According to reports, it is likely that an announcement of the merger of the PSA Group, the French owner of Peugeot, and its US-Italian rival Fiat Chrysler will be made shortly.

If the merger actually happens between the two companies, the resultant business entity will have combined market value of almost $50bn with enough resources to challenge the likes of German auto giant and the largest auto maker of the world Volkswagen, said reports quoting sources with knowledge of the matter.

This is the second effort of Fiat Chrysler for a merger within a year after its failed attempt to merge with France’s Renault in June.

The news of the negotiations on merger resulted in the shares of Fiat Chrysler rising by more than 9 per cent.

According to source based reports published by Reuters, AFP and the Wall Street Journal, the announcement of the merger could be made as early as this week.

However reports also claimed that there would be significant political and financial hurdles for the merger to be successful.

Sources have also however warned that the deal might not go through even at the last moment. In the eventuality of the two companies merging together into one entity, the new company is expected to be headed by PSA chief executive Carlos Tavares. On the other hand, the current position would be retained by John Elkann, Fiat Chrysler’s chairman and the head of Italy’s Agnelli industrial dynasty that has controlling power over the business.

The merger negotiations between Fiat Chrysler and French carmaker Renault collapsed last June after the talks were broken off by Elkann following the intervention of French government officials who demanded that Renault should first settle its issues with the its Japanese auto partner Nissan.

The intention of Fiat Chrysler to continue to search for alternative merger deals was confirmed by Elkann after the failed attempt with Renault.

Restructuring and partnerships have become the new norm for the global auto industry because auto companies are under pressure for investing billions for development and production of electric cars as well as for self driving technologies. This has been exacerbated by a downturn in demand in the global auto market.

If the merger between the two companies takes place, it would bring a number of brands under one fold which includes the likes of Alfa Romeo, Citroen, Jeep, Opel, Peugeot and Vauxhall.

Last year 8.7 million vehicles was the total number of for sales of Fiat Chrysler and Peugeot, including China joint venture partners, said Morningstar senior equity analyst Richard Hilgert. The merger thus would create a new entity that would be placed fourth Volkswagen, Toyota and the Renault-Nissan Alliance where in each of the companies sell more than 10 million vehicles annually.

“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.

(Adapted from BBC.com)

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