By on March 13, 2009

Through sickness and through hell … Picture courtesy

Fiat shares opened up 7 percent at 4.64 Euros, following a newspaper report on a plan to merge with PSA, Reuters reports. The Il Sole 24 Ore newspaper said Italian investment bank Mediobanca has drawn up a report together with a strategic consultant on merging the two companies, and that Fiat Chief Executive, Sergio Marchionne, had yet to decide if or when to present the plan to the board.

A few hours later, Reuters came out with the story that Fiat’s board is not considering a plan to merge with another car maker. How could they, if Sergio is still sitting on it? Fiat then put out a statement saying that they are still interested in collaborating with other car makers to cut costs and enter new markets: “No proposal for a merger with another automotive group is currently under consideration. It is a known fact that Fiat frequently examines opportunities for agreements of various types which would offer it operational synergies and access to new markets.” And what’s Paris saying to the advances?

A PSA spokesman declined comment but reiterated recent comments made by a PSA executive about the moment not being right to talk about mergers while management has more important things on their plate, such as dealing with the market downturn.

Morgan Stanley analyst, Adam Jonas, thinks European automakers are between a rock (their governments) and a hard place (the market). According to Jonas, the only justification for a merger between the two car makers would be to cut costs, production capacity and headcount dramatically.

“That is the logic and that logic is diametrically opposed to the political agenda in Europe right now,” he said. Governments try their darndest to prevent massive job losses in the industry.  The Italian government probably would look kindly on the secret Fiat plan. Il Sole 24 Ore said the plan would have PSA rather than Fiat cut jobs at its factories in exchange for having the head offices of the merged company based in Paris. Marchionne would be chief executive, it said. Moving from damp Torino to swank Paris would be a sacrifice worth taking.

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6 Comments on “Rumor Du Jour: Fiat Weds PSA...”

  • avatar

    Oh, the product overlap…

    Both are strong in the small to midsize segment. And both have had problems selling non-premium big cars. And none is strong in the premium market. That should be Alfa Romeo, then. And the non-existent Lancia range. None of wich sells in any big numbers. I don’t count Fiats ownership of Ferrari and Maserati, concerning synergie-effects vis à vis PSA, they are irrelevant.

  • avatar

    Il Sole 24 Ore said the plan would have PSA rather than Fiat cut jobs at its factories in exchange for having the head offices of the merged company based in Paris.

    Not to mention that Fiat plants have had significant overhauls and are now among the most efficient in Western Europe….

    But the above comment is just yaddayaddayadda.

    It ain’t happening. Not now. Not in the future either. Their product lines completely overlap meaning you’d have 2 companies vying for the same customers (PSA and GM brands redux). And ’cause of this one company could possibly just disappear inside the other. Like you said Mr. Schmitt, in the times we live, niente or would that be rien de tout?

  • avatar
    Justin Berkowitz

    So the rumor is that Fiat may present a merger proposal to the board? Doesn’t sound like the rumor is “Fiat Weds PSA” to me.

  • avatar

    Jeez! And I thought DaimlerChrysler was a dumb move!

    Forgetting product overlap for a second, the French and Italians working together?

    FIAT must be desperate to merge with someone for them to consider this idea. It just doesn’t make sense.

    The only reason why PSA could find FIAT interesting is the stake in Chrysler.

    When Chrysler fails, PSA might leverage the dealer network to bring Peugeots and Citroens to NA. But then, FIAT had the same idea too. Could be a squabble over that.

    In fact, I changed my mind, I hope this does go through. The amount of squabbling, fighting and culture clashing is vast!

  • avatar


    Nah. It’s just Marchionne who would like that. He has many qualities, but this merger thing, I fear, is becoming irksome.

    Anyway, as Mr. Schmitt pointed out, none of these companies will go against the grain (their governments and public opinion). Maybe this exercise is a kind of gimmick to pressure their govs to give more bailout.

  • avatar

    @ fromBrazil
    Think you’re right – this is just a ‘cunning plan’ to scare national govts (and the EU) to ante up more €uros to avoid any merger that would cost jobs.

    Fiat already have their hands full with partnerships with PSA (vans), Suzuki (pseudo off roader) and Ford (their new Ka), plus they’re digging into Crysler …. and they have salaried people taking forced vacation/layoff in Turin.

    Common sense says that they don’t have the resource to manage all this while they’re struggling to pay the wages.

    That said – Katie’s right (as usual), if this is for real the fallout between the French and Italians would be hugely entertaining – imagine the French standing by while PSA plants were closed in favour of the Italians …. heck, French workers take to the streets over the price of fuel, importing British sheep and anything else that upsets them.

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