It took months of secret planning and trans-Atlantic flights but, if all goes according to plan, Fiat Chrysler Automobiles and Peugeot maker PSA Group will announce plans to merge on Thursday, creating the world's fourth-largest automaker by sales, with a combined worth of around $50 billion.
Both sides, however, are well aware of what happened barely five months ago, when a seemingly unstoppable merger between Fiat Chrysler and PSA's arch-rival Renault collapsed at the last minute. The French government took much of the blame following the breakdown for demanding delays that Fiat Chrysler officials found unacceptable, prompting them to call off the talks.
Everyone involved in the latest merger bid "learned their lessons" by studying what went wrong, said a senior executive close to the Fiat-Chrysler-PSA talks, especially "the government which got hit with a lot of brickbats for screwing up the last one."
This time, however, all appears to be on track. Virtually all the details have been locked into place, the executive, who asked not to be identified due to the sensitivity of the talks, told CNBC, following separate extraordinary board meetings at PSA headquarters in Paris and FCA's official headquarters in London.
While the timetable could change slightly, plans call for the two automakers to put together a memorandum of understanding in the next few weeks, the executive explained. That would set in motion a complicated process that would subject the merger proposal to various forms of scrutiny in the U.S. and Europe.
Among other things, anti-trust regulators would have to weigh in – though several insiders said they doubt there would be any significant pushback. Eventually, stockholders would get their say.
There could even be some hiccups in the coming weeks, as part of contract talks between Fiat Chrysler and the United Auto Workers union, said Art Schwartz, a former GM negotiator and current head of Detroit-based Labor and Economics Associates.
"They'll want to make sure the merger doesn't cost jobs," he said.
The process, the corporate insider told CNBC, could be resolved as early as mid-2020, though he cautioned that the two automakers anticipate things could stretch on for a year "or longer," especially if regulators have concerns.
While the French government is expected to press a merged company to protect the country's jobs and manufacturing base, officials from both automakers have privately concluded it won't try to block a deal. And there would be far less reason to even though it holds a 12.23% stake in the Paris-based automaker.
The Fiat Chrysler-Renault merger was complicated by that French company's long-standing ties to Japan's Renault. Worse, the Renault-Nissan-Mitsubishi Alliance was in turmoil following the November 2018 arrest of Carlos Ghosn, who held a variety of leadership roles within the alliance.
The French government holds a smaller stake in PSA than it did in Renault.
There also appears to be more confidence in the leadership of CEO Carlos Tavares, several of those with insight into the talks said. The executive has been hailed as one of the best leaders in the industry even by rivals such as Ford's President of Europe Jim Farley.
Tavares' track record is certainly impressive, especially since leaving Renault where he was second-in-command to Carlos Ghosn, to join the nearly bankrupt PSA in late 2013. Today, the PSA Group, which includes brands Peugeot, Citroen and DS, is solidly in the black, generating a record operating margin of 8.7% for the first half of this year, rivaling the numbers of many luxury automakers.
Tavares also led a turnaround of the Opel brand PSA acquired from General Motors in 2017. As part of the French company, it was profitable in its first year, reversing two decades of losses under GM.
One of those particularly impressed with Tavares is Michael Manley, the Fiat Chrysler CEO who pitched the merger proposal to his French counterpart over at least three trips to Paris in the last month, an official close to the negotiations told CNBC.
It helped that the two men developed a solid friendship over the past 10 years, that insider said, adding that there are "a lot of similarities in their style and approach."
The insider confirmed several key details about the planned merger. While several scenarios have been discussed, including one in which PSA would acquire the Italian-American counterpart, the deal ultimately shifted to the same basic model that Fiat Chrysler and Renault intended to follow, a merger-of-equals.
That makes sense considering PSA, Europe's second-largest car manufacturer, has a stock-market valuation of about $26.3 billion, compared with Fiat Chrysler's $22.3 billion. Together, they would have a valuation of nearly $50 billion, or about the same as Honda.
The current plan, CNBC has learned, calls for Tavares to be named CEO of the combined automaker.
John Elkann, heir to Fiat's founding Agnelli family, would carry over his current role as chairman. Some reports have indicated Manley will become chief operating officer with responsibility for the North American region. Those close to the talks declined to offer specifics about his new role, though one stressed Manley "is in it for the long haul."
If he does assume command of North American operations, Manley would oversee the ongoing effort to bring PSA back to the U.S. market it abandoned a quarter-century ago. More directly, that effort is being managed by Larry Dominique, a former Chrysler executive who, last week, told CNBC the effort is on track.
But the plan announced two years ago is set to play out in a series of stages through the middle of the coming decade — and only in its final stage would products bearing the Peugeot badge be sold to retail customers.
Whether that process will now speed up is unclear but "there would certainly be synergies," said an insider with connections to PSA. Among other things, PSA could access Fiat Chrysler warehouses and, perhaps, even manufacturing facilities. Peugeot might also want to tap some of Fiat Chrysler's U.S. dealers – though its current plan suggests it wants to take a different approach to retailing than has been the American norm. That could mean anything from factory-owned stores to online sales, PSA officials have suggested over the last several years.
Meanwhile, the PSA insider suggested the French automaker may also make some of its passenger car lines available to the Fiat Chrysler side for North America. Currently, it has abandoned virtually all of its mainstream sedans and coupes except for a handful of large and performance models like the Dodge Challenger. But in a market increasingly focused on SUVs, CUVs and pickups, it's not clear whether that would happen.
Where the merger is expected see the two companies quickly combine forces is in the area of electrified and autonomous vehicles, several insiders from both sides of the company agreed.
"We didn't have the resources" working independently, said the senior executive close to Fiat Chrysler.
The automaker only recently begun to embrace battery-powered drivetrain technology. It currently offers just one plug-in hybrid, a version of the Chrysler Pacifica, and its only all-electric model, the Fiat 500e, is being pulled from the U.S. market.
PSA has been more aggressive in adopting battery-based technology but, like FCA, it still lags behind industry juggernauts such as General Motors, Ford and Volkswagen, and even French rival Renault and its alliance partners Nissan and Mitsubishi.
But in sharing efforts, the insider said, Fiat Chrysler and PSA hope to begin catching up to those rivals in technologies that are expected to dramatically change the auto industry over the next decade.