The merger between Groupe PSA and FCA is not in danger despite the slowdown in the global economy due to Coronavirus pandemic
According to a recent report emerged on the internet, Groupe PSA won’t back down from its merger with Fiat Chrysler Automobiles amidst COVID-19 concerns. The Coronavirus emerged from Wuhan province of China and in no time, it has spread across the globe. Almost every country in the country has been affected and the consequences are deadly both in health and economic perspectives.
As for the automotive industry, the production halts have been the order of the day as people are quarantined at their homes with self-isolation and social distancing advised everywhere. Those who breach would endure hefty fines and even criminal cases. The Coronavirus has caused tremendous loss to the automotive component suppliers, manufacturers, retailers and everyone involved as well directly and indirectly.
Amidst the financial concerns, Groupe PSA will pursue with its merger reportedly. Both the brands penned down MoU back in December 2019 following the speculations. This would bring about 13 different companies under a single entity making the conglomerate the fourth largest in the world. As dealerships have temporarily been closed and the production stopped, profits cannot be seen for long.
Moreover, it is yet unknown when a definitive cure will be found to end this pandemic on a whole. With uncertainty in the air, several rumours have surfaced on the interweb saying that the merger could face difficulties to get going. As part of the signed deal, a special dividend of just over 6 billion USD should be paid to the shareholders of Fiat Chrysler Automobiles.
FCA is also reportedly seeking lines of credit with two banks in the name of working capital needs and general corporate purposes. The Italian-American automaker will be spinning off its French parts supplier, Faurecia, as part of the merger.
The possibility of government assistance and loans while paying shareholders might not be well-received among taxpayers as well. Groupe PSA dismissed the speculations as it currently focusses on safeguarding its businesses and working personnel. PSA will re-enter India through Citroen brand’s C5 Aircross later this year.