Fiat Chrysler confirms talks with Peugeot about possible merger

Tie-up would create one of the world’s biggest car makers

The potential merger   could create a $50 billion (€45 billion) car giant. Photograph:   Getty Images

The potential merger could create a $50 billion (€45 billion) car giant. Photograph: Getty Images

 

Talks between Fiat Chrysler and Peugeot owner PSA over a potential tie-up that could create a $50 billion car giant gathered pace on Wednesday, with one source saying a deal could be announced as early as Thursday.

The two groups said in separate statements they were holding discussions aimed at creating one of the world’s leading auto makers, better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry.

The companies have each called unscheduled board meetings on Wednesday to discuss the potential deal, people close to the matter said.

After ditching a proposed merger with Renault in June, Fiat Chrysler chairman John Elkann confirmed the group’s bid to pursue an alternative alliance as carmakers face huge investments in electrification, emission reduction and autonomous driving technologies.

Milan-listed shares in Fiat Chrysler rallied more than 10 per cent on Wednesday, after ending up more than 7.5 per cent on Tuesday in New York. Peugeot share rose more than 6 per cent to hit their highest in more than 11 years.

The merged entity would still face substantial challenges, as auto manufacturers grapple with a global downturn in demand while trying to develop costly, cleaner car models as deadlines to meet ever more stringent anti-pollution rules loom.

And a combination of PSA and Fiat Chrysler would first have to overcome a series of political, financial and governance hurdles, though it elicited an encouraging early response from the French government, a key PSA shareholder.

France’s dithering over Fiat Chrysler’s pursuit of Renault – where it is also a shareholder, but was keen for the French carmaker to first resolve its tensions with existing partner Nissan – contributed to the collapse of that merger plan.

Morningstar senior equity analyst Richard Hilgert said in a note that total volumes of Fiat Chrylser and PSA, including China joint venture partners, amounted to 8.7 million vehicles last year, ranking the eventual combined group fourth behind Volkswagen , Toyota and the Renault-Nissan alliance. – Reuters