Economic uncertainty grips the world.
The future of what would be the world's fourth-largest automaker isn't in jeopardy, according to PSA Group. The automaker said it's committed to its merger with Fiat Chrysler Automobiles, according to a new report from Automotive News, even as the world's economic outlook darkens with the spreading coronavirus pandemic. The virus has forced automakers to halt production while dealerships have closed their doors.
The two automakers signed a memorandum of understanding back in December, less than two months after the initial announcement when both said there were ongoing discussions about a potential merger. Between the October announcement and December's finalization, we learned the merger would retain the numerous automakers each automotive group owns, putting 13 brands under one corporate roof.
Putting the deal in jeopardy, at least according to some, is the worsening economic outlook automakers – and the world – are facing. With vehicle production halted and dealerships closed, it's difficult for automakers to make money. Part of the deal between the two included paying a special dividend – €5.5 billion ($6.1 billion) – to FCA shareholders. At the same time, PSA would spin-off Faurecia, a French parts supplier, as part of the deal. The optics of either automaker taking government assistance, loans or otherwise, while paying shareholders billions would likely not be well received by taxpayers, according to the report. Both have seen share prices fall since the merger's announcement.
PSA Groupe told the publication it was "inappropriate to speculate" about the merger or how it could change considering the recent – and still developing – events around the world. The company said it's focusing on protecting its employees and the company. FCA declined to comment to Automotive News about the situation. Two potential fees may need to be paid if there are unforeseen hiccups with the merger.