Fiat Chrysler Automobiles said Wednesday it is in talks with French rival PSA Peugeot in its second bid this year to reshape the global auto industry at a time of heightened uncertainty for the sector.
A merger would create the fourth-largest automaker, with a combined market value of around $50 billion, and the potential for big savings in Europe just as the industry struggles with slowing sales and the need to invest heavily in technologies like electric cars.
In a statement, Fiat Chrysler said the discussions are "aimed at creating one of the world's leading mobility groups," but gave no further details.
The timing of any deal is unclear, but the Peugeot board was meeting Wednesday, said a person close to the discussions, on condition of anonymity.
Shares in Fiat Chrysler shot up nearly 9%, just a day before it releases its third-quarter earnings, while Peugeot shares surged 6%.
Fiat Chrysler has long been looking for a partner to help shoulder investments in the capital-heavy industry, under the view that companies that fail to consolidate would inevitably struggle. The push is even more urgent given the transition across the industry to electric cars and autonomous driving — technologies where Fiat Chrysler lags.
"We view the combination of these two companies as reasonable, given global competition, high capital intensity and industry disruption from electrified powertrain as well as autonomous technologies," says Richard Hilgert, an analyst at Morningstar Equity Research.
Fiat Chrysler's talks this year with another French carmaker, Renault, to create what would have been the third-largest automaker broke down over French government concerns about the role of Japanese partner Nissan and criticism from Renault's top union.
Fiat Chrysler Automobiles was formed in 2014 out of a merger of Italy's Fiat and the American company Chrysler, which Fiat brought back from bankruptcy.
Fiat Chrysler has a larger global footprint than Peugeot, whose focus is on Europe, where it is the second-largest carmaker.
Peugeot, meanwhile, has performed a remarkable turnaround in recent years, going from one of the industry's sicker car companies to one of its more powerful.
In 2017, Peugeot bought General Motors' Opel and Vauxhall brands for $2.33 billion, making it Europe's No. 2 automaker after Volkswagen.
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October 31, 2019 at 01:00AM
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