Fiat Chrysler Automobiles is in talks with French automaker Peugeot Group over a possible merger, according to a Wall Street Journal report. After talks with Renault fell through earlier this year, its chief rival in France emerged as a potential partner when it approached FCA. If this deal does go through, those close to the matter say it could create a $50 billion company, and one of the world’s largest automakers.
One of the possibilities, WSJ states, could be a so-called merger of equals. Under that deal, Peugeot Group CEO Carlos Tavares would lead the combined company as its CEO. FCA chairman John Elkann, who heads the Italian-American conglomerate, would take the same role in the combined company. Under a merger of equals, shareholders surrender their shares and receive securities from the newly formed company.
Right now, particularly as auto sales slow, companies are ferociously competing for customers. The whole industry is shifting toward electric cars and autonomous technology — a massive resource drain for any automaker to take on alone. Automakers worldwide, beyond just FCA and Peugeot, are looking to cut investment costs and boost production output to generate profits by pursuing joint ventures and mergers. Toyota, for example, is partnering with Mazda on a new production plant in Alabama, slated to begin production in 2021 (though, to be clear, this is not a company merger). In FCA and Peugeot’s case, combining resources could put them ahead of their larger competition in the next decade.
How would a combined FCA-Peugeot look?
The two companies combined sold 8.7 million cars last year. That puts a potential merged company as the world’s fourth-largest automaker, just ahead of GM and behind the Renault-Nissan-Mitsubishi alliance, Toyota and Volkswagen Group. It could also signal Peugeot’s return to the U.S. market, something CEO Tavares is eager to see. FCA, on the other hand, could increase its exposure in Europe, where it sold under half the volume that Peugeot managed on its own.
Nothing is set in stone just yet. According to the Wall Street Journal‘s sources, talks are “fluid” at this point. There is currently no guarantee that these two companies will merge. Beyond their own negotiations, the merger would need to pass through regulatory approval before it could actually take place.