— This is the script of CNBC's news report for China's CCTV on November 1, 2019, Friday.
The merger of fiat Chrysler and PSA Peugeot Citroen is a sea change for the global auto industry. According to a joint statement issued by the two companies, each will own 50 percent of the shares to create a new global auto giant.
They sold 8.7m vehicles last year, had turnover of $190bn, employed 400,000 people and the combined company will have a market capitalisation of nearly $50bn. The new company will be the world's fourth-biggest carmaker by sales, after Volkswagen, Renault-Nissan and Toyota.
This is a complementary merger for the two companies. PSA Peugeot Citroen hopes to use fiat Chrysler to return to North America, while fiat Chrysler hopes to use PSA to turn around its ailing operations in European.
Fiat Chrysler reported record profits in North America on Thursday, but continued to struggle in Europe. CEO Michael McKay did not directly discuss the merger during a post-earnings conference call, but said the next focus would be to boost electric vehicle sales, especially in Europe.
Mike Manley, FCA CEO
when I look at the pricing in the EU, particularly for EVs, I must say much more encouraged now than I was a few months ago， particularly on the full battery vehicle.
In addition to the complementary nature, more importantly, the merger of the two companies will bring economies of scale that will reduce their research and development costs in electric and driverless cars and jointly withstand the headwinds facing the development of the traditional car industry.
The two companies estimate synergy benefits of about $4.1 billion a year, shares for the two companies received a big boost on news of the merger,However, after the details announced, their stock prices' trends are clearly divided.
Fiat Chrysler shares rose to a one-year high
Psa Peugeot Citroen's shares plunged to their lowest level in half a month
That is largely because the latter's investors are unhappy with the details of the deal that Fiat Chrysler's shareholders will receive a €5.5 billion special dividend. The merger is currently subject to regulatory approval. However, information from the French government do not appear to pose much of a hurdle, and the French finance minister has welcomed the merger.
Once the deal is approved, analysts expect there will be more such mergers.
At present, the global automobile industry is in a transition period, and the major traditional automobile manufacturers are facing the reality of demand weakening and the challenge of industrial transformation. Recently, cooperation has become the norm in the auto industry
We will keep an eye on this issue.