Peugeot and Vauxhall owner agrees merger plan with Fiat Chrysler

Peugeot and Vauxhall maker PSA has agreed plans for a merger with Fiat Chrysler that would create the world’s fourth largest carmaker.

PSA boss Carlos Tavares said it would mean a “bright future” for the combined company though unions are already worried about what a deal would mean for thousands of workers at Vauxhall’s Ellesmere Port and Luton factories.

However the companies said plans to make annual savings of €3.7bn (£3.2bn) through the deal were “not based on any plant closures”.

The announcement that the boards of the two companies had agreed to work towards a 50/50 merger came a day after they confirmed speculation that they were in talks.

It would create a company valued at almost £40bn with combined revenues of nearly €170bn (£147bn) and operating profit of more than €11bn (£9bn).

The companies said they would expect to make big savings from a “more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology” and from greater buying power.

Mr Tavares, who will become chief executive of the new combined group, said: “This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity.”

The tie-up comes at a time when carmakers face a slowdown in global demand while at the same time having to make huge investments in areas such as self-driving technology, electrification and connectivity.

The companies said that the merged group would “meet these challenges with speed and capital efficiency”.

PSA employs 5,000 people in the UK including 1,300 in Luton and 1,300 at Ellesmere Port, with others working in its retail and brand operations.

The planned merger would bring brands including Fiat, Chrysler, Alfa Romeo, Dodge, Jeep and Maserati together with PSA’s Peugeot, Citroen, Vauxhall and Opel.

It could also spell renewed uncertainty for Vauxhall workers, two years after PSA bought the UK business, together with Germany’s Opel brand, from America’s General Motors.

Earlier this year, PSA said that it planned to make the next generation of its Astra model at Ellesmere Port, where it employs 1,000 people working solely on the Astra, but that its investment depended on the terms of the UK’s departure from the EU.

It has already announced hundreds of redundancies at the plant since it took over Vauxhall.

Trade union Unite on Wednesday described the merger talks between Fiat Chrysler and PSA as “deeply unsettling” for workers at British plants and called for a meeting with management.

Carmakers in the UK have been squeezed by the global pressures weighing on the industry, with Honda pulling out of Swindon and Ford closing its Bridgend engine plant while Jaguar Land Rover earlier this year announced it was cutting thousands of jobs from its global workforce.

Fiat Chrysler was created in 2014 out of a merger between Italy’s Fiat and America’s Chrysler – the latter of which had been on the brink of bankruptcy.