FCA-PSA Merger Could Put European Factories In Danger

Despite Fiat Chrysler Automobiles and the PSA Group saying that their merger will not affect any manufacturing facilities, a report surfaced saying that factories in Europe are likely to come under heavy strain.

The combined auto group would end up having spare production capacity of 6 million vehicles amid a slowing market, especially in the European small car segments, where both FCA and PSA are heavily exposed, Reuters reports.

Related: FCA And PSA Agree To Merge, Create The World’s Fourth Largest OEM

“The utilization rate would be low at 58 percent, which would leave the group with almost 6 million units of spare capacity worldwide,” forecaster LMC Automotive said. “Europe is likely to bear the brunt of any potential plant closures.”

Plants like Fiat’s facility in Kragujevac, Serbia, and PSA’s Vauxhall factories in Ellesmere Port and Luton, UK, are becoming increasingly vulnerable according to LMC Automotive.

Government officials and labor unions have already expressed their concern about potential job losses, but so far both PSA and FCA have ruled out any factory closures in an attempt to put these fears to rest.

In addition, Europe’s deadline to car makers to meet 2021 and 2025 emission targets puts more pressure on Fiat Chrysler to adopt PSA’s more modern and efficient engines, raising alarms about the future of FCA’s engine factories in Italy and Poland. “In terms of engine plants, it is likely that in the long term, one or two FCA plants in Europe would no longer be needed,” LMC said.