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Fiat Chrysler and PSA finalize merger to become Stellantis

Fiat Chrysler and PSA have finalized their long-awaited merger on Saturday to form Stellantis, the world’s fourth-largest automobile group with deep enough pockets to fund the transition to electric driving and take on bigger rivals Toyota and Volkswagen.

It took more than a year for the Italian-American and French automakers to finalize the $52 billion deal, during which the global economy was upended by the coronavirus crisis. They first announced prepares to merge in October 2019, to create a group with annual sales of around 8.1 million vehicles.

“The merger between Peugeot S.A. and Fiat Chrysler Automobiles N.V. that will lead the path to the creation of Stellantis N.V. became effective today,” the two automakers stated.

Shares in Stellantis, which will be headed by present PSA CEO Carlos Tavares, will start trading in Milan and Paris on Monday, and in New York on Tuesday.

Now analysts and investors are turning their focus to how Tavares prepares to address the huge challenges dealing with the group – from excess production capacity to a woeful performance in China.

Tavares will hold his first press conference as Stellantis CEO on Tuesday, after ringing NYSE’s bell with Chairman John Elkann.

FCA and PSA have said Stellantis can cut yearly costs by more than 5 billion euros ($6.1 billion) without plant closures, and investors will be eager for more details on how it will do this.

Marco Santino, a partner at consultant Oliver Wyman, said he expected Tavares to reveal the outlines of his action plan soon, but without going into too many details at first.

“He has proven to be the kind of person who prefers action to words, so I don’t think he will make loud statements or try to over-sell targets,” he said.

Like all worldwide automakers, Stellantis needs to invest billions in the years ahead to transform its automobile range for the electric era.

But other pressing tasks loom, including restoring the group’s lagging fortunes in China, rationalizing its huge global empire, and addressing massive overcapacity.

“It will be a step by step process, also to allow the market to better appreciate every single move. I don’t think we will have all the details before one year,” Santino said.

FCA CEO Mike Manley – who will head Stellantis’ key North American operations – has said 40% of the automakers’ expected synergies would come from the convergence of platforms and powertrains and from optimizing R&D investments, 35% from savings on purchases, and another 7% from savings on sales operations and general expenses.

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