The merger would bring together Italian-American Fiat Chrysler, with its strong footprint in North America where it makes at least two-thirds of its profits (through its Chrysler, Jeep and Dodge brands), and France’s PSA Group, the second-largest car manufacturer in Europe.
Both lag in China, despite the participation of the Chinese shareholder Dongfeng in PSA Peugeot, and are catching up in the transition to electrified powertrains.
The 50-50 merger is expected to create synergies of more than £3 billion and enough scale to confront what the firms say is “the new era in mobility”.
The new company would have combined revenues of almost £150 billion, an operating profit of almost £10 billion and produce nearly 9 million cars a year — behind only Toyota, Volkswagen and the Renault–Nissan alliance. The combined market capitalisation would be around £43 billion.
The merger decision comes about five months after a similar deal with French rival Renault fell apart, mostly over French government concern about the role of Renault’s Japanese alliance partner Nissan. There were no signs of resistance to this deal, beyond concerns for jobs.
The companies said head offices would continue to operate in France, Italy and the US, and shares would be traded in the main exchanges in those three countries. The parent company would be based in the Netherlands, as is currently the case with Fiat Chrysler.
Another nervous wait for Vauxhall’s UK factories?
The companies said they expect to achieve without any factory closures — a concern of unions in the UK, France and Italy where the makers have more model overlap.
However, industry experts are not convinced. Professor David Bailey of Birmingham Business School said British plants may not be closed immediately, but will likely remain under threat.
He told the PA news agency that the Italian government will want to preserve factories at Fiat in Italy, while the French government – a part-shareholder in PSA Group – will be keen to maintain jobs in France.
He said: “I think, given the merger of these two giants, there will be pressure to take capacity out and British plants will be vulnerable.”
“I have a real fear that if this merger goes ahead then the likes of Ellesmere Port, which is actually a very efficient plant, could be sacrificed to get the sort of savings that the company is looking for especially in the context of all the uncertainty over Brexit.”
PSA Group announced in June that it planned to build the next generation of the Astra at the Ellesmere Port factory, but warned this was conditional on the final terms of the UK’s withdrawal from the EU.
Vauxhall currently employs 3,000 people in the UK.