Peugeot owner PSA Group and Fiat Chrysler Automobiles (FCA) have confirmed a merger that would create one of the world’s largest motoring conglomerates.
The deal, which the companies say will be finalised “in the coming weeks”, will see the firms join forces on a 50/50 basis and lead to one automotive giant worth an estimated £40bn, according to Autocar.
Once combined, the motoring giant will encompass 12 brands. PSA Group owns Peugeot, Citroen, DS and Vauxhall-Opel, while FCA’s stable includes Fiat, Chrysler, Alfa Romeo, Jeep, Lancia, Maserati and Ram.
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FCA chief executive Mike Manley said the car giant has “a long history of successful cooperation with PSA Group and I am convinced that together with our great people we can create a world class global mobility company.”
Carlos Tavares, head of PSA Group, said he had been “pleased” by previous collaborations with FCA’s Manley and “will be very happy to work with him to build a great company together”.
Why are the two motoring giants merging?
While it may seem odd that two rival manufacturers would merge, several car companies have announced similar partnerships, albeit to a lesser degree, to spread the high costs of developing electric car technology.
As reported by Auto Express, FCA may use the deal to take advantage of PSA Group’s “newer, and electrified” production platforms. The French motoring giant recently released its first mass-production EV, the Peugeot e-208, and will launch an electric version of the Vauxhall Corsa (Opel Corsa in Europe) early next year.
In return, PSA Group could use FCA’s presence in the US to expand into that market, the motoring magazine says. None of PSA Group’s brands sells models to the American market, but that’s due to change next year when the company plans to launch a few low-volume and sports models in the region.
Finally, Auto Express adds, the sheer scale of the merger would “present new opportunities linked to autonomous and connected vehicle projects”.
What effect will it have on the industry?
When the merger is complete, the car giant will have combined vehicle sales of 8.7 million, with revenues of €170bn (£146bn) and operating profits in excess of €11bn (£9.4bn), according to the Financial Times.
This would elevate the new company above South Korea’s Hyundai-Kia and US motoring giant General Motors in terms of sales, the FT notes. Only the VW Group, Toyota and the Renault-Nissan-Mitsubishi Alliance would edge the new conglomerate.
However, there are fears the merger could lead to cost-cutting measures that may impact Vauxhall jobs in the UK.
Professor David Bailey, from Birmingham Business School, told the BBC that the deal should concern the 3,000 staff at Vauxhall’s facility in Ellesmere Port, Cheshire, as major cost cutting “isn’t going to be achievable without plant closures and significant job cuts”.
Des Quinn, national officer at trade union Unite, added: “Merger talks combined with Brexit uncertainty is deeply unsettling for Vauxhall’s UK workforce which is one of the most efficient in Europe.
“The fact remains, merger or not, if PSA wants to use a great British brand like Vauxhall to sell cars and vans in the UK, then it has to make them here in the UK,” he told the broadcaster.
PSA Group and FCA, however, are adamant that the deal won’t result in any plant closures, Autocar reports.
