Fiat Chrysler, PSA should revise merger terms, investor says

Automotive Industry

Source: Automotive News Europe, 2020-06-22

A PSA Group shareholder is calling for the automaker to change the terms of its merger with Fiat Chrysler Automobiles to reflect the downturn in the global auto industry and declining prospects of FCA.

Six months after striking a deal to combine, the two companies’ fortunes have diverged, Paris-based Phitrust said in a statement Monday ahead of PSA’s annual meeting 25 June. “Even back in December 2019, the respective situations of each group didn’t justify a 50-50 merger,” it said.

The auto sector has undergone a seismic shift since the two carmaking dynasties unveiled their plan to combine into the world’s fourth-biggest producer. The coronavirus pandemic shut factories and dealerships across the globe, leading to a collapse in sales.

While FCA is poised to get a state-backed €6.3bn ($7.1bn) credit facility in Italy, PSA CFO Philippe de Rovira has said the French company wants to be “as free as possible of public dependence.”

PSA’s strong balance sheet and cost-cutting have helped it weather the slump, while FCA's finances appear increasingly fragile, Phitrust said.

“PSA didn’t burn through cash since the start of the year the way FCA did,” Olivier de Guerre, head of Phitrust, said by phone. He added the combined company also faces complications from an expected post-merger restructuring in Europe.

A spokeswoman for PSA declined to comment on the critique, but pointed to the groups’ joint statement last week in which they said preparations for the merger are advancing as planned.

FCA did not respond to a request for comment.

PSA and FCA already have revised one aspect of the merger. They scrapped €1.1bn in dividends each agreed to pay as part of their agreement, citing the negative impact of the COVID-19 crisis.

The deal also included a plan for Fiat Chrysler to distribute a €5.5bn special dividend. The companies have not provided details on that payment since the outbreak started.

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