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It’s Official: Fiat Chrysler Hooks Up with Peugeot Citroën in Merger of Equals

The brands involved: Fiat, Alfa Romeo, Maserati, Chrysler, Jeep, Dodge, Ram, Peugeot, Citroën, DS, Opel, and Vauxhall.

Not since truckmaker DAF produced cars from the 1950s to the '70s has Holland been such an automotive powerhouse. Fiat Chrysler and Peugeot Citroën announced a 50/50 stake merger of equals Wednesday, to be headquartered in tax-friendly Amsterdam, The Netherlands. The combined automaker becomes the fourth largest globally by volume, after Volkswagen Group, Toyota Motor Company, and General Motors, and the third largest by revenue.

That status, with combined annual global volume of 8.7 million cars and trucks makes Fiat Chrysler and Peugeot Citroën a powerhouse in terms of platform- and powertrain-sharing, and thus able to purchase parts and supplies at high-volume discounts. The two companies estimate a "run rate"—defined as future revenue of the new enterprise based on current results for each—of €3.7 billion annually, or roughly $4.1 billion based on today's exchange rates.

"More than two-thirds of run-rate volumes will be concentrated on two platforms," Fiat Chrysler says in a prepared statement, "with approximately 3 million cars per year on each of the small platform and compact/midsize platform." That means Fiat, which is almost certain to depart the North American market, will share its next 500 architecture with B-class Peugeots and Citroëns, which are already aligned mechanically. The next Jeep Renegade also would be a candidate for this platform, and the compact/midsize front-drive-based Peugeot-Citroën platform would underpin future versions of such models as the Dodge Journey and Chrysler Pacifica.

Much of the remaining 2.7 million vehicles, the ones not on these two platforms, will use architecture that will encompass Jeep cash cows like the Cherokee, Grand Cherokee, and Wrangler, and Ram's North America-specific full-size and upcoming midsize trucks. Fiat Chrysler appears to be committed to extending the Dodge Challenger's life. It considers the evolution of the original Mercedes-Benz platform under the Chrysler 300 and Dodge Charger to have become its own architecture, and with some tweaking and updating, we could see those models continue well into the 2020s as well, with relatively minor investment in exchange for sizable profit margins.

PSA CEO Carlos Tavares and FCA CEO Mike Manley celebrate the signing of the merger.

But the vast majority of commodity vehicles, namely the compact and midsize front- and all-wheel-drive SUVs now very popular in Western Europe as well as the U.S., will run on a Peugeot-based platform. The big question now is whether Fiat Chrysler Peugeot Citroën (my name—the two have not yet announced whether they'll adopt a new company name, such as the FCPSA seen in our own illustration) electric vehicles will be based on one or both of these two high-volume platforms, or whether EVs will get a skateboard-like platform of their own. If the latter, these would account for another chunk of the 2.7 million non-compact and non-midsize vehicles, at least until EVs can capture more than 1 to 1.5 percent of the automotive market. The current Fiat 500, for example, which has been on sale in Europe for more than a decade, is expected to become an EV-only car in the near future.

Another question is whether Fiat Chrysler Peugeot Citroën can keep 11 brands, the equal of VW Group, alive and breathing through the next decade as the auto ownership model most certainly changes drastically. The United Kingdom's Brexit alone could be enough reason to eliminate the Vauxhall brand. Citroën, without unique model categories or without the forward-thinking engineering and design that made it so avant garde (and so unprofitable) until Peugeot bought it in the '70s, is not really Citroën. Alfa Romeo's costly plans to become an Italian BMW are likely due for review. Chrysler and Dodge may become redundant.

Speaking of Peugeot, there is no word yet on how the merger might affect the automaker's plans to return to the U.S. market by 2026, though a permanent hold for such plans would be the way to bet. I also don't know the future of Larry Dominique, Peugeot's North American CEO. The merger announced Wednesday lists Agnelli-family scion John Elkann as group chairman and Carlos Tavares as group CEO, with a five-year board contract. Michael Manley, the British-native Jeep whiz who replaced Sergio Marchionne after his untimely death as Fiat Chrysler's CEO, remains with the merged company as the Fiat Chrysler chief.

Automotive News notes that both Fiat and Peugeot were started by two industrial dynasties: Fiat by the Agnellis and Peugeot by its eponymous family. Considering that, I'd guess the new name will be the Fiat Peugeot Group, which passes another dynasty-run automaker, the Ford Motor Company, in becoming the world's fourth largest. Note, by the way, that it was Ford after World War II that ceded to Willys and its new owner, Kaiser Industries, the Jeep brand, which will continue to lead the newly merged Netherlands-based automaker in volume and profit.

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