DETROIT — In a merger deal that appears to be heading for approval, Fiat Chrysler stands to gain electric vehicle technology while PSA Peugeot Citroen could benefit from a badly needed dealership network to reach its goal of selling vehicles in the U.S.
The Wall Street Journal, citing sources it did not identify, reported Wednesday that the boards of Fiat Chrysler and Peugeot approved the deal. The board of Exor NV, the Agnelli family holding company that controls Fiat Chrysler, also affirmed the deal, the newspaper said.
The merger would create the world’s fourth-largest automaker with a combined market value of around $50 billion. Neither company would comment.
Experts say the two automakers would be able to share car, SUV and commercial vehicle designs, helping each other fill weaknesses and share costs that will make them a strong global player.
“We view the combination of these two companies as reasonable given global competition, high capital intensity, and industry disruption from electrified powertrain as well as autonomous technologies,” Morningstar analyst Richard Hilgert wrote in a note to investors.
Fiat Chrysler Automobiles confirmed Wednesday that it’s in talks with French rival PSA in its second try this year to reshape the global auto industry at a time of heightened uncertainty for the business. The talks started after a merger with France’s Renault collapsed earlier this year. FCA for years has been looking for a partner to share huge capital costs to develop future technologies.
The timing of any deal is unclear, but the Peugeot board was meeting Wednesday, said a person close to the discussions on condition of anonymity.
Here are four areas that could be crucial to the two automakers’ success:
TECHNOLOGY: For years, Fiat Chrysler has lagged its rivals in electric vehicle technology, with its former CEO once trying to discourage people from buying its only fully electric car in the United States, the Fiat 500E, because he lost money on each sale. The company has made progress on gas-electric hybrids and may have plans for more fully electric vehicles, but PSA has valuable technology that FCA can use, said Navigant Research analyst Sam Abuelsamid.
UNITED STATES: PSA been working on ride-hailing services and talking to dealerships, but little progress has been revealed in selling vehicles in the U.S. A deal with FCA could accelerate that goal greatly. With 2,640 dealers across the U.S., Fiat Chrysler would be a ready distribution network for Peugeot and other PSA vehicles. PSA even could remain separate from Fiat Chrysler brands by selling in underutilized Fiat and Alfa Romeo dealerships.
PSA specializes in small and medium-sized cars, which have fallen out of favor with U.S. and even some international buyers who prefer SUVs and trucks. PSA could build its own vehicles off the underpinnings of FCA’s hot selling Jeep SUVs and Ram trucks, Abuelsamid said.
EUROPE: Fiat Chrysler and PSA are likely to have an easier time completing a merger due to decades of cooperation in both Italy and France on building commercial vehicles. But Europe will also pose one of the bigger problems. There is a large overlap in the types of smaller cars and sedans built under the Fiat, Peugeot, Citroen and Opel marquees.
ASIA: The merger is expected to do very little to help the two carmakers in the world’s largest market: China.
Despite a 2014 investment in Peugeot by the Chinese carmaker Dongfeng, there has been no real push to expand the French carmaker’s sales in the Chinese market. This seems to indicate that the two carmakers are not as intertwined in China as expected.