Fiat Chrysler confirms talks with Groupe PSA

Time 8:43 am, October 30, 2019

FIAT Chrysler Automobiles has confirmed that it is in talks with French rival Groupe PSA over a tie-up to create one of the world’s biggest car makers.

This is the Italian-American firm’s second bid this year to reshape the global car industry as it faces huge challenges with the transition to electric and autonomous vehicles.

A statement said the discussions were ongoing ‘aimed at creating one of the world’s leading mobility groups’, but did not specify whether the goal was a full merger or a looser alliance.

Groupe PSA – which also confirmed today that talks were being held between the two companies – manufactures vehicles under the Peugeot, Citroen, DS, Opel and Vauxhall brands, with Peugeot the largest marque. If the two do merge, it is estimated the combined businesses would have a market value of some £40bn.

Shares in Fiat Chrysler shot up by nearly nine per cent to 12.75 euros (circa £11) in Milan trading this morning.

But there were fears over the impact of a deal on British workers at Vauxhall’s factory in Ellesmere Port, Cheshire. Trade union Unite said it was seeking urgent meetings with PSA management.

Unite national officer Des Quinn said: ‘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.’

Fiat Chrysler has long been looking for a partner to help shoulder investments in the capital-heavy industry, under the outlook that failure to consolidate will inevitably lead some companies to fail.

Talks this year with another French car maker, Renault, failed over French government concerns over the role of the Japanese partner Nissan.

Financial turnaround

Fiat Chrysler Automobiles was formed in 2014 out of a merger of Italian car maker Fiat and the American company Chrysler, which Fiat brought back from the brink of bankruptcy.

Back in 2015, Groupe PSA ruled out getting into bed with Fiat Chrysler until the former had finalised a financial turnaround.

Like Renault, PSA is partly owned by the French government, which will prioritise protecting jobs in French plants. China’s Dongfeng Motors and French state investment bank BPI France each have 12.23 per cent of capital and 19.5 per cent voting rights.

Fiat Chrysler is controlled by the Fiat-founding Agnelli family, represented by chairman John Elkann, who spearheaded the Renault talks. His role in these talks has not been disclosed.

The firm has a larger global footprint than PSA, whose focus is on Europe where it is the second-largest car maker.

Fiat Chrysler last year sold 5.8 million cars globally but it makes the lion’s share of its profits in the United States and has been struggling in Asia and Europe. PSA sold 3.9 million cars last year.

PSA has performed a remarkable turnaround in recent years, going from one of the industry’s least-healthy car companies to one of its most powerful. That is thanks in large part to an unusual £3.1 billion bailout in 2014 in which Dongfeng and the French state gained equal shares to the family that founded Peugeot 200 years ago.

In 2017, PSA bought General Motors’ Opel and Vauxhall brands for $2.33bn (circa £1.81bn), making it Europe’s second-largest car maker after Volkswagen.

PSA is now planning to reintroduce Peugeot cars to North American markets as part of a plan that includes a car-sharing service introduced in Washington last year.

MORE: ‘Political climate’ sees end to possible Fiat Chrysler merger with Renault

MORE: Peugeot UK appoints new chairman of dealer association

MORE: Deal or no deal: Fiat Chrysler Automobiles gives Brexit price commitment

MORE: Vauxhall owner could pull production from Ellesmere Port over Brexit

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