PSA Group chief executive officer Carlos Tavares pushed down the road any possibility that the terms of its planned merger with Fiat Chrysler Automobiles NV could be further modified, saying the company is on track to execute the existing deal.
“This isn’t the moment, in the middle of post-Covid-19 rebuilding, to raise the question,” Tavares said at the French car maker’s annual general meeting on Wednesday. “The balance was worked out over a long period. It was fine-tuned.”
PSA management is moving ahead with concluding the current agreement “and anything beyond, if there were other events, will be decided by the boards,” he said. The shares rose as much as 2.7% in Paris trading.
Tavares was responding to a question from PSA shareholder Phitrust, which has said the terms of the merger accord should be revised to better reflect the downturn in the global auto industry and the Italian-American manufacturer’s declining prospects. A planned dividend to be paid out to FCA shareholders has emerged as a sore point for the investor.
“We are going through a period of strong volatility and uncertainty,” Tavares said at the AGM, adding that PSA is in the process of rebuilding.
“Whatever people can read here and there could be attempts to destabilise this agreement and that wouldn’t be in the best interests of our shareholders,” he said. “This isn’t a purely financial merger” and its benefits would be seen over decades.
The auto sector has undergone a seismic shift since the two car making dynasties unveiled plans to combine into the world’s fourth-biggest producer. The coronavirus pandemic shut factories and dealerships across the globe, leading to a sales collapse.
“Even back in December, the respective situations of each group didn’t justify a 50-50 merger,” Phitrust said earlier this week. Six months after striking a deal to combine, the two companies’ fortunes have further diverged.
PSA and Fiat Chrysler have already revised one aspect of the merger. They scrapped the €1.1bn ($1.2bn) dividends each agreed to pay as part of their agreement, citing the negative impact of the Covid-19 crisis. Their deal also included a plan for Fiat Chrysler to distribute a €5.5bn special dividend. PSA plans to distribute to its own investors a 46% stake in car-parts maker Faurecia SE, whose shares have lost about a third of their value since the start of the year.
Tavares said he is confident the combined companies can achieve at least €3.7bn in savings from the deal, the level pledged when it was unveiled in December, and that the carmaker isn’t at risk of having to pay European Union emissions fines because sales of electric cars are going well.
PSA’s plan to have pure or hybrid-electric versions of all its models in five years is on track, he said, adding that sales of electrified models currently make up about 6% of the total.
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