Fiat Chrysler, Peugeot Owner PSA in Talks to Combine -- 2nd Update

By Ben Dummett, Nick Kostov and Christina Rogers 

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 $50 billion trans-Atlantic auto giant.

One possibility the two sides are discussing, according to one of these people, is an all-share merger of equals. Peugeot Chief Executive Carlos Tavares would head the combined auto maker as its CEO, while John Elkann, FCA chairman and the head of the Agnelli family, which controls the Italian-U.S. auto maker, would assume the same role at the new company, this person said.

Talks are fluid, according to one of these people, and other options or terms could be considered. There is no guarantee that any final agreement will be reached.

The proposed combination comes months after Fiat dropped an earlier offer to merge with Peugeot rival Renault SA of France. That deal fell apart after Fiat failed to win the full backing of the French government, a big Renault shareholder, and Renault's alliance partner Nissan Motor Co.

Fiat had left open the possibility of renewing talks with Renault. It had also been approached previously by Peugeot over a combination, as previously reported by The Wall Street Journal.

Auto-industry consolidation is a perennial theme, with brands fighting furiously for customers, especially in mature markets. 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.

A combination would lift Peugeot and Fiat Chrysler in the auto industry's global standing, offering them added scale and potential cost-cutting opportunities. The two companies together sold 8.7 million cars last year, which would have ranked their combination at No. 4, just ahead of General Motors Co.'s 8.4 million vehicles sold.

There would still be some distance between a combined Fiat Chrysler-Peugeot and the world's top three auto makers.

Volkswagen AG sold 10.8 million vehicles last year, roughly the same as the alliance between Renault, Nissan and Mitsubishi Motors Co. No. 3 Toyota Motor Corp. tallied 10.6 million vehicles.

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

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, the market leader with a 24% market share.

Write to Ben Dummett at [e-mail], Nick Kostov at [e-mail] and Christina Rogers at [e-mail]

(END) Dow Jones Newswires

October 29, 2019 15:13 ET (19:13 GMT)

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