No 'downside threat to Canada' in FCA, PSA merger, say industry analysts

PSA Group and Fiat Chrysler Automobiles will merge to create the fourth-largest automotive company in the world but it might not have the expected effect on the North American auto industry.

The new group, owned 50 per cent by Fiat Chrysler Automobiles (FCA) and 50 per cent by French automotive conglomerate PSA Group expects to spend about $4 billion to "achieve the synergies" which does not include closing any operating plants. The combined revenue within four years is expected to be about $50 billion.

The plan is for each company to have an equal share in the combination, including five board members nominated by both FCA and PSA. The chief executive officer will be Carlos Tavares for an initial five-year term.

Industry analysts expect the move to be "neutral" for the North American auto industry.

"It should be at least neutral for anybody in North America, including Windsor," said automotive industry analyst Dennis DesRosiers.

Peugeot currently has no presence in Canada. DesRosiers said the merger will likely have a stronger influence on the European automotive market than the one in North America.

"In Canada and in particular all of North America, the sales distribution of anything could be positive, in that this merger could lead to more product being available for FCA to sell to North America, including Canada," said DesRosiers.

"I don't see any downside threat to Canada."

Any economic development a 'long ways off'

Greg Layson, the digital and mobile editor of Automotive News Canada, said very little will likely change in the short-term.

In the long-term, however, he said PSA could choose to bring its vehicle brands to the Canadian market, which might lead to more of the company's vehicles being built in Canada.

Watch Greg Layson discuss what an FCA, PSA Group merger might mean:

What a Fiat Chrysler - Peugeot merger could mean for Windsor

5 years ago

Duration 2:58

Digital editor of Automotive News Canada Greg Layson breaks down what this could mean for Windsor-Essex

The above interview was recorded before terms of the merger were released.

Layson said Unifor, which believes in a "build where you sell" mindset, would be a contributing factor.

"If PSA is going to come here and sell some of their brands, one would have to assume that Unifor at some point would want PSA and FCA to be building products in the country in which it sells those vehicles," he said, adding that any such development is a "long ways off."

'Really not surprised,' says Unifor

Unifor national president Jerry Dias said he wasn't surprised to hear about merger talks between FCA and another major automotive conglomerate, saying he was expecting such a development.

"It is clear that Fiat Chrysler has to grow, and to compete with the real big boys globally, there is going to be a merger," he said. "I'm really not surprised."

Dias said mergers between smaller automotive players even dominant companies like FCA and PSA Group will become increasingly common in order for companies to compete with global powerhouses like General Motors and Ford.

"I think that the two companies will candidly compliment themselves on a whole host of separate synergies, including research and development," Dias said.

Dias said he doesn't see a union between FCA and PSA Group "having any impact at all."

"Peugeot builds vehicles predominantly for the European market. We build vehicles in Canada predominantly for the North American market," he said. "I really don't see how there is going to be a huge impact in the short-term."

Dias added that it doesn't make sense for a company to pull resources from North American operations to "beef up Peugeot," especially since the vehicles manufactured at FCA plants in Canada sell so well.

And should Peugeot decide to manufacture vehicles in North America intended to be sold in the North American market, Dias said that decision would be a victory for local auto industries.

Dave Cassidy, president of Unifor Local 444, echoed some of Dias's comments, saying that "merging companies is something we've been used to. It's nothing new with us here at Chrysler."

Watch Unifor Local 444 president Dave Cassidy speak with reporters:

Unifor Local 444 president Dave Cassidy speaks with reporters

5 years ago

Duration 5:58

Unifor Local 444 president Dave Cassidy took time on Oct. 31, 2019 to respond to questions about the merger between Fiat Chrysler Automobiles and French automotive conglomerate PSA Group.

In terms of worker concerns, Cassidy emphasized that Unifor currently holds a collective agreement that is up for renegotiation in 2020.

"And that collective agreement, whoever owns us is going to follow," he said. "We just want to make sure that our members know that nothing is changing and we're going to work on the great products that we do that, and we're going to continue doing that."

Cassidy acknowledged that he didn't know very much about Peugeot as a company, but said the company's presence in Canada could lead to the development of new products at the Windsor Assembly Plant.

"Our facility is set up to build multiple vehicles," he said. "Everybody knows that we need a new product at the Windsor Assembly Plant We're looking for a new product here."

Concerns at the Windsor Assembly Plant

While industry analysts see few downsides to a FCA-PSA conglomeration, one employee at the Windsor Assembly Plant expressed frustration with the news.

"Basically around here, everybody is kind of shook up a little, because we're always changing ownership all the time," said Doug Damm.

Kathy McKay, another worker at the plant, said workers were "cautiously optimistic" about the news.

McKay said that workers are hopeful that a possible expansion might save some of the 1,500 jobs expected to be lost as a result of the elimination of the plant's third shift.

"We're hoping that the possible expansion of different levels of models and price points will save some jobs," she said.

Much like Cassidy, McKay pointed out that the plant has the capacity to build other vehicles, adding that all employees need to continuing building cars is a design plan and monetary investment.

"If you want it built right, build it in Windsor," she said.

McKay added that workers are watching the developments between FCA and PSA Group "with great interest."

We're hoping that the possible expansion ... will save some jobs- Kathy McKay, Windsor Assembley Plant employee

Before the Windsor Assembly Plant manufactured vehicles for FCA, the company produced vehicles for the company that was then known as Daimler Chrysler which represented German automotive giant Daimler's ownership of Chrysler.

Once Chrysler was bought out by Fiat, the new company formed out of the merger was branded FCA.

FCA attempted a merger with French car maker Renault earlier this year, but talks eventually fell through following intervention from the French government.