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Another Chrysler ‘Merger Of Equals’ Sees France’s PSA Take Fiat, Jeep, Dodge, Ram

Groupe PSA Chairman Carlos Tavares has his hands on the French automakers biggest prize: Fiat . [+] Chrysler Automobiles and its swag of brands plus a huge American footprint. Photo: Aurelien Morissard/IP3/Getty Images

The public statements on the creation of Stellantis from Fiat Chrysler Automobiles and France’s Groupe PSA are calling it a “merger of equals”.

The official financial filing documents call the Stellantis merger what it really is: a takeover of Fiat Chrysler, including the Jeep, RAM, Dodge, Maserati, Alfa Romeo, Lancia and Fiat brands, by PSA.

Analysts have long suspected that PSA, which controls Peugeot, Citroen, DS and Opel, would emerge as the stronger of the two Stellantis founders, even with FCA’s John Elkann as Stellantis Chairman.

And according to the prospectus for the merger (which will be voted on in late January next year), they’re exactly right.

It will be the French taking over the Italo-Americans.

“Based on the assessment of the indicators under IFRS 3 (International Financial Reporting Standards) accounting standard and consideration of all pertinent facts and circumstances, FCA and PSA’s management determined that Peugeot S.A. is the acquirer for accounting purposes,” the prospectus states.

FCA filed its prospectus last week in Italy’s Mercato Telematic Azionario and Paris put its version in at the Euronext stock exchange, while it has also been filed with the Securities and Exchange Commission in the United States.

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And it is telling that this “merger of equals” is very similar to the last major “merger of equals” in the car industry, where Daimler and Chrysler created a $36 billion merger in 1998.

History shows that Chrysler was the junior partner that time around and it looks very similar for the company again today.

Later Daimler CEO, Dr Dieter Zetsche was parachuted in to Auburn Hills to run the Chrysler . [+] operations after their «merger of equals», with a stream of private planes flowing so steadily from Stuttgart that Daimler had its own airline, DC Aviation. Photo: AP

The DaimlerChrysler period was hugely damaging to Chrysler, in particular, and 80.1 percent of the American firm was sold to private equity firm Cerberus Capital Management for just $7.4 billion

It needed a $4 billion bailout from the Obama administration to stay afloat and filed for bankruptcy in 2009. Fiat took the company over on the basis of delivering cleaner combustion processes across the board and the two companies merged in 2014.

While it may be just bookkeeping to remain within the guidelines of the IFRS, the Groupe PSA takeover is also in line with what most analysts have forecast.

Fiat Chrysler Automobiles (FCA) CEO Michael Manley has been denied a seat on the Stellantis board, . [+] but has Chrysler finally found its «forever home»? Photo: KENZO TRIBOUILLARD/AFP via Getty Images

Of the 11 Stellantis board members, six (including the CEO Carlos Tavares, who is locked down for five years), will be from north of the European Alps, plus PSA is paying a pre-merger premium to even out the contributions to shareholders of both companies.

There is an argument that FCA’s biggest shareholder, the Exor holding company of the Agnelli clan, will hold the biggest Stellantis stake at 14.4 percent.

To counter that, the Peugeot clan will own 7.2 percent, while Chinese automaker Dongfeng will own 5.6 and the French Government will have 6.2 percent. And there’s little doubt they would all fall on the French side of the argument if push came to shove.

Here’s more evidence: when the FCA holding company in The Netherlands swallows PSA to create Stellantis, PSA’s shareholders will receive 1.742 FCA shares for each of their PSA shares.

It’s a huge prize for PSA, which has long struggled with its lack of North American footprint.

FCA operates in 40 countries and sells its cars and trucks in 130 countries. It covers volume, luxury, premium and sports cars, as well as trucks through the RAM brand.

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Is Fiat Chrysler About to Sell Off Jeep and Ram?

It was the sort of casual comment that many of those listening in on the Fiat Chrysler Automobiles earnings conference call just might have missed, but a single word from FCA Chief Executive Sergio Marchionne could signal some massive changes to come.

For several years, the CEO has made no effort to hide his interest in finding a partner for the smallest of the Detroit-based automakers. During a call with analysts and reporters to discuss FCA’s strong first-quarter earnings Marchionne was asked if his strategy might even include the idea of selling off the company’s crown jewels, the Jeep and Ram brands.

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“Yes,” Marchionne said, before moving on to other topics. And, curiously, those on the call let the subject drop without a single follow-up query.

Yet, that one-word answer has raised lots of questions both in and around Fiat Chrysler, the most fundamental being: Was he serious? And, if so, what would be left if someone did buy just Jeep and Ram, the two brands that generate a disproportionate share of the automaker’s sales and earnings?

Wrangling the Jeep

There’s little doubt that Jeep is the most attractive part of the FCA empire, according to various industry analysts. Jeep was the first automaker to take a serious stab at mainstreaming the sport-utility vehicle with the launch of the original Cherokee model three decades ago. It was slow to adapt to other trends, notably the car-based crossover, but since the old Chrysler Corp. emerged from bankruptcy in 2010 ad merged with Fiat, Jeep has been making up for lost time.

It has been launching new products, like the Renegade and next-generation Compass, at a frenetic pace, with more coming. That includes a new pickup truck now in the works, the first in decades. Jeep has also been adding new production facilities around the world: Brazil, Italy, China. Again, the timing has been prescient, the brand taking advantage of the fact that the American utility-vehicle boom is now spreading worldwide.

The brand has seen its sales nearly triple in recent years, to around 1.4 million annually, and the maker doesn’t think the growth that will tapering off soon, with a near-term target of 2 million. Significantly, officials at rival Ford this month noted that SUV sales in the U.S. have gone from 28 percent to 40 percent of the American market since 2006, and forecast that could hit 50 percent in five years.

Not Sheepish on the Ram

Ram, meanwhile, has also benefited handily from growing demand for light trucks, and the profit margins on its full-size pickups run at some of the highest levels in the industry.

So, analysts would not be surprised if there might be willing buyers for either Jeep, Ram or both, even if FCA itself has so far failed to find a buyer or merger partner.

But take those brands away and “there’d be nothing left,” said Joe Phillippi, of AutoTrends Consulting, certainly not with the automaker’s remaining, American brands Dodge and Chrysler. FCA went so far as to halt production of all passenger models produced in the U.S. — the Chrysler 200 and Dodge Dart. Only a few lower-volume, Canadian-made models, the Chrysler 300 sedan and Dodge Challenger and Charger muscle cars remain, as well as the new Chrysler Pacifica minivan. Hardly a successful company do those make.

There are the Italian brands Fiat, Alfa Romeo and Maserati, but except for Fiat in Europe and a few other markets, those are niche brands and ones just going through major makeovers. FCA has been spending billions to rebuild Alfa with new products like the Giulia sedan and Stelvio SUV.

What would be left “would be in the lower quadrant of sales and profitability” among mainstream makers, suggested Phillippi. But, he added, perhaps that would be what Marchionne has in mind. The most valuable asset for what would be left of FCA would be its U.S. dealer body, and that might be something that could be sold to an emerging Chinese automaker, or perhaps a company like France’s PSA. The parent of Peugeot and Citroen, PSA recently announced its intentions of returning to the American market after a quarter-century absence.

And the Price?

How much might the Jeep and Ram brands be worth? In January, Adam Jonas, the Morgan Stanley analyst who asked Marchionne about a sale calculated the SUV division would go for around $22 billion, while he valued Ram at $11.2 billion.

Consider that Wall Street investors, after bumping up FCA shares in the wake of its strong quarterly earnings, still give the entire company a market capitalization of around $17 billion. A potential suitor might suddenly see an advantage to coming in and buying the company up whole and jettisoning the brands it doesn’t want.

That nearly happened back in the 1990s when billionaire Kirk Kerkorian made an ultimately unsuccessful bid to buy out Chrysler and take it private.

It may be that Marchionne is simply trying out a new tactic to generate interest in his company, said one source close to FCA. Added another, “We know something is going to happen at some point.”

Paul A. Eisenstein is an NBC News contributor who covers the auto industry.

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Концерн Fiat Chrysler перейдет в руки китайцев?

Олег Меньщиков

По сообщениям американской прессы, компания Fiat Chrysler Automobiles (FCA) ведет переговоры с несколькими потенциальными покупателями из Поднебесной. Официальных сообщений нет, но журналисты опознали среди зачастивших в штаб-квартиру FCA делегаций топ-менеджеров концернов Dongfeng, Great Wall, Geely и GAC. В то же время со ссылкой на анонимный источник утверждается, что представители FCA, в свою очередь, уже посетили китайский Баодинь для встречи с руководством фирмы Great Wall.

То, что FCA выставлен на продажу, давно не секрет. Глава концерна Серджио Маркионне уже предлагал слияние фирмам General Motors и Volkswagen. Первая интереса не проявила, а Фольксвагену в силу дизельгейта нынче не до масштабных инвестиций. Китайские же компании до последнего времени в качестве покупателей не рассматривались. Однако два года назад правительство Китая озвучило новую стратегию захвата международных рынков. Отчаявшись завоевать их в лоб с помощью собственной продукции, Коммунистическая партия дала директиву приобретать на корню иностранные предприятия. Наверняка одним из примеров послужила компания Geely, за последние семь лет скупившая фирмы Volvo Cars, London Тaxi, Proton и Lotus.

В рамках новой стратегии компании из Поднебесной уже выкупили шинную фирму Pirelli и немецкого производителя промышленных роботов Kuka. А в ближайшее время, по оценкам экспертов, китайские автомобильные компании потратят около 1,5 триллиона долларов на покупку профильных активов за границей. Одно из предприятий американской «большой тройки» в этих условиях, пожалуй, самый лакомый кусок. Тем более что основной инвестор FCA, принадлежащий семье Аньелли холдинг Exor, подготовил фирму к продаже.

Американское отделение FCA вывело из гаммы все компактные модели, сосредоточившись на маржинальных пикапах, минивэнах, кроссоверах и внедорожниках. Сейчас по всему миру у FCA 162 завода и 87 научно-технических центров, а дилерская сеть только в США насчитывает около 2600 салонов. Автомобили концерна продаются под марками Chrysler, Dodge, Jeep, Ram, Fiat, Alfa Romeo, Lancia и Maserati, хотя фирма Ferrari пару лет назад была дальновидно выведена в отдельное предприятие. Очевидно, то же самое будет сделано и с марками Alfa Romeo и Maserati: продав их отдельно, семья Аньелли выручит куда больше денег.

Но кто станет владельцем FCA, если слухи о продаже азиатам подтвердятся? Говорят, одна из китайских компаний уже сделала финансовое предложение «чуть дороже» рыночной цены, которое было отвергнуто. По-видимому, пользуясь ситуацией, руководство FCA собирается устроить из продажи некое подобие аукциона.

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