The companies announced the deal to create the world’s fourth biggest carmaker in December, putting under one roof the Italian company’s brands such as Fiat, Jeep, Dodge, Ram, Maserati and the French company’s Peugeot, Opel and DS.
The combined company is particularly strong in SUVs, the fastest growing segment in Europe. But it is weak in luxury cars, a market dominated by Audi, BMW and Mercedes.
Fiat and PSA sought EU approval on Friday, the Commission site showed.
EU competition enforcers can approve the deal with or without conditions or open a full-scale investigation of about four months following the end of the preliminary review should they have deep concerns.
The deal comes amidst falling car sales across the world as companies shut down production lines and showrooms to contain the coronavirus outbreak, although some companies are reopening plants as countries ease lockdowns.
The coronavirus and the mass global lockdown designed to limit its spread has caused massive global disruptions to industry and had cast doubt over a merger which would create the world’s fourth-largest automaker.
The huge falloff in economic activity saw the European Automobile Manufacturers Association reveal last month that April sales on the continent fell by 55 per cent.
All carmakers suffered, but FCA recorded the worst drop, 76.6 per cent, as it is heavily dependent upon Fiat’s home market of Italy, which was the first major European economy to go into lockdown.
FCA and PSA say the merger would permit around 3.7 billion euros in savings.
The crisis triggered by the coronavirus has virtually wiped out demand for new vehicles, pushing automakers to temporarily halt most production and leaving them needing cash.
The accord brings Fiat Chrysler and PSA, the maker of Peugeot and Citroën cars, much closer to creating a carmaker bigger than General Motors. But there will remain the task of integrating the companies.
The accord confirmed that Carlos Tavares, the head of PSA, would be the chief executive of the new company, and that John Elkann, the chairman of Fiat Chrysler, would be the chairman. Elkann is a scion of Italy’s powerful Agnelli family, which has long controlled Fiat.
By combining, Fiat Chrysler and PSA will surpass Volkswagen as the market leader in Europe. Between them they will have more than 400,000 employees and sales worldwide of 8.7 million vehicles.
But analysts regard the two carmakers, which have not said what the new entity will be called, as an imperfect match. They share some weaknesses, including a dependence on the declining European market and the lack of a strong presence in China, the world’s largest car market by far. The new company will get almost 90% of its sales from Europe and the United States.
All of the two companies’ largest shareholders have agreed to back the merger, Fiat and PSA said, virtually assuring its approval. Those include the Peugeot family; Exor, the holding company for Agnelli family interests; and Dongfeng Motor, the Chinese automaker that owns 12% of PSA.
As part of the accord, Dongfeng, which has a joint venture to sell Peugeots and Citroëns in China, will reduce its share in PSA so that it ends up with 4.5% of the new entity. The French cars have not sold well in China, and Dongfeng appears to be scaling back its relationship with PSA.
(With inputs from Reuters and NYT News Service)