Some of the world’s biggest auto makers have seen billions wiped off the value of shares after a disappointing day for the industry.
Ford F, -0.31% will be hit with a one-off $650-million cost to cover the closure of one of its European plants.
The auto giant announced plans to close a U.K. plant that makes engines, and 1,700 jobs are at risk. The news sent share down 1% in early trading.
Shares in France’s Renault RNO, +1.33% were 6.41% lower, and partner Nissan 7201, +1.48% slipped 1.70%, after Italy’s Fiat Chrysler (TICKER:FCA.MI) FCAU, +0.83% broke off merger talks with its European rival.
Car makers are seeing unprecedented change as consumer taste shift toward electric vehicles and autonomous cars. Ford, Renault and FCA are all playing catch-up in the face of disruption from rivals such as Tesla TSLA, +4.76%
Some are consolidating to generate economies of scale while others are make savings by closing sites.
Ford’s Bridgend plant in Wales, which opened in 1977, built around 20% of Britain’s 2.7 million automotive engines last year.
Along with a sister site in Dagenham in east London, the Bridgend plant builds 1.3 million engines that are exported for fitting in vehicles in Germany, Turkey, and the U.S.
“Changing customer demand and cost disadvantages, plus an absence of additional engine models for Bridgend going forward make the plant economically unsustainable in the years ahead,” Ford Europe President Stuart Rowley said.
The closure is part of a global belt tightening. Last month Ford announced plans to cut about 10% of its global salaried workforce, cutting about 7,000 jobs by the end of August as part of a restructuring aimed at saving $600 million annually.
Earlier in the day talks between Fiat Chrysler and Renault collapsed after accusations of interference by the French government.
Fiat announced its board had withdrawn its merger proposal, citing “political conditions in France” as the main barrier for reaching an agreement following a stakeholder meeting last night. “It has become clear that the political conditions in France don’t currently exist for such a combination to proceed successfully,” Fiat Chrysler said.
The French government holds a 15% stake in Renault and was seeking guarantees French workers wouldn’t lose jobs.
It also asked for a dividend to be paid to Renault shareholders of which it is the biggest and wanted to delay an agreement until the deal had the backing of Nissan.
The Japanese car maker has a separate alliance with Renault and owns 15% through a cross-ownership of shares.
While Nissan had said it didn’t see “any particular negative aspect” to the merger it abstained in a crunch vote last night. The French government wanted Nissan to support the merger, so voted against the deal to buy more time, but this prompted Fiat Chrysler to walk away.
Gerald Darmanin, the French budget minister said he hoped the door had “not closed” on a deal.
Fiat Chrysler walked away from a deal that would have created the world’s third-largest auto giant worth $37 billion.
FCA had been looking for a merger partner for some time and this tie-up could have delivered synergies of 5 billion euros in six years.
The two firms would make 8.7 million vehicles annually, growing to 15 million if Renault’s alliance with Nissan is included.
Fiat could have tackled its problem CO2 emissions using Renault’s superior electric vehicle technology. Renault would have benefited from Fiat’s strength in the SUV (sport-utility vehicle) market with its Jeep brand.
Tom Narayan, an analyst for broker RBC, said: “We continue to like the dynamics if a Fiat-Renault combination and wouldn’t count that deal out completely.”
FCA’s interest in Renault could be the catalyst provoking Nissan to transform its existing alliance to a more formal, and long awaited, merger, with its French partner.
Narayan says: “Nissan now knows that they are not the only dance partner at the ball for Renault, and that could perhaps push them closer in the Alliance.”