Peugeot and Fiat Chrysler agree $50bn merger

Fiat Chrysler and PSA Peugeot have agreed a $50bn merger that will create the world’s fourth-largest car maker by volume.

The combined company will have annual unit sales of 8.7 million vehicles, with revenue of nearly €170bn and recurring operating profit of more than €11bn. Fiat and Peugeot said the "strong" combined balance sheet provides "significant financial flexibility and ample headroom both to execute strategic plans and invest in new technologies throughout the cycle".

The merger is expected to result in €3.7bn of cost savings without the closure of any plants.

Carlos Tavares, chairman of Groupe PSA, said: "Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services."

At 0850 GMT, Fiat shares were up 0.3% at €13.64 and Peugeot shares were 1.4% higher at €22.41.

CMC Markets analyst Michael Hewson said: "There is certain to be a sizeable overlap between the two businesses, with the business in the UK perhaps the most vulnerable given the politics at play, and the labour laws in France and Italy which make it much more difficult to reduce the size of the work force there.

"The deal will also need regulatory approval and this may well be where it could fall down given that China’s Dongfeng will have a 4.5% stake in any newly amalgamated business. Given current relations between the US and China, any concerns the US might have about Chinese influence in a big US employer, could well be something that the US President might use to block the deal."