Fiat, Peugeot confirm merger talks to create car giant

It was a brief statement by each of the car-makers which pretty much confirmed the news.

On Wednesday, Groupe PSA had this to say: “Following recent reports on a possible business combination between Groupe PSA and FCA Group, Groupe PSA confirms there are ongoing discussions aiming at creating one of the world‘s leading automotive groups.”

Likewise, there was just a quick line from Fiat Chrysler Automobiles (FCA): “Following recent reports on a possible business combination between Groupe PSA and FCA Group, Fiat Chrysler Automobiles confirms there are ongoing discussions aimed at creating one of the world’s leading mobility groups. FCA has nothing further to add at this time.”

The talks between the two European car-makers come barely five months after FCA withdrew the merger offer it had made to Renault. Even at that point in time, reports were doing the rounds that PSA had been earlier sought out as a potential suitor but nothing much emerged subsequently.

This is when Renault entered the scene but it was perhaps the shortest merger offer in recent times when FCA changed its mind barely 10 days after it first reached out to the car maker. The French government, which has a stake in Renault, was apparently of the view that it made more sense for the company to fix its ties with decades-old ally Nissan first before embarking on this new innings with FCA.

The French government also has a stake in PSA but is not likely to intervene this time around. After all, its Chairman, Carlos Tavares, has spearheaded a remarkable turnaround story for the manufacturer of the Peugeot and Citroen brands which has now added Opel and Vauxhall to its portfolio.

Any merger with FCA will be a win-win for both car-makers when it comes to markets like Europe and North America. One of the biggest brands in FCA’s portfolio is Jeep, which contributes to over a third of its sales and is hugely successful in the US. This will be music to PSA’s ears especially given the fact that it recently announced a strategy for North America where the Peugeot brand will lead the way.

India angle

It is quite natural to ask what this will mean for India where PSA is on course with plans to launch the Citroen range from 2020-21. FCA has, of course, been here longer but with little to show except for the Jeep Compass, which has been its biggest success story in its decades-long tenure.

There is really no Fiat brand to showcase for the company though there were short-lived hits in the form of the Uno and the Palio.

In the case of PSA, it has acquired the CK Birla plant near Chennai for its Citroen line but that will begin unfolding only in the next couple of years.

To that extent, these are early days yet for any possible India impact arising from a PSA-FCA merger.

If things go to plan, then there could be some interesting dynamics emerging in the latter half of the following decade where the two companies could contemplate common platform initiatives in India to keep costs in check.

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