Car giant Fiat Chrysler has confirmed it is in "ongoing discussions" about a tie-up with Peugeot and Vauxhall owner PSA.

PSA, which operates UK Vauxhall factories at Ellesmere Port and Luton, said the talks were "aimed at creating one of the world's leading automotive groups".

The talks come after Fiat Chrysler ditched a previous attempted merger with another France-based car maker, Renault, earlier this year.

A merger between the US-Italian company and PSA could create a company valued at more than $50bn (almost £40bn).

Shares in Fiat Chrysler had risen sharply on Tuesday on reports that the two companies were in talks.


PSA shares rose 6% in early trading on Wednesday as the companies confirmed the discussions.

The French firm employs 5,000 people in the UK including 1,300 in Luton and 1,300 at Ellesmere Port, with others working in its retail and brand operations.

April 2018: Vauxhall owner hands boost to UK plant

The potential tie-up comes as carmakers face a slowdown in global demand while at the same time having to make huge investments in electrification, reduced emissions, and self-driving vehicle technology.

It would bring brands including Fiat, Chrysler, Alfa Romeo, Dodge, Jeep and Maserati together with PSA's Peugeot, Citroen, Vauxhall and Opel.

A deal could also spell renewed uncertainty for Vauxhall workers, two years after PSA bought the UK business, together with Germany's Opel brand, from America's General Motors.

Earlier this year, PSA said that it planned to make the next generation of its Astra model at Ellesmere Port, where it employs 1,000 people working solely on the Astra, but that its investment depended on the terms of the UK's departure from the EU.

It has already announced hundreds of redundancies at the plant since the takeover.

Carmakers in the UK have been squeezed by the global pressures weighing on the industry, with Honda pulling out of Swindon and Ford closing its Bridgend engine plant while Jaguar Land Rover earlier this year announced it was cutting thousands of jobs from its global workforce.

Fiat Chrysler was created in 2014 out of a merger between Italy's Fiat and America's Chrysler - the latter of which had been on the brink of bankruptcy.

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