Milan and New York. PSA’s Carlos Tavares heads the joint venture of PSA and FCA as chief executive and FCA’s John Elkann as chairman. Five months ago, we saw FCA abandoning its deal with Renault. This got a problem for them as they faced a downturn in their market and hefty investments coming up through electric and self- driving vehicles.
Gains and Losses
But now, PSA would help FCA giving it access to the more modern vehicle platforms and new stringent emissions rule. And, the PSA who focuses on Europe, would profit from the FCA’s U.S. business. They could feature brands as Ram and Jeep. But, the expert analysis finds PSA paying 32 per cent of the premium to take control of FCA. And it might be difficult dividing the profits according to market differences.
And thereby, PSA shareholders are assuming more market risk than FCA. But, the same deal is also considered to be a logical and attractive combination for now, in the automobile industry.
The PSA and FCA are going to talk about finance and finalizing the deal in the upcoming weeks. They would aim at 8.7 million i9nn vehicle sales and putting back the Volkswagen, Toyota and Renault-Nissan alliance. They aim to make savings from the group, which includes Fiat, Jeep, Dodge, Chrysler, DS, Opel and many more. This deal may affect other automakers who are facing a drop in demands shortly, which mostly includes Volkswagen, Daimler, Ford and Continental. Le Maire added to their glory that this deal is going them the chance to face both the challenges of autonomous vehicles and electric cars at the same time.
Also, seeing the past results, the deal will be in scrutiny. The combined group will have domicile of Netherlands but have an operating centre in France, Italy and the U.S.