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Fiat Chrysler shares get a boost after revised Stellantis merger deal with PSA

MILAN — Shares in Fiat Chrysler (FCA) rose sharply in Milan on Tuesday after the car maker and French partner PSA revised the terms of their merger deal, with FCA's shareholders getting a smaller cash payout but a stake in another business. FCA and PSA, which last year agreed to merge to give birth to Stellantis, the world's fourth largest car manufacturer, said late on Monday they had amended the accord to conserve cash and better face the COVID-19 challenge to the auto sector. Milan-listed shares in Fiat Chrysler rose almost 8% by 1000 GMT, while PSA gained 1.5%. Under the revised terms, FCA will cut from 5.5 billion euros ($6.5 billion) to 2.9 billion euros the cash portion of a special dividend its shareholders are set to receive on conclusion of the merger. However, PSA will for its part delay the planned spinoff of its 46% stake in car parts maker Faurecia until after the deal is finalized. That means all Stellantis shareholders — and not just the current PSA investors - will get shares in a company which has a market value of 5.8 billion euros. Based on Stellantis' 50-50 ownership structure, FCA and PSA respective shareholders will each receive a 23% stake in Faurecia. Analysts welcomed the 2.6 billion euros in additional liquidity for Stellantis' balance sheet as well as the increase in projected synergies to more than 5 billion euros from 3.7 billion. There was also further reassurance as the two companies confirmed they expected the deal to close by the end of the first quarter of 2021. "All told, the two players emerge as winners," broker ODDO BHF said in a note. "Of the two, FCA might be a bit more of a winner in the short term given the structure of the deal and the numerous payouts to shareholders to come in the quarters ahead (potentially close to 5 billion euros versus the current capitalization of around 16 billion euros)." The special dividend for FCA shareholders had proved contentious after Italy offered state guarantees for a 6.3 billion euro loan to the company's Italian business. "These announcements should, at last, end the debate over the financial terms of the merger, which had become a big topic and was still penalizing the two groups' share performances," ODDO BHF said. PSA and FCA said they would consider paying out 500 million euros to shareholders in each firm before closing or else a 1 billion euro payout to Stellantis shareholders afterwards, depending on market conditions and company performance and outlook.

UAW turns its focus to Fiat Chrysler, which may resist more than Ford did

DETROIT — The United Auto Workers union on Monday turned its bargaining focus to Fiat Chrysler, raising the possibility of another strike against a Detroit automaker. Ford workers ratified their contract Friday night, while the union settled with General Motors last month after a 40-day strike by 49,000 workers that shut down the companyÂ’s U.S. production. Ford, which has 55,000 UAW workers, mostly followed the pattern agreement set at GM. But industry analysts say the same deal will cost Fiat Chrysler a lot more money because of the makeup of its workforce. Fiat Chrysler CEO Mike Manley said recently that automakers are in “different conditions” in terms of labor forces, hinting the company may be reluctant to follow the pattern. The union, however, expects FCA to follow the template set by GM and Ford. “We look forward to bargaining a fair, balanced and patterned contract as FCA is a profitable company,” the UAW said in a statement. “You cannot brag about your earnings to Wall Street and at the same time ignore the sacrifice of your workforce that put you in that profitable position.” The deal with Ford and GM gives workers hired after 2007 pay raises so they reach top UAW production wages within four years. It also gives temporary workers a path to full-time jobs within three years. Workers hired after 2007 now are paid lower wages than workers hired before that, even though theyÂ’re doing the same jobs. Workers hired before 2007 get a mix of annual pay raises and lump sum payments. Fiat Chrysler has more workers hired after 2007, and a higher percentage of temporary workers than either Ford or GM. That means the terms of the contract would cost the company more money, said Kristin Dziczek, vice president of labor and manufacturing with the Center for Automotive Research, an industry think tank in Ann Arbor, Michigan. “They are looking at significant cost increases,” Dziczek said of FCA. She says a strike against FCA isnÂ’t out of the question, and depends on how willing the company is to follow the pattern set by Ford and GM. FCA said in a statement it welcomes bargaining toward a deal to keep investing in the companyÂ’s future and creating opportunities for employees and communities. Ford has about 18,500 workers hired after 2007 who will get big pay raises with the new contract, compared with GM's 17,000. But Fiat Chrysler has over 20,000 union employees hired after 2007.

Chrysler Recalls Jeep SUVs For Ignition Switches

The ignition switch defects that engulfed General Motors are now a rapidly growing problem at Chrysler. Chrysler said Tuesday it is recalling up to 792,300 older Jeep SUVs worldwide because the ignition switches could fall out of the "run" position, shutting off the engine and disabling air bags as well as power-assisted steering and braking. That's the same problem that has forced GM to recall more than 15 million cars over the last six months. Chrysler's recall covers 2005-2007 Grand Cherokees and 2006-2007 Commanders. The company said it is not sure exactly how many will be recalled, but said it will notify customers by mid-September. Chrysler said an outside force such as a driver's knee can knock switches out of the "run" position. Engineers are working on a fix. The Auburn Hills, Michigan-based automaker, now part of Fiat Chrysler Automobiles NV, said it knows of no related injuries and only one accident. But it said owners should keep clearance between their knees and keys until repairs are made. Chrysler has now recalled more than 1.7 million vehicles for ignition-switch problems. In June, the company added 696,000 minivans and SUVs to a 2011 recall to fix faulty ignition switches. Those recalls covered Dodge Journey SUVs and Chrysler Town & Country, Dodge Caravan and Volkswagen Routan minivans - which Chrysler made for the German automaker - from the 2007 to 2010 model years. Tuesday's recall is the outgrowth of two investigations opened by U.S. safety regulators last month as part of a broader probe into ignition-switch and air-bag problems across the auto industry. The agency wouldn't say Tuesday whether its investigation could lead to recalls at other automakers. The National Highway Traffic Safety Administration said in June that it was investigating Jeep Commanders and Grand Cherokees after getting 32 complaints that a driver's knee can hit the key fob or key chain, causing the ignition switch to move out of position. The federal investigation is still open. The agency said Tuesday that it is requesting additional information from Chrysler to ensure that its repairs will be effective. The investigations and recalls come after GM bungled an ignition-switch recall of older small cars. GM acknowledged that it knew of the ignition problem for more than a decade but failed to recall the cars until earlier this year, when it recalled 2.6 million small cars such as the Chevrolet Cobalt.