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After failing with Renault, Fiat Chrysler wants to get engaged with PSA

Paris (AFP)

A few months after the failed merger with Renault, Italian-American car manufacturer Fiat Chrysler discussed the merger with other large French groups in the sector, PSA, told AFP Tuesday a source close to the case.

The two groups are discussing an equivalent merger, which will create a business worth around $ 50 billion. Other options also exist on the table, adding this source on condition of anonymity.

PSA board chairman Carlos Tavares will be the managing director of the new entity, whose board of directors will be chaired by Fiat Chrysler (FCA) boss John Elkann, heir to the Agnelli dynasty.

Talks continued between the two car groups, but there was no guarantee that they would produce an agreement, sources warned, confirming information from the Wall Street Journal.

PSA sold 3.9 million vehicles last year, generating a turnover of 74 billion euros. FCA has sold 4.8 million vehicles, with a price of 110 billion.

In Paris Bourse, the French group has a capitalization of 22.54 billion euros, while the market valuation of the FCA, which is listed on Wall Street and Milan, varies: slightly above 28.1 billion dollars in the United States and 20.74 billion euros in Milan.

The union of the two groups will give birth to world number 4 in the number of vehicles sold (based on annual figures 2018). That will point behind Volkswagen, Renault-Nissan-Mitsubishi Alliance and Toyota, with Alfa Romeo, Chrysler, Citroen, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and the Vauxhall brand.

This alliance will allow the French group to return through a large door to the US market, where FCA, through the Jeep brand and Dodge RAM pickup, holds a significant market share in the segment with the most profitable margins.

– No comment –

The FCA, for its part, needs partners in Asia, where there is very little presence, and which consolidates its position in Europe, where the group is less strong, was recently explained to AFP Giuliano Noci, professor of strategy at the Polytechnic Business School in Milan.

The group, which mainly lives in Europe selling Fiat 500 city cars, saw its market share melt from 6% in 2010 to 4.6% last year, its vehicle range has not been sufficiently updated.

"Both the FCA and PSA groups need an alliance" and "this is not the first time Elkann and Tavares have spoken to each other," commented late Tuesday the Fim-Cisl union secretary general, Marco Bentivogli, from the Italian agency AGI.

The alliance must also gather energy to facilitate the transition to electric vehicles, he added.

"We do not comment on market rumors," said a PSA spokesman, contacted by AFP.

Even refusal to react at Fiat, in Turin. But the FCA was able to communicate on Wednesday after an extraordinary board of directors, or Thursday morning on the sidelines of the publication of the results, the source told AFP.

These talks came just months after the merger project was canceled announced between Fiat Chrysler and Renault, France's number one car.

The Italian-American group quickly surrendered, unable to get a quick commitment from France, overcome by state shareholders.

The French state is also present in the capital PSA, through the public investment bank Bpifrance which holds about 12%.

PSA, for its part, has never hidden its interest in consolidating the automotive sector.

Tavares said he was "open to every opportunity that might arise", even if there was no ongoing discussion.

"Everything is open, if we make money, we can dream everything," he said in March at the Geneva Motor Show, when a press article had thrown it into the arms of the Italian-American group.

In recent years, PSA has pursued policies that focus on sales profitability and operational efficiency, rather than seeking volume at all costs.

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