Fiat and PSA on course for €1.5bn savings after merger approved

6 January 2021

Shareholders of Fiat Chrysler and PSA Group, owner of Peugeot and Vauxhall, have approved a merger that is expected to generate €1.5bn in procurement savings.

The carmakers announced that shareholders approved the merger by an overwhelming majority with more than 99% of the votes cast in favour of the transaction.

It is expected to be completed by 16 January 2021 under a new group name Stellantis. 

The proposed merger was first announced in 2019 and is expected to generate a total of €3.7bn in annual run-rate synergies, with 40% coming from purchasing.

“Technology, product, and platform-related savings are expected to account for approximately 40% of the total €3.7bn in annual run-rate synergies while purchasing – benefiting principally from scale and best price alignment – will represent a further estimated 40% of the synergies,” the automakers said. 

A one-time cost of €2.8bn is required to achieve the synergies, but the firms estimated the synergies would be net cash flow positive from year one, with 80% realised within four years. 

Meanwhile, the Society of Motor Manufacturers and Traders (SMMT) found that the UK new car market fell by almost a third (-29.4%) in 2020. 

Covid restrictions, an acceleration of the end-of-sale date for petrol and diesel cars to 2030, and Brexit uncertainty all were considered factors that led the industry to suffer a total turnover loss of some £20.4bn.

Mike Hawes, SMMT chief executive, said: “2020 will be seen as a lost year for automotive, with the sector under pandemic-enforced shutdown for much of the year and uncertainty over future trading conditions taking their toll. 

“However, with the rollout of vaccines and clarity over our new relationship with the EU, we must make 2021 a year of recovery.”

Carmaker Honda has also been forced to halt production at its Swindon factory for the second time in two months due to “global supply issues”.

Work at the facility was also halted in December due to vessel delays and port congestion.

A spokesperson told the BBC: “The situation is currently being monitored with a view to restart production on Thursday 7 January.”

The factory is due to permanently close in July 2021.

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