Fiat Chrysler and PSA seal merger to become fourth-largest carmaker Stellantis

Fiat Chrysler and PSA said Stellantis can cut annual costs by over 5 billion euros without plant closures.
Fiat Chrysler and PSA said Stellantis can cut annual costs by over 5 billion euros without plant closures.PHOTO: AFP

MILAN (REUTERS) - Fiat Chrysler (FCA) and PSA sealed their long-awaited merger on Saturday (Jan 16) to create Stellantis, the world's fourth-largest auto group with deep enough pockets to fund the shift to electric driving and take on bigger rivals Toyota and Volkswagen.

It took over a year for the Italian-American and French automakers to finalise the US$52 billion (S$69 billion) deal, during which the global economy was upended by the Covid-19 pandemic. They first announced plans to merge in October 2019 to create a group with annual sales of around 8.1 million vehicles.

Shares in Stellantis, which will be headed by current PSA chief executive Carlos Tavares, will start trading in Milan and Paris on Monday, and in New York on Tuesday.

Now analysts and investors are turning their focus to how Mr Tavares plans to address the huge challenges facing the group - from excess production capacity to a woeful performance in China.

Mr Tavares will hold his first press conference as Stellantis CEO on Tuesday, after ringing NYSE's bell with chairman John Elkann.

FCA and PSA have said Stellantis can cut annual costs by over €5 billion (S$8 billion) without plant closures, and investors will be keen for more details on how it will do this.

Mr Marco Santino, a partner at consultants Oliver Wyman, said he expected Mr Tavares to disclose the outlines of his action plan soon, but without divulging too many details at first.

"He has proven to be the kind of person who prefers action to words, so I don't think he will make loud statements or try to over-sell targets," he said.

Like all global carmakers, Stellantis needs to invest billions in the years ahead to transform its vehicle range for the electric era.

But other pressing tasks loom, including reviving the group's lagging fortunes in China, rationalising its huge global empire and addressing massive overcapacity.

"It will be a step by step process, also to allow the market better appreciate every single move. I don't think we will have all the details before one year," Mr Santino said.

FCA CEO Mike Manley - who will head Stellantis' key North American operations - has said 40 per cent of the carmaker's expected synergies would come from convergence of platforms and powertrains and from optimising R&D investments, 35 per cent from savings on purchases, and another 7 per cent from savings on sales operations and general expenses.