Fiat Chrysler (FCA) and Peugeot owner PSA have agreed to go after a merger which would create a €180bn (£155bn) revenue automotive industry titan.
PSA and FCA said they had decided to “work towards” a deal which would give shareholders in each company 50 per cent ownership of the new firm, creating the fourth-largest car maker in the world.
The new company would be listed in Paris, Milan and New York, and would be headed up by Carlos Tavares as chief executive. Fiat’s John Elkann, who had previously pursued a merger with French rival Renault, would be chairman.
French finance minister Bruno Le Maire welcomed the plan, which would give Paris a say in two of the world’s top four carmakers. The French government was blamed for blocking the collapse of Fiat’s proposed merger with Renault earlier this year.
“It gives us critical size to face the dual challenges of autonomous vehicles and electric cars,” Le Maire told reporters.
Union concerns over Vauxhall
The companies assured workers the combined group would have no need to close factories to hit savings targets.
That should reassure PSA’s British workforce of 3,000 people, who make Vauxhall cars at the company’s Ellesmere Port site on Merseyside and vans at its factory in Luton.
“Merger talks combined with Brexit uncertainty are deeply unsettling for Vauxhall’s UK workforce, which is one of the most efficient in Europe,” said Unite’s national officer for the automotive sector Des Quinn.
“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.”
The two companies are eyeing €3.7bn-worth of cost savings once they partner up, reshaping the industry at a pivotal time in its history.
Car makers are racing to develop electric vehicle (EV) technology and bring it to the mass market – in the industry’s most extreme period of innovation for decades. They have thrown about €300bn at EVs over the last few years – a figure which is set to carry on rising.
Meanwhile, global revenues are slowing at an alarming rate. The industry’s biggest market, China, suffered a fall in sales in September for the 15th month in 16.
Tavares said: “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”