Fiat, Peugeot mull $50 billion tie-up

Bid to overcome tech & regulatory challenges

Talks between Fiat Chrysler and Peugeot owner PSA over a potential tie-up that could create a $50 billion (£39 billion) car giant gathered pace on Wednesday, with one source saying a deal could be announced as early as Thursday.

The two groups said in separate statements they were holding discussions aimed at creating one of the world’s leading auto makers, better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry.

A deal could be announced soon, a source familiar with the discussions said. A Fiat Chrysler Automobiles (FCA) spokesperson declined to comment on a timeline.

After ditching a proposed merger with Renault in June, FCA Chairman John Elkann confirmed the group’s bid to pursue an alternative alliance as carmakers face huge investments in electrification, emission reduction and autonomous driving technologies.

Even if a combination of PSA and FCA succeeds in overcoming political, financial and governance hurdles, the new enterprise would still face substantial challenges.

The deal is being put together as automakers face a global downturn in demand at a time when the cost of investments into low-emission technologies are rising as deadlines to meet ever more stringent anti-pollution rules loom.

Morningstar senior equity analyst Richard Hilgert said in a note that total volumes of FCA and PSA, including China joint venture partners, amounted to

8.7 million vehicles last year, ranking the eventual combined group fourth behind Volkswagen, Toyota and the Renault/Nissan Alliance, each at more than

10 million vehicles. “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,” Hilgert said.

France is closely monitoring the merger discussions, with special attention given to governance matters, a French finance ministry source told Reuters on Wednesday. Paris has a 12 per cent stake in PSA through state bank BPI.

Italy’s Industry Minister Stefano Patuanelli said on Wednesday that Rome— which has no stake in FCA —was following talks between the two groups but declined to comment further on a “market operation”.

Rome is keen to avoid major job losses in Italy, where 58,000 workers are employed by FCA, and with most of its Italian plants heavily underused.

Closing factories is politically problematic, but carmakers can glean savings by combining vehicle platforms and plants, pooling research and development efforts and increasing economies of scale in procurement.

The talks come as European carmakers struggle to meet tough carbon dioxide emissions targets.

Strategy firm PA Consulting has forecast FCA faces a fine of 700 million euros ($777 million) unless it radically changes its emissions profile to sell more electric and hybrid cars.

New Delhi, Oct. 30: Germany and India are likely to sign agreements including a partnership on the use of artificial intelligence in farming during a three-day visit to New Delhi by Chancellor Angela Merkel that begins on Thursday, the German ambassador said.

Merkel will be accompanied by several cabinet colleagues and a business delegation, ambassador Walter J. Lindner told reporters.

Merkel and Indian Prime Minister Narendra Modi are expected to discuss trade, investment, regional security and climate change.

Both countries could sign agreements in areas such as artificial intelligence and green urban mobility, Lindner said.

“This time, the focus will be on economic and trade relations, innovation and digitalization, and climate protection and sustainable development,” Merkel said in a message ahead of the visit released by the Indian embassy in Berlin.

Bilateral trade between the two countries rose to

$24.06 billion in the

2018/19 fiscal year ending in March from $22 billion the previous year, while German companies have invested nearly $12 billion in India since 2000.

Germany is India’s largest trading partner in Europe and more than

1,700 German companies are operating in India.