Antitrust Issue Raised Over Fiat Chrysler-PSA Merger

Partner must address van market share worries this week


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Could the van market undo the proposed merger between Fiat Chrysler Automobiles and PSA Group?

Maybe so. Regulators fret that a merger would create a company that controls one-third of small-van sales in Europe and commands twice the market share of its nearest rivals, sources tell Reuters.

Why It Matters

The proposed $47 billion merger would be the auto industry’s largest ever, creating a behemoth that ranks fourth in sales after Volkswagen, Toyota and—at least before the coronavirus—the Renault-Nissan-Mitsubishi alliance.

Unless FCA and PSA can resolve the antitrust concern this week, the van issue will trigger a four-month-investigation by regulators at the European Commission.

The two carmakers described their merger plan in detail last October and two months later signed a binding agreement to proceed. Reuters says the companies hope to finalize the deal in early 2021.

Quick Concessions?

The companies may be able to shortstop an EC probe by offering concessions of some sort in the next few days. But what?

FCA and PSA produced a combined 755,000 light commercial vehicles last year for the European market. More than half that total comes from the 50:50 venture the carmakers launched in Sevel, Italy, 42 years ago.

These days, the Sevel complex—considered Europe’s largest and most flexible commercial vehicle assembly facility—builds roughly 400,000 vans per year for the Fiat, Citroen, Opel, Peugeot and Vauxhall brands.

The partners won’t be eager to cede their market position in the lucrative European van market by giving up production capacity. But they may have no choice.

Other Hurdles

It’s no surprise that a giant deal like this one faces multiple challenges.

The impact of the COVID-19 pandemic on the bottom lines of both partners has turned out to be the biggest problem. Neither company, for example, is likely to make good on its vow to pay its shareholders $1.2 billion in dividends for last year’s performance. Paying any dividend would cloud the ability of either company to obtain government-backed, pandemic-related bailout loans.

Nevertheless, the companies are charging ahead. Just last week FCA said it was ready to spin off its Comau industrial automation business next spring. The move will raise cash and further focus the carmaker around its mainstream business.

FCA also is battling a claim by General Motors that for years in profited from lower labor rates in its U.S. plants because of concessions gains by bribing United Auto Workers union executives.

The charges stem from a continuing federal probe into financial crimes involving UAW officials and, initially, FCA executives. GM contends that former FCA executives conspired to damage GM in hopes of pushing the company into a merger.

FCA claims that GM’s assertions don’t make economic sense and fail to show direct harm. The case is moving slowly through the U.S. District Court in Detroit.