The European Commission confirmed on Wednesday (17 June) that a proposed tie-up between Italo-American motor group Fiat-Chrysler and French carmaker Peugeot would be subject to an in-depth competition probe.
Fiat-Chrysler’s (FCA) latest attempt to complete a merger with one of France’s compact-car specialists has hit a stumbling block, after the Commission decided to launch an inquest into how the deal could affect the van market.
The two companies announced last October that they would pursue an agreement and had planned to finalise it by the first quarter of 2021. If successful, the €45 billion deal would create the world’s fourth largest carmaker.
FCA’s efforts to broker a similar tie-up with Renault last year were undermined by pressure exerted by the French government, which is one of Renault’s major shareholders.
According to the EU executive, the merger risks distorting competition when it comes to light commercial vehicle sales, which both firms are heavily invested in.
EU competition chief Margrethe Vestager said that the two companies “have a strong position in commercial vans in many European countries. We will carefully assess whether the proposed transaction would negatively affect competition in these markets.”
After completing a preliminary assessment, Vestager’s services said that the deal could have a negative effect in Belgium, Croatia, the Czech Republic, France, Greece, Hungary, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain and the UK.
“There are fewer competitors in vans than in passenger cars, and in most of these countries, all competitors would be significantly smaller than the merged entity,” the Commission warned in a statement.
FCA and Peugeot have until now competed head to head for sales and have priced their vans accordingly so the merger risks removing “an important competitive constraint for both of them,” the Commission said.
In the passenger car market, the tie-up would reportedly not breach competition rules, as neither hold a significant enough market-share to raise any red flags.
FCA and Peugeot notified the Commission of their intentions in early May and declined to offer any concessions to placate Brussels during the initial investigation. The EU executive has until 22 October to make a decision.
In a statement, FCA and Peugeot said they are still working to the same timetable as before, despite the new development.
It may not be the only time FCA’s business comes under the Commission microscope this year, as the carmaker has requested a €6.3 billion emergency loan from the Italian government, in order to help prop up its operations.
Like most other firms in the auto industry, FCA has been hit hard by the economic slump prompted by the coronavirus. The bailout request – which could be approved by Rome this week – has already stoked controversy, as the firm is actually based in the Netherlands.
Negotiations with Peugeot began last year when FCA’s plans with Renault fell through. The French company hopes to benefit from improved access to the US market, while FCA aims to tap into Peugeot’s electric vehicle and compact car know-how.
The Italo-American firm is lagging behind its rivals when it comes to rolling out cleaner vehicles and has already entered into a so-called pooling agreement with Tesla, in order to bring down its average fleet emissions.
EU legislation on CO2 levels kicked in this year and a bloc-wide target of 95g per kilometre awaits carmakers by the end of 2020.
(Edited by Frédéric Simon)