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Peugeot, Fiat prepare merger agreement for next week

Dec 13. 2019
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By Syndication Washington Post, Bloomberg · Ania Nussbaum, Daniele Lepido, Tommaso Ebhardt 

Fiat Chrysler Automobiles and Peugeot maker PSA Group are aiming to sign a formal agreement next week to combine into the world's fourth-biggest car manufacturer, according to people familiar with the matter.

Progress is being made on the memorandum of understanding even though some outstanding issues still have to be resolved, said the people who asked not to be named because the information isn't public. Ways to assess potential Fiat liabilities that have come to light since a broad outline of the accord was unveiled Oct. 31 are still under discussion, they said, adding that more than 100 managers are participating.

Representatives for Fiat and PSA declined to comment. The companies had said they aimed to sign a deal before the end of the year.

Following the unveiling of the merger plan, rival General Motors hit Fiat with a blockbuster racketeering lawsuit alleging a bribery and corruption scheme. Fiat has called the accusations "meritless."

In a separate development, Italian tax authorities claimed Fiat underestimated the value of its American business by 5.1 billion euros ($5.7 billion) following its phased acquisition several years ago. Fiat has said it "strongly" disagrees with the case, which could potentially lead to a levy of as much $1.5 billion.

A merger of Fiat Chrysler and PSA, the No. 2 for car sales in Europe, would create a regional powerhouse to challenge Volkswagen. Under the plan, the new company based in the Netherlands would be headed by PSA Chief Executive Officer Carlos Tavares, while Fiat Chrysler Chairman John Elkann would keep his role as chairman.

The combination would leave Tavares, who turned around PSA and the loss-making Opel brand it acquired, to figure out how to improve Fiat's struggling operations in Europe. Fiat's deep Italian roots, along with the French government's 12% stake in PSA, may make any plans to slim down the new entity more difficult.

 

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