FIAT and PEUGEOT TALK               

By Todd Horwitz 

Fiat in Merger Talks

Fiat Chrysler Automobiles NV and Peugeot maker PSA Group of France are in talks over a potential combination, according to people familiar with the matter—a deal that could create a roughly $46 billion trans-Atlantic auto giant. The merger pursuit comes as the world’s largest auto makers try to restructure their businesses as cost pressures mount and the global car market slows down after a period of heady growth.

Auto-industry consolidation has long been a perennial theme, especially in Europe, where a crowded marketplace and stringent tailpipe-emissions rules make it difficult to earn money. Auto makers are also under intense pressure to innovate with electric vehicles and self-driving technology, forcing collaboration between traditional rivals to share the investment load.

In May, Fiat Chrysler made a merger proposal to another French automaker, Renault, in a deal that by some measures would have created an automaker larger than GM. But it quickly withdrew the offer, saying that “it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

The French government owns 15% of Renault and is its largest shareholder; it also owns 12.2% of PSA. France has said it would approve the deal only if there were protections for French jobs and factories.

PSA, Peugeot’s owner, has been involved in mergers as a way of bulking up as well. In 2017 it agreed to pay $2.3 billion to buy GM’s European business, adding the Opel and Vauxhall brands as GM exited the continent. GM lost about $22.4 billion in Europe over the 17 years before the deal, but Opel and Vauxhall are now profitable for PSA.

A deal would give Fiat Chrysler more exposure to Europe, where Peugeot sold 2.5 million vehicles last year, compared with one million for Fiat Chrysler. The Italian American company, however, has tried in recent years to lessen its dependence on the Continent. A combined Fiat Chrysler-Peugeot would sell almost as many vehicles in Europe as Volkswagen, which leads the market with a 24% share.

Todd “Bubba” Horwitz