Fiat Chrysler and PSA shareholders approve merger

A merger between Fiat Chrysler and France's PSA Group won approval from both sets of shareholders on Monday.

The deal will create the world's fourth biggest carmaker and comes two years after talks began.

The combined company will bring together well-known brands such as Peugeot, Citroen and Vauxhall from PSA with Fiat, Jeep and Chrysler.

The new company following the $52bn (£38bn) deal will be called Stellantis.

Stellantis, which means to brighten with stars, will have 14 car brands under one roof including niche players Maserati and Alfa Romeo.

Executives expect the merger to be finalised by the end of March and say it will provide significant cost savings.

This has raised concerns about the closure of some factories across the brands, including those of Vauxhall which employs 3,000 people in the UK.

However, in November PSA pledged not to close factories after the merger even though the combined group would have spare production capacity of almost six million cars.

While creating the fourth biggest carmaker globally, critics argue that bigger isn't always better.

Tesla is often used as an example of this as it has relatively small production compared to its bigger rivals but a much higher market value.

And US-based General Motors (GM), the world's fifth biggest car brand in terms of production, has scaled back from many markets to focus on North America.

While it will be ahead of GM and Ford in terms of global sales, Stellantis will still trail VW, the Renault-Nissan-Mitsubishi alliance and Toyota.

The new car giant will be known as Stellantis - a name which the architects of the deal say is derived from the Latin verb stello, meaning to cover with stars.

But the rationale for the merger is rather more down to earth. The auto industry is going through a technological revolution. Electric or fuel cell power is set to take over from the internal combustion engine within the next two decades.

Cars themselves are likely to become increasingly connected and autonomous. The merger will allow the two companies to pool expertise and resources - and save costs.

At the same time it will combine PSA's strength in the European market with FiatChrysler's muscle in North America.

That's the theory - although it's worth mentioning that mega mergers in this industry don't always work. The late-nineties link up between Chrysler and German giant Daimler, for example, later broke down at the roadside

Bosses hope the combined firm will have more financial muscle to compete with its bigger rivals.

One area Stellantis is expected to focus on is China, the world's biggest car market where 21 million vehicles are sold each year.

"On their own, each group might not be able to afford a reboot in China," said Philippe Houchois, an analyst at Jefferies investment bank.

But managing such a large portfolio of brands will be a major challenge experts say as they could eat into each other's sales.

In Asia, PSA and FiatChrysler are "miles behind the industry leaders, like Toyota, VW and Honda," said Michael Dunne, chief executive of ZoZo Go, an investment advisory firm focused on China's car market. The brands accounted for less than 1% of Asia vehicle sales in 2020.

"But Asia's car markets are still young, offering Stellantis an opportunity to bet big on new innovations in electric, connected and autonomous vehicles," he added.