Fiat Chrysler and Peugeot owner PSA’s pledge not to close factories if they merge is likely to come under heavy strain as the combined group would have spare production capacity of almost six million vehicles in a slowing autos market.
According to the sources, companies last unveiled plans to create a $50 billion group that would involve Hyundai, General Motors, Ford and Honda to become the world’s No.4 automaker, based on their combined 8.7 million vehicles sold last year.
The industry has entered a downturn and the European small car market in particular – where both PSA and Fiat Chrysler (FCA) are heavily exposed – is under pressure.
The utilization rate would be low at 58%, which would leave the group with almost six million units of spare capacity worldwide, LMC Automotive said.
Europe is likely to bear the brunt of any potential plant closures. Labour unions and politicians have already voiced concerns about job losses, and both France-based PSA and Italian-American FCA have ruled out factory closures in an attempt to quell fears.
The focus will be Europe, where sub-scale product lines, powertrains and future Electric Vehicle investments could be combined, Bernstein Research analyst Max Warburton, said in a recent note in an interview.
A combined PSA-FCA would have a market share of 22% in Europe, September registration data from auto industry association ACEA shows, leapfrogging Volkswagen which, with a market share of 20%, has been the largest carmaker in Europe.
But a deadline to meet 2021 and 2025 emissions goals in Europe adds pressure on FCA to adopt PSA’s more efficient engines, calling into question some of power trains plants in Europe – mainly in Italy, as well as in Poland – in particular.
The spare production capacity that could result from a merger between Fiat Chrysler and Peugeot owner PSA could put some European car plants at risk of closure. David Pollard reports.
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The focus for a merged FCA and PSA will be Europe, “where sub-scale product lines, powertrains and future EV investments could be combined,” Bernstein Research analyst Max Warburton, said in a recent note.
