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Shares in both companies jumped more than 10 per cent as investors welcomed the prospect of an enlarged business aiming for US$5.6-billion in annual savings.Jonathan Ernst/Reuters

The head of the union representing autoworkers at Fiat Chrysler’s three Ontario factories says he has been assured jobs in the province are safe under a proposed merger between Fiat Chrysler Automobiles NV and Renault SA.

Jerry Dias, national president of Unifor, said he was told by an executive with the company that the merger plan unveiled on Monday was about offsetting costs by sharing vehicle platforms and systems while offering complementary lineups.

Mr. Dias said he was told, “This isn’t about making any cutbacks. This is about forging forward with larger markets.”

Fiat Chrysler (FCA) said on Monday its offer to merge with the French manufacturer would form the third-largest car maker globally with 8.7 million yearly vehicle sales and a strong presence in most large markets.

“The benefits of the proposed transaction are not predicated on plant closures, but would be achieved through more capital-efficient investment in common global vehicle platforms, architectures, powertrains and technologies,” Fiat Chrysler said in a statement.

If the deal goes ahead, the US$35-billion-plus tie-up would alter the landscape for rivals including General Motors and Peugeot-maker PSA Group, which recently held inconclusive talks with Fiat Chrysler, and it could spur more deals.

Renault said it was studying the proposal from Italian-American FCA with interest and considered it friendly.

Shares in both companies jumped more than 10 per cent as investors welcomed the prospect of an enlarged business aiming for US$5.6-billion in annual savings.

It would rank third in the global auto industry behind Japan’s Toyota Motor Corp. and Germany’s Volkswagen AG.

But analysts also warned of complications, including Renault’s existing alliance with Nissan; the French state’s role as Renault’s largest shareholder; and potential opposition from politicians and workers in France to any cutbacks.

Fiat Chrysler said the offer follows talks between the two sides in which they identified countries and products on which they could collaborate. Without being specific, Fiat Chrysler pointed to the greater speed at which the bigger manufacturer could enter the growing markets for electric and autonomous vehicles.

Fiat and Chrysler merged in 2014, bringing together European brands Alfa Romeo, Fiat and Maserati with North American marques Jeep and Dodge. Renault’s main brands include Dacia and Lada, and it also has a partnership with Nissan and Mitsubishi.

Renault has a strong sales presence in Europe, Russia, Africa and the Middle East. The deal proposed by Fiat Chrysler would give it access to the Canadian and U.S. markets.

"The merger between the two actually makes sense,” said Unifor’s Mr. Dias.

“Look at what Renault specializes in: small vehicles. Look at Chrysler’s core: pickup trucks, SUVs, crossovers, large cars. Totally different portfolios,” Mr. Dias said by phone. “It would be one thing if they merged with a North American company that built the same vehicles. Then you can start asking all kinds of questions."

Fiat Chrysler employs about 10,000 people at its three Ontario factories: 3,600 at a Brampton factory that makes the Chrysler 300, Dodge Charger and Dodge Challenger; 280 at a Toronto engine-castings plant; and 6,100 at a minivan plant in Windsor.

Fiat Chrysler recently said it will eliminate one shift at the Windsor plant by September, cutting 1,500 unionized jobs. And there are questions about the Brampton plant amid reports the Chrysler 300 will be discontinued.

The Ontario auto sector has been in retreat for several years as car makers move to lower-cost regions in the United States and Mexico, slashing jobs in Ontario. General Motors will close its sedan assembly line in Oshawa by December, eliminating almost 3,000 jobs.

With a report from Reuters