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The US to monitor the Fiat Chrysler-PSA agreement with Chinese manufacturer Dongfeng

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The long-awaited creation of a new auto giant is just around the corner. Fiat Chrysler (FCA) and the PSA Group are more than likely to formalise in writing their intention to merge in early December, while each step in this direction is monitored with a magnifying glass.

In this regard, the Trump Administration has already warned that it will “very carefully” review the agreement regarding the ties linking PSA with Chinese manufacturer Dongfeng, as it will involve China’s investment in a US company.

Dongfeng would have 6% of the new automotive giant

In statements collected by Bloomberg, the economic advisor of the US Government, Larry Kudlow, recalled that the United States and China are still in commercial war, and they will not lower their guard with respect to what they still consider an enemy:

“We need to make sure that China’s trade developments do not happen not only to the detriment of our economy but also to our own national security,” said Kudlow, who has been nevertheless open if conditions are favourable to them: “We will welcome a good agreement. We expect more production, more factories and workers and employment come to the United States.”

The agreement between FCA and PSA would give Chinese automaker Dongfeng a 6% stake in the new company, which would involve China’s investment in U.S. companies.

Last year, Trump signed new legislation that tightens surveillance, for the sake of national security, regarding foreign investment spending in U.S. companies, a move that is considered aimed primarily at Chinese buyers.

Dongfeng currently holds a 12.2% shareholding and a 19.5% voting shareholding in PSA, and it has been speculated that it could use the link to sell his stakes and make a strategic technology transfer to China.

But if Dongfeng wants to get out of the complicated situation that lives because of the trade war and the sharp slowdown in the Chinese market, it should take advantage of the pull of a new partner and monetize his share in PSA. In fact, three months ago, all alarms went off regarding PSA’s stay in China via Dongfeng.

A source close to the company’s shareholder meeting said they are “one step away” from having to withdraw from what is so far the largest automotive market in the world, and that the number of employees will be reduced from 8,000 to 5,000 by the end of the year 4,000 in three years, as it will sell the inactive Wuhan 2 facility.

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