World's 4th Largest Automaker Set To Take Shape Monday

World's 4th Largest Automaker Set To Take Shape Monday

Shareholders are scheduled to vote on the merger between Fiat Chrysler Automobiles NV (FCAU) and PSA Group (PUGOY) on Monday, January 4.

Sizing Up

Finalization of the merger, which has been in the works for years, would create the world's fourth largest automaker by volume, Bloomberg reported. The combined new company, called Stellantis, includes the brands Fiat, Jeep, Dodge, Ram and Maserati, Peugeot, Opel, and DS.

The companies agreed to the $50 billion all-share deal in December 2019. The brands will keep their badges and logos, Reuters reported earlier.

Why It Matters

The company expects its greater scale to give it an edge in an industry undergoing vehicle electrification, with Tesla Inc. (TSLA) gaining all the spotlight and facing challengers from outside, including possibly Apple Inc. (AAPL).

But the auto industry has a mixed record of results from big mergers, including one of the brands involved in this one — Chrysler. Daimler-Benz's purchase of Chrysler in 1998 is the classic example that merger skeptics point to as evidence that scale doesn't always work in the industry.

PSA Chief Executive Officer Carlos Tavares is expected to take on the task of cutting costs at Stellantis. He "takes a Darwinian view on the industry, arguing that only the strong carmakers will survive the pivot to electric drivetrains and pursuit of autonomous driving," Bloomberg reported. His experience in reviving PSA and the brand Opel are pointed to as encouraging signs that he can manage the transformational challenges the company faces.

Recent Trading Action

Shares of Fiat ended the last trading week of 2020 up 1.74% at $18.09. PSA Group trades as Peugeot SA on the Euronext Paris exchange and ended the week down 0.49% at €22.37.

© 2020 Benzinga does not provide investment advice. All rights reserved.

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