Fiat Chrysler's tie-up with Peugeot set for green light from European Union

The $38bn merger would create the world's fourth-biggest car maker uniting brands like Fiat, Jeep, Dodge, Peugeot and Opel

FILE PHOTO: The logos of car manufacturers Fiat and Peugeot are seen in front of dealerships of the companies in Saint-Nazaire, France, November 8, 2019. REUTERS/Stephane Mahe/File Photo

Fiat Chrysler and PSA are set to win EU approval for their $38 billion merger to create the world's fourth-biggest car maker, sources said, as they strive to meet the industry's dual challenges of funding cleaner vehicles and the global pandemic.

The green light from the European Commission would formalise the creation of Stellantis, a carmaking group that could tap hefty profits from selling Ram pickup trucks and Jeep SUVs to US drivers to fund the expensive development of zero-emission vehicles for sale in Europe and China.

The all-share merger announced late last year would unite brands such as Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel and DS – while targeting annual cost cuts of €5bn ($6bn) without closing factories.

The Commission and Italian-American group Fiat Chrysler Automobiles declined to comment. France's PSA did not immediately respond to a request for comment.

PSA and FCA shares reversed losses after the Reuters story was published. PSA stock was up 0.6 per cent at €16.60, while FCA shares were 1.1 per cent higher at €11.23 at 8.11pm UAE time on Monday.

To allay EU antitrust concerns, PSA has offered to strengthen Japanese rival Toyota Motor, with which it has a van joint venture, by ramping up production and selling vans to it at close to cost price, the people said.

FCA and PSA will also allow their dealers in certain cities to repair rival brands.

Following feedback from rivals and customers, the car makers only had to tweak the wording of their concessions, with no changes to the substance, the people said.

The companies did not have to use the Covid-19 pandemic to argue for the merger, they said, adding the EU decision could come by the end of the year, ahead of the official February 2 deadline.

FCA and PSA have said they hope to complete the merger in the first quarter of 2021.

The challenge of switching to electric cars has been complicated by the Covid-19 pandemic.

Just last month, FCA and PSA restructured the terms of their deal to conserve cash and raised their targeted cost savings because of the economic fallout from the health crisis.

The companies have said about 40 per cent of the savings will come from product-related expenses, 40 per cent from purchasing and 20 per cent from other areas, such as marketing, IT and logistics.