Fiat Chrysler (FCA) and Peugeot’s parent organization PSA Group made commitment of not closing any of their factories in case they came to an agreement to merge, a pledge with a combined extra yearly capacity of manufacturing almost six million vehicles in a stagnating global auto market will be putting that combined group under high strain.
The two companies last week unveiled their intentions of creating $50 billion group that would be leaving the General Motors, Honda, Ford and Hyundai behind to secure the position of fourth largest automaker in the world for combined sale of 8.7 million vehicles last year.
In case of successful merger, the potential production capacity of new car and truck manufacturing giant would be nearly 14 million vehicles, forecasters LMC Automotive told Reuters, adding that the global auto industry has started declining putting European small car market particularly under pressure, an area of auto industry where both FCA and PSA are heavily exposed.
The consumption rate of auto industry would likely to be lowered at 58%, which prompts that the new group would have an extra production capacity of almost 6 million units worldwide, LMC Automotive said. The burden of closing any of auto manufacturing plants is likely to be bear by the Europe.
Labor unions and politicians also raised their concerns over the merger for job cuts, but in an attempt to put those fears down, both Italian-American FCA and France-based PSA have discarded any idea of closing plants.
But European Commission’s deadline of meeting 2021 and 2025 emission goals are forcing FCA to adopt the more efficient engines of PSA, which put the question mark against the fate of FCA’s engine manufacturing plants in Europe generally; and of those in Italy and Poland particularly.
A combined FCA-PSA would be holding about 20% of auto market share in Europe, passing the Europe’s largest car manufacturer Volkswagen, which has a market share of 20%.