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Peugeot-Fiat-Chrysler Would/Could Be World’s 3rd Largest

Italy’s Fiat shot down the rumor, sort of, saying reports that it was planning to raise a loan to merge with Peugeot-Citroen of France were “groundless”.

According to Italian investment bank UniCredit, a combination of Peugeot, Fiat and Chrysler would be the third largest auto company in the world after Toyota and General Motors with a total production of 8.8 million vehicles based on 2007 numbers. If they did get together, UniCredit said this would allow Fiat and Peugeot to achieve significant synergies, and start selling their cars in North America. Peugeot’s auto supplier Faurecia could increasingly supply Fiat and Chrysler.

The current malaise in the global auto industry has set in motion the long awaited “rationalisation”, at least in theory. GM’s Saab and Opel, and Ford’s Volvo have been spotlighted as candidates for the chop, or takeover.

Peugeot and Fiat already build vans and MPVs together, and Deutsche Bank believes that if the two combined, they would be able to make big savings on purchasing, and R&D. Unfortunately, their model ranges overlap significantly and this would lead to “cannibalisation”.

Credit Suisse analyst Arndt Ellinghorst, in a recent report, said the current crisis should be a catalyst for action to finally dump excess  capacity, and wants Mercedes and BMW of Germany to get closer together, and Peugeot-Fiat.

“We strongly believe that the current crisis presents an historic opportunity for the sector to finally consolidate. We highlight material efficiency potential if BMW/Mercedes and/or Fiat PSA collaborated more closely,” he said.

“We think potential collaboration at BMW and Mercedes would be of benefit, and possible platform sharing at PSA and Fiat. We also see scope for at least three European plant closures as global manufacturers scale back capacity and/or shut down brands – we think Saab could be at risk here,” Ellinghorst said.

Neil Winton – January 29, 2009

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