An Italian-American conglomerate teams with a French giant to become the world’s fourth-largest automaker. We’ll go into all of that on this very spooky of Oct. 31, 2019.

So this is happening: Fiat Chrysler Automobiles and PSA Group—the French owners of Peugeot, Citroën, DS and also Opel and Vauxhall now—will merge in a 50-50 share swap that will create the world’s fourth-largest automaker. Five months ago FCA was in talks with Renault, but those fell apart, so it seems they had better luck with that company’s rival.

The new company may get a new name. It will be under a Dutch parent company, with a board of 11 members including five nominated from FCA and five from PSA.

You can probably guess why this is happening. The decision fulfills to merge his company with another large automaker in an attempt to cut costs, increase scale, reduce redundancies and dump money into expensive but necessary future technologies like autonomy and electrification. Over the years, FCA had talks with General Motors, Geely, the aforementioned Renault and probably some others we don’t even know about.

The cost savings are exactly what they’re playing up in the announcement. Here’s :

The management teams of FCA and PSA will seek to finalize the discussions in the coming weeks to create a group with 8.7 million in annual vehicle sales and make savings of 3.7 billion euros ($4.1 billion), even without plant closures, they said.

The group will include the Fiat, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, Citroen, DS, Opel and Vauxhall brands, allowing it to serve mass and premium passenger car markets as well as trucks and light commercial vehicles.

About 80 percent of potential synergies could be achieved within four years, at a cost of 2.8 billion euros ($3.1 billion), the companies said.

“In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global r&d footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency,” FCA and PSA said.

This is a big deal! It’s all very exciting.

2nd Gear: What’s In It For FCA?

FCA’s doing pretty well at the moment, actually. As story notes, it just posted a record $2.3 billion operating profit in North America. It has Jeep, quite possibly the most valuable individual car brand in the world, and Ram, whose truck sales are helping to print money over here.

But it’s safe to say FCA feels behind the times, technologically speaking. It’s the most old-school of the American(-ish) automakers, full of dated platforms and without many strong forays into electric cars and hybrids. In addition to the cost-cutting advantages, it needs to modernize a bit. This may help. From that Reuters story:

A combination with PSA would give FCA access to the French group’s more modern and more flexible vehicle technologies, including the CMP modular platform, which was launched in 2019 for Peugeot’s e-208 subcompact, and donated the technology which allowed Opel to build a sibling model, the Corsa-e.

Plus, we know that truck and Jeep sales probably won’t keep the lights on alone forever as the world changes—and maybe as gas prices go up or we see a wider shift to autonomy.

Also, we get Opel and Vauxhall “back,” after those former GM brands were sold to PSA. Get, uh, excited?

PSA currently has no footprint at all in the U.S., the world’s second-largest car market. The French automaker has wanted (back) in for a while, and though there are preliminary , this could change that equation.

It remains to be seen how, exactly. No announcements have been made yet as to when or how those brands could be utilized here in North America. But the deal gives PSA a more solid connection than it had before to a market that’s FCA’s primary profit driver.

I was going to say that hopefully, this gives us Americans , but then I remembered they killed it off. Bring back the Cactus and sell it in America, cowards! I need something to look forward to, dammit!

4th Gear: Not Really A Merger Of Equals

The press materials make it look like this was a true merger of equals, but as notes, “it didn’t take long for investors to figure out who the buyer is.”

Shares of Fiat Chrysler jumped 10% Thursday after the two sides announced the deal, billed as a 50-50 merger. Peugeot owner PSA fell by about the same amount, taking the typical acquirer’s hit.

The math bears it out. Fiat shareholders will get a premium of almost 5 billion euros ($5.6 billion), based on closing prices Tuesday, before reports of the talks, as both sides shed assets before throwing their remaining equity into the pot.

Adjusting for the differences in market values and a 5.5 billion-euro dividend being paid out to Fiat Chrysler shareholders, “achieving a 50/50 shareholding suggests PSA is paying a 32% premium to assume control of FCA,” Jefferies analyst Philippe Houchois said in a note. “PSA shareholders are assuming more market risk.”

Interesting.

5th Gear: Carlos Is The New Sergio

Agnelli family scion John Elkann had a major ally and advocate in Marchionne, and after he died Elkann pushed ahead with a merger partner. He gets a new powerhouse automotive executive in Carlos Tavares, head of PSA, a onetime protegé of Carlos Ghosn at Nissan-Renault and someone with major global carmaking experience. He too is known as “a ruthless cost-cutter.”

Tavares will be named CEO of the combined company for at least five years. Elkann will be chairman.

From :

“Auto sector deals are incredibly complex to deliver upon and have no hope of success without a ‘Great Man’ CEO at the controls,” said Max Warburton, an automotive analyst at Sanford C. Bernstein & Co. “It’s clear that Tavares has spent years thinking about how a deal with FCA might work.”

PSA, maker of the Peugeot brand, may not have been Elkann’s preferred partner — another merger attempt with Renault SA fell through in June after demands by the French government proved insurmountable. But Tavares best fits the mold of Marchionne, a shrewd operator who passed away after a short illness in July 2018 at the age of 66.

Both men turned around businesses that from the outside looked beyond repair. Marchionne accomplished that feat with Fiat, before combining the storied Italian brand with Chrysler to gain a global footprint. Tavares revived Peugeot after it was saved from the brink. Two years ago, he managed a bold reversal when he took over Opel from General Motors Co. and successfully integrated the notoriously unprofitable asset.

Reverse: He Didn’t Own Any Cars

On October 31, 1776, in his first speech before British Parliament since the leaders of the…

Neutral: What Do You Think Of This Merger?

Has FCA finally done it, or is this deal pretty meh?

An earlier version of this story said PSA has no footprint in North America. It sells cars in Mexico. We regret the error.