Fiat Chrysler, PSA should revise merger terms, says investor

A PSA Group shareholder is calling for the French carmaker to change the terms of its merger with Fiat Chrysler Automobiles NV to reflect the downturn in the global auto industry and declining prospects of the Italian-American manufacturer.

Six months after striking a deal to combine, the two companies’ fortunes have diverged, Paris-based Phitrust said in a statement Monday ahead of Peugeot-maker PSA’s annual meeting on June 25. “Even back in December 2019, the respective situations of each group didn’t justify a 50-50 merger," it said.

The auto sector has undergone a seismic shift since the two carmaking dynasties unveiled their plan to combine into the world’s fourth-biggest producer. The coronavirus pandemic shut factories and dealerships across the globe, leading to a collapse in sales.

While Fiat Chrysler is poised to get a state-backed 6.3 billion euros ($7.1 billion) credit facility in Italy, PSA Chief Financial Officer Philippe de Rovira has said the French company wants to be “as free as possible of public dependence."

PSA’s strong balance sheet and cost-cutting have helped it weather the slump, while Fiat Chrysler’s finances appear increasingly fragile, Phitrust said.

“PSA didn’t burn through cash since the start of the year the way FCA did," Olivier de Guerre, head of Phitrust, said by phone. He added the combined company also faces complications from an expected post-merger restructuring in Europe.

A spokeswoman for PSA declined to comment on the critique, but pointed to the groups’ joint statement last week in which they said preparations for the merger are advancing as planned.

Fiat Chrysler didn’t respond to a request for comment.

PSA and Fiat Chrysler already have revised one aspect of the merger. They scrapped 1.1 billion-euro in dividends each agreed to pay as part of their agreement, citing the negative impact of the Covid-19 crisis.

The deal also included a plan for Fiat Chrysler to distribute a 5.5 billion euro special dividend. The companies haven’t provided details on that payment since the outbreak started.