Fiat Chrysler Could Sell Its Jeep Business to China, Resulting in Job Losses

Jeep and Fiat group company logo on Czech dealership building
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Chinese Company Shows Interest in Buying Fiat Chrysler Jeep Division

A Chinese auto manufacturing company wants to buy a car unit owned by American automaker Fiat Chrysler Automobiles NV (NYSE:FCAU). If the unit is sold, American workers stand to lose hundreds of jobs to cheaper labor in China.

The Chinese automaker, Great Wall Motor Co Ltd (SHA:601633), has indicated an interest in acquiring America’s famous sports utility vehicle (SUV) brand, Jeep, which is owned by American automaker Fiat Chrysler. Through the acquisition, the Chinese company aims to become a leader in the international market for SUVs.

Jeep is Fiat Chrysler’s most profitable brand and substantially contributes to its bottom line. Its sale to the Chinese company will significantly loosen America’s grip over the international SUV market.

Worse yet, since many of the Jeep components are common to all Fiat Chrysler cars, the sale of some or all of these components will weaken the American automaker.

What’s more, the auto parts for the Jeep brand are often produced in the same factories where other Fiat Chrysler cars are produced. If the Chinese company closes the deal to acquire the Jeep brand, there’s a fair chance that the Chinese company will set up an alternate manufacturing plant in China. This could result in countless American jobs lost.

A spokesperson of the Chinese company has not confirmed whether they have approached Fiat Chrysler with a formal offer or not. Fiat Chrysler has, however, clarified that no offer has yet been received.

This is not the first time a Chinese company has shown interest in buying an American auto brand. A few years ago, another Chinese automaker, Zhejiang Geely Holding Group, bought the Volvo Car from Ford Motor Company (NYSE:F).

Although we find a precedent in history, there’s a good chance that a Chinese acquisition of an American brand will face serious opposition under the Trump administration.

It’s no secret that President Trump sees China as a grave threat to the American economy, and has repeatedly bashed the Chinese for taking away American jobs. It is unlikely that he will let this slip under the radar.

We will update our readers once the two companies proceed further with an official offer on the table.

 

Sources

China’s Great Wall Motor Expresses Interest in Buying Fiat Chrysler’s Jeep,” The Wall Street Journal, August 21, 2017.

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