Italian-American firm Fiat Chrysler Automobiles has confirmed that it is in talks with French rival PSA – which owns Vauxhall – over a tie-up to create one of the world’s biggest carmaker.

This is Fiat Chrysler’s second bid this year to reshape the global car industry as it faces huge challenges with the transition to electric and autonomous vehicles.

A deal between the manufacturing groups would create a business with a combined market value of around $50bn (£39.9bn).

A statement said the discussions were ongoing ‘aimed at creating one of the world’s leading mobility groups,’ but did not specify whether the goal was a full merger or a looser alliance.

Fiat Chrysler has long been looking for a partner to help shoulder investments in the capital-heavy industry, under the outlook that failure to consolidate will inevitably lead some companies to fail.

Pressure has mounted on the sector in recent years as carmakers face a slowdown in global demand, mainly caused by the unpopularity of diesel vehicles that have been stigmatised as being dirty.

And while having to cope with declining sales, manufacturers are at the same time having to make huge investments to develop plug-in electric vehicles, cleaner technology and self-driving vehicle systems.

A merger of the two groups would bring under one roof Abarth, Alfa Romeo, Chrysler, Citroen, Dodge, Fiat, Jeep, Lancia, Maserati and Citroen, DS Automobiles, Peugeot and PSA’s most recent acquisitions Opel and Vauxhall.

PSA reached an agreement to buy the Vauxhall and Opel brands from General Motors in March 2017 in a deal worth €2.2billion.

The deal has resulted in growing uncertainty for Vauxhall staff in the UK, including hundreds of redundancies since the takeover.

Earlier this year, PSA said that it planned to continue to make the next-generation Astra family car – a consistently popular model on British roads – at Ellesmere Port, though a final decision would be dependent on the terms of the UK’s departure from the EU.

The Ellesmere Port facility currently employs around 1,000 staff solely working on Astra assembly lines.

Confirmation of these latest talks follows a failed attempt by FCA earlier this year to tie-up with Renault.

The deal was eventually scuppered by French government concerns over the role of Renault’s Japanese partner Nissan.

Fiat Chrysler Automobiles was formed in 2014 out of a merger of Italian carmaker Fiat and the American company Chrysler, which Fiat brought back from the brink of bankruptcy.

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