Italian-American automaker Fiat Chrysler is currently in talks with French automaker PSA Group, the owner of Peugeot and Citroen, for a possible merger.
Both Fiat Chrysler and PSA Groups have issued statements confirming that they are taking part in "ongoing discussions" over a potential merger deal.
If completed, the merger deal would create a $50 billion automobile company but there is no guarantee that a deal will be reached despite talks being smooth. The idea of a merger was taken positively by investors, resulting in a 9% increase in Fiat Chrysler shares in early trading and an almost 6% surge in PSA Group shares.
Recently, automakers globally are being challenged by declining sales due to a slowdown in China, currently the largest market for new car sales. Amidst the trade war with the US resulting to a weaker economic growth, car sales in China dipped by around 11%.
In May of this year, Fiat Chrysler proposed a merger with another French automaker Renault but it decided to withdraw the offer, claiming that "it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."
Renault's largest shareholder is the French government, holding 15% of the company, France also owns 12.2% of PSA and said that it would only approve the merger if there were protections for French jobs and factories.
In 2017, PSA bought General Motors' European business for $2.3 billion, which includes the Opel and Vauxhall brands. GM decided to exit Europe after it lost around $22.4 billion in the continent over 17 years prior to the deal. PSA has turned both Opel and Vauxhall profitable.
Meanwhile, Fiat Chrysler is forecast to report profitable third quarter results on Thursday. The US Securities and Exchange Commission (SEC) recently reached an agreement with Fiat Chrysler on a fine of $40 million after it deceived investors for falsely reporting its US sales.
