DETROIT — The merger of Fiat Chrysler and French automaker PSA Group will reshape the global automotive industry in an effort to address unprecedented change occurring around autonomous and all-electric vehicles.
That's how top executives for both companies on Wednesday described the 50-50 all-share tie-up to create the world's fourth-largest automaker. The merged company is expected to achieve cost savings of 3.7 billion euros (US $4.1 billion) a year without closing factories.
The cost savings are expected to assist the combined company in investing billions in autonomous and all-electric vehicles — two emerging segments that the automakers are behind on addressing as smaller, separate companies.
"It is better to face the challenges of the future together than on a standalone basis," PSA CEO Carlos Tavares told investors during a call to discuss the agreement.
Tavares, who will lead the yet-unnamed $50 billion combined entity, described the merger as "a once in a lifetime opportunity."
Shares of Fiat Chrysler were down more than 1% after the call, while PSA's stock was up about 1.5% on the European stock exchange in Paris.
The cost savings, 80% of which are expected to be realized in the first four years, are anticipated to primarily come from product-related expenses such as consolidating vehicle platforms as well as scale for better purchasing costs.
During the call, Tavares and Fiat Chrysler CEO Mike Manley stressed that the merger is occurring at the right time, as both companies report strong profits despite a global slowdown in vehicle sales.
"With this merger, we're actually going to execute what has only been theorized many times before, which is smart industry consolidation," Manley said.
The combined company will have annual global sales of 8.7 million vehicles, with revenues of nearly 170 billion euros (US $188.9 billion), recurring operating profit of over 11 billion euros (US $12.2 billion) and an operating profit margin of 6.6%, based on 2018 results.
"We will have the size to provide cutting-edge technology," Tavares said, later adding that the new company will "challenge the status quo in terms of what is now ongoing in the worldwide automotive industry."
Brands under the combined companies are expected to include Alfa Romeo, Citroen, Dodge, Fiat, Jeep, Maserati, Opel, Peugeot, Ram and Vauxhall.
Shares of the merged company, which will be based in the Netherlands, will be listed on the Euronext Paris, Borsa Italiana (Milan) and New York Stock Exchange, according to the companies.
The largest shareholder of the combined company is expected to be Exor SpA at roughly 14%. Exor is the family investment company of Fiat Chrysler chairman John Elkann, whose great-great-grandfather founded Italian automaker Fiat.
Elkann is slated to be chairman of the combined company, which will have an 11-member board that includes Tavares and split representation between members nominated by Fiat Chrysler and PSA.
The companies said they expect the deal to close in the next 12 to 15 months, and they would come up with a name over the coming months.