Merger Talk Between Fiat Chrysler, Peugeot Owner PSA

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It has confirmed PSA Group, the French owner of Peugeot, is planning a merger talk with its US-Italian rival Fiat Chrysler.

If it works, this deal between the two carmakers would create a business with a combined market value of nearly $50bn.

On Wall Street, Fiat Chrysler shares hikes 7.5%  and after Fiat Chrysler pulled out of an agreement with Renault in June this is its’s second attempt at a merger this year.

These discussions remain in the early stages and there is no guarantee of a final deal and this potential merger would face significant political and financial hurdles.

PSA chief executive Carlos Tavares is expected to lead the enlarged group, if the two companies do combine.

Fiat Chrysler’s chairman John Elkann who is also the head of Italy’s Agnelli industrial dynasty which controls the business, would retain the same position at the new company.

This merger of the two groups can bring a number of brands under one roof including Citroen Alfa Romeo, Jeep, Opel, Peugeot and Vauxhall.

The talks come months after a proposed tie-up between Fiat Chrysler and French carmaker Renault collapsed.

Peugeot’s Chinese and French ownership stakes would likely draw attention in the U.S., where the Committee on Foreign Investment in the United States has looked closely at Chinese-related deal making involving U.S. companies and technology. The Trump administration has focused on U.S. manufacturing, including the auto industry—though the modest 12.2% stake that China’s state-run Dongfeng Motor Group Co. holds in Peugeot might not cause much alarm.

For Fiat Chrysler this deal can give more exposure to Europe where Peugeot sold 2.5 million vehicles last year. However Italian-American company has tried in recent years to lessen its dependence on the Continent.  Leading  the market with a 24% share a combined Fiat Chrysler-Peugeot would sell almost as many vehicles in Europe as Volkswagen.

In the U.S. where the French brand has been absent for almost three decades Peugeot’s Mr. Tavares has been eager to expand. He has planned to eventually reintroduce in the U.S., but a tie-up with Fiat Chrysler would bring with it wide access to the U.S. market. Fiat Chrysler dealers selling the popular Jeep and Ram brands could potentially offer Peugeot models as well.