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Fiat Chrysler and Peugeot agree to merge into mega auto deal



The shareholders of each automaker will own 50% of the combined operation, the companies said in a joint statement Thursday. The binding agreement could be finalized within weeks, the statement said.

The combined company will be based in the Netherlands, which is the present headquarters of Fiat Chrysler. John Elkan, current chairman of Fiat Chrysler ( FCAU ) will play the same role in the combined company, while PSA Group CEO Carlos Tavares will be CEO. [19659004] The company will rank among the largest automakers in the world. Fiat Chrysler and PSA ( PUGOY ) sold a combined 8.7 million vehicles last year, just before GM ( GM ) which sold 8.3 million and is not far behind Volkswagen ( VLKAF ) and Toyota ( TM ) each of which has sold over 1
0 million.

The merger comes amid a global slowdown in sales. At the same time, car manufacturers are racing to invest in the electrical and hybrid technologies needed to achieve rigorous new emissions targets in China and Europe. Autonomous vehicles of the future also pose a threat to traditional business models of the industry.

The enormous amount of capital needed to meet these new challenges has forced some manufacturers to find partners and others have become acquisition targets.

"We view the combination of these two companies as reasonable given the global competition, high capital intensity and interruption of the electrified power engine industry, as well as autonomous technologies," says Richard Hilgert, senior equity analyst at Morningstar, in a scientific note on Wednesday.


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