Profits Surge at PSA Ahead of Fiat Chrysler Merger

Groupe PSA’s net profit increased 13.2% to a record 3.2 billion euros, and the company increased its dividend against 2019 results to 1.23 euros per share, up 58% from 2018 levels. PSA offset a slump in vehicle sales by selling pricier SUV models, with launches including the Citroën C5 Aircross helping to lift revenues by a higher-than-expected 1% to 74.7 billion euros ($81.2 billion US).

C5 Aircross

PSA said its profitability reached a record high in 2019 but forecast falling industry sales in Europe this year as it pursues its merger with Fiat Chrysler, which is strong in North America.

PSA has trimmed costs in areas such as the procurement of components as it has integrated its acquisition of Opel and Vauxhall, boosting operating margins to 8.5% last year.

That helped it stand out in a car market where some rivals including Renault have struggled with sliding revenues and profits, amid a broader downturn in demand.

However, PSA did forecast a 3% contraction in Europe’s car market this year, by far its biggest market. It hopes that its merger with Fiat Chrysler will help it gain exposure to that group’s strong presence in North America with brands like Jeep. The two companies struck a deal in December to create the world’s No.4 carmaker, to better cope with market turmoil and the cost of making less-polluting vehicles. Fiat also posted more upbeat results than most rivals this year.

PSA CEO Carlos Tavares told a news conference that the two groups were both in good shape and well placed to face market challenges together.

Groupe PSA CEO Carlos Tavares

He said he did not expect any major regulatory hurdles to the merger, adding it had so far submitted 14 approval requests to competition authorities out of the 24 it needs so far. There are no immediate plans to change anything in the large portfolio of brands within the combined group, he added.

Coronavirus Concern

The coronavirus outbreak has paralyzed all of PSA production in China and has hit the carmakers’ supply chain.

PSA said the coronavirus impact was still difficult to assess. Its factories in Wuhan, at the epicentre of the outbreak, are due to reopen in the second week of March.

PSA suffered 700 million euros in losses and writedowns last year in China, where its car sales have tumbled, and where it is exiting a joint venture with China’s Chongqing Changan Automobile.

Tavares said the carmaker had not succeeded in Asia yet and that the virus outbreak was likely to derail a slight improvement there in recent months.

“In January, things were getting better until the coronavirus,” Tavares told a news conference. He added that PSA planned an “offensive” in electric vehicles in China, without giving details.

Fiat Chrysler Regulatory Filing

On a related note, Fiat Chrysler disclosed in a filing on Tuesday that CEO Mike Manley received 13.3 million euros ($14.45 million US) in 2019 compensation which was in line with a target set by the company. It included a base salary of 1.43 million euros for 2019, a bonus of 1.2 million euros and long-term incentives totalling 8.8 million euros. Last year, FCA set a compensation target for Manley of $14 million. Manley took over as head of FCA in July 2018 after the death of his predecessor Sergio Marchionne.

Fiat Chrysler CEO Mike Manley

FCA Chairman John Elkann received a base salary of 893,000 euros and long-term compensation totalling 2.28 million euros, as part of total compensation of 3.85 million euros, the filing said.

Fiat Chrysler and PSA agreed in December to combine forces in a $50 billion deal to create the world’s No. 4 automaker, in response to slower global demand and mounting costs of making cleaner cars amid tighter emissions rules. Manley said in January that talks with PSA were progressing well and he hoped to complete the deal by early 2021.

It has been rumoured that Manley is being courted to take over as CEO of Jaguar Land Rover after current CEO Ralf Speth retires.

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