Fiat-Peugeot merger sends shockwaves through British car industry

A proposed merger between two automotive giants could result in a restructuring for their British-based operations.

PSA Group, the French owner of Peugeot, is set to join forces with its US-Italian rival Fiat Chrysler creating the world’s fourth largest car manufacturer.

The deal, which came to light this week, will give rise to a business with a combined market value of $50bn (£39.9bn), with predicted annual sales of 8.7 million vehicles.

A Peugeot production line in Shenzhen, China. Image courtesy of Peugeot Citroen.
Fiat considers the move necessary to manage costs and overcapacity, and to fund investment in electric vehicles – image courtesy of Peugeot Citroen.

The announcement sent shivers through PSA-owned car maker Vauxhall, which currently employs around 3,000 people in the UK and could now be subject to a restructuring.

Unions have called for talks with France’s PSA, according to reports by the BBC.

This is Fiat Chrysler’s second merger attempt this year after a deal with French car-maker Renault collapsed in June.

Although discussions are still in the early stages, PSA’s board of directors have given chief executive Carlos Tavares the green light to launch a full-scale all-stock merger, with John Elkann, Fiat Chrysler’s chairman retaining his current position in the newly-formed group.

Elkann is also head of Italy’s Agnelli industrial dynasty, which controls Fiat Chrysler Automobiles.

Fiat Chrysler, the car-maker behind big industry names like Alfa Romeo and Maserati, has for years been exploring potential alliances with other manufacturers including at one time General Motors, believing the move necessary to manage costs and overcapacity, and to fund investment in electric vehicles.

The 50-50 merger would see a number of car brands brought under one roof, including Alfa Romeo, Citroen, Jeep, Opel, Peugeot and Vauxhall.

Both companies are in talks about basing the enlarged group in the Netherlands, a neutral location, where FCA is currently operating.

By Rory Butler, Staff Journalist