Dec 20, 2019

The Fiat Chrysler-PSA merger can't solve all their problems

Joann Muller

The CEO's of both companies shaking hands. — PSA's Carlos Tavares (left) and FCA's Mike Manley. Photo: Courtesy of FCA

Fiat Chrysler Automobiles is merging with France's PSA Group to create the world's fourth-largest automaker, a deal intended to help both companies bear the cost of new technologies like electric and self-driving cars.

The big picture: The merger also gives Peugeot's parent a long-desired entry into the U.S. and will help FCA catch up in fuel-efficient powertrains. "It is better to face the challenges of the future together than on a standalone basis," PSA CEO Carlos Tavares said during an investor call, CNBC reported.

Yes, but: The merged company will have some glaring problems.

It will still be overly reliant on the European market, where sales are sluggish and tightening regulations make it more difficult for all players to do business there.
And both companies are poorly positioned in China, a combined weakness that's only amplified as the world's largest auto market shifts sharply toward electric vehicles and homegrown brands.

The bottom line: Tavares, who will lead the combined entity, is an industry wizard, but pulling this off will likely be the most difficult challenge of his career.

Go deeper: High-tech cars drive auto loans to record highs in the U.S.

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The Fiat Chrysler-PSA merger can't solve all their problems

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