Fiat Chrysler Automobiles NV and French automaker PSA Group yesterday said they are in talks about a possible combination, in a potential deal that would reshape the global auto industry and create a European powerhouse to rival Volkswagen AG.
“There are ongoing discussions aimed at creating one of the world’s leading mobility groups,” Fiat said in a statement, confirming media reports.
PSA issued a similar statement.
A merger of the Italian-US automaker and PSA, the No. 2 for vehicle sales in Europe, would create a global company with a current stock-market value of US$47 billion — about the same size as Japan’s Honda Motor Co.
The talks come several months after Fiat Chrysler and PSA explored a partnership on pooling investment to build vehicles in Europe, and following the collapse of negotiations between Fiat Chrysler and French competitor Renault SA in June.
The French government would play a key role in any deal, because France is one of the biggest owners of PSA, whose brands include Peugeot, Opel and Citroen.
Automakers face tremendous pressure to combine forces and share costs from platform development to manufacturing and purchasing as they battle through trade disputes, a global slowdown and an expensive shift toward electrification and autonomous driving.
Volkswagen in July said it would work with Ford Motor Co on electric and self-driving vehicle technology, while Toyota Motor Corp is strengthening ties with partners such as Subaru Corp and China’s BYD Co (比亞迪).
Honda and Hitachi Ltd yesterday agreed to merge four of their auto parts businesses to create a components supplier with almost US$17 billion in sales.
In Europe, PSA and Fiat Chrysler face the additional burden of new emissions regulations that would force the industry to meet stringent fleet requirements next year.
The companies’ Chinese businesses have been trailing the competition and it is unlikely that a merger would quickly reignite their revenue growth in the world’s biggest vehicle market.
China’s Dongfeng Motor Corp (東風汽車), which holds about 12 percent of PSA, could also have a say on the deal.
PSA has been floated as a logical merger partner with Fiat, because of their complementary product and geographic fit, and the two sides talked about a possible partnership earlier this year.
However, the Italian-US automaker instead pursued a deal with Renault. Those talks were called off in June amid opposition from the French government and a lack of support from Renault’s Japanese alliance partner, Nissan Motor Co.
Separately, Volkswagen lowered its outlook for vehicle deliveries this year on a faster-than-expected decline in auto markets around the world amid economic jitters in Europe and an unprecedented slump in China.
The world’s biggest automaker now expects vehicle deliveries to be flat this year, compared with a previous expectation of a slight rise, the Wolfsburg, Germany-based company said yesterday in a statement.
Volkswagen cited the slowing global economy, increasingly intense competition and volatile exchange rates for the change.
The gloomier sales outlook came amid widespread strain on the auto industry. Renault earlier this month slashed its profit goals, while German rival Daimler AG stumbled with two profit warnings this year.
Volkswagen’s operating profit excluding special items in the third quarter rose to 4.82 billion euros (US$5.36 billion), beating analyst expectations of 4.1 billion euros.
The strong results prompted the company to stick to its forecast for an operating return on sales to be in a range of 6.5 to 7.5 percent for the full year.
That could indicate weaker results in the fourth quarter, after the profit margin widened from 7.6 percent to 7.9 percent in the first nine months.
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