Fiat Chrysler Reportedly Turns Down PSA Group Merger, But ‘Cooperation’ May Still Happen

The French Groupe PSA was supposedly eyeing FCA after buying GM's Opel division in 2017

Fiat Chrysler Reportedly Turns Down PSA Group Merger, But 'Cooperation' May Still Happen

Last month, FCA’s CEO said the company was open to opportunities.

Sources close to Fiat Chrysler’s decision makers told the Wall Street Journal that the company turned down an offer to merge with French PSA Group. After the multinational automaker acquired GM’s Opel division in 2017, it had been reportedly eyeing FCA for another deal.

According to another Wall Street Journal report, the merger would have resulted in a $45 billion business. It would also allow the companies to reposition their offerings in the U.S. and Europe. The two companies already cooperate on commercial van production in Europe. What’s more, a merger would help PSA Group reintroduce brands like Peugeot and Citroën to the United States.

Peugeot could have used an FCA merger as a springboard to reintroduce its models in the U.S.

However, FCA contends that a deal would have increased focus on an already “mature” European market. In other words, it would have taken away from developing markets, where there’s more of a profit-making opportunity. Right now, the company is focusing on growing brands like Jeep in China and Ram in the U.S. to overtake General Motors’ Chevrolet and GMC trucks. The Agnelli family, which holds a controlling stake in Fiat Chrysler, was also reportedly against a merger.

If the deal were to actually go through, PSA Group would have to leverage its equity in stock in order to make it happen. Going about the deal in that way would help keep its debt under control after the $2.5 billion it spent purchasing Opel from General Motors.

PSA Group acquired Opel from General Motors in 2017.

Does it make sense?

Some industry analysts believe it does make sense for the two companies to combine forces. By doing so, they would create the fourth largest automaker in the world. FCA and PSA combined would reportedly produce 9 million vehicles per year — enough to compete with Volkswagen Group, the Renault-Nissan-Mitsubishi Alliance and Toyota. Still, CEO Mike Manley said he’s not opposed to joint ventures or partnerships that will make Fiat Chrysler a stronger company.