VW and Fiat deny having talks over possible merger

Article by Christian A., on July 21, 2014

Volkswagen AG, Fiat SpA and Fiat's controlling shareholder all dismiss a report by Manager Magazin that the companies have talked about a potential merger. The magazine, citing unnamed sources, reported that Volkswagen has approached Fiat about a possible merger, adding that VW Chairman Ferdinand Piech has held discussions with associates and members of the Agnelli family, which controls Fiat.

A VW spokesman, however, denied that the carmaker currently has takeovers on its agenda since it is focused on improving its efficiency. Fiat spokesman said in a statement that the Italian carmaker had not had any talks with VW.

A spokesman for Exor, the holding company that holds a 30-percent stake in Fiat, told Reuters that the group did not discuss any merger with VW. According to the report, the Agnelli family would concentrate on Fiat's Ferrari sports-car unit while pulling out almost entirely from the auto business.

It added that Chrysler Group would be able to support VW in the US, where the German carmaker is still struggling. Volkswagen is valued at EUR88 billion ($120 billion), while Fiat is valued at EUR9.9 billion.

Gabriele Gambarova, an analyst with Banca Akros in Milan, told Automotive News that they deem the report as realistic. Juergen Pieper, an analyst with Bankhaus Metzler, noted that an acquisition of Fiat would enable Volkswagen to realize its goal of becoming the largest carmaker in the world immediately.

He, however, said that real interest in Fiat as a whole is “unrealistic” and would entail many issues. It should be noted that Fiat is currently on a slump in Europe and may face potential antitrust issues in South America. The magazine added that any merger would face obstacles like finances and divergent strategies pursued by the carmakers.

In January, Fiat announced it completed the acquisition of shares in Chrysler Group after striking a $4.35 billion agreement to gain full control of Chrysler. Fiat has now bought the remaining 41.46 percent stake in Chrysler from a UAW retiree healthcare trust called Voluntary Employee Beneficiary Association (VEBA). VEBA was paid $3.65 billion in cash for the stake.

With Chrysler now a wholly owned subsidiary of Fiat, the Italian carmaker sought to merge the two companies. The merger was finally approved by the board of directors of Fiat in June, although the move remains subject to shareholders’ approval at the upcoming meeting next month.

The merger, once fully approved, will create Fiat Chrysler Automobiles N.V., which would boast of synergy large enough to compete against global carmakers like Toyota Motor Corp., General Motors, and Volkswagen AG.

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Topics: vw, fiat

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