Paris (AFP)

A few months after its abortive merger with Renault, the Italian-American car manufacturer Fiat Chrysler discusses a merger with the other major French group in the sector, PSA, told AFP Tuesday a source close to the case.

The two groups are discussing a merger of equals, which would create a business valued at some $ 50 billion. Other options are also on the table, added this source on condition of anonymity.

The chairman of the PSA board Carlos Tavares would become managing director of the new entity, whose board of directors would be chaired by Fiat Chrysler boss (FCA) John Elkann, heir to the Agnelli dynasty.

Discussions are continuing between the two automobile groups but there is no guarantee that they will lead to an agreement, the source warned, confirming information from the Wall Street Journal.

PSA sold 3.9 million vehicles last year, generating a turnover of 74 billion euros. FCA has sold 4.8 million vehicles, for 110 billion.

On the Paris Bourse, the French group has a capitalization of 22.54 billion euros, while the market valuation of FCA, listed on Wall Street and Milan, varies: it is a little over 28.1 billions of dollars in the United States and 20.74 billion euros in Milan.

The union of the two groups would give birth to the world number 4 of the sector in number of vehicles sold (based on 2018 annual figures). It would point behind Volkswagen, the Renault-Nissan-Mitsubishi Alliance and Toyota, with the Alfa Romeo, Chrysler, Citroen, Dodge, DS, Jeep, Lancia, Maserati, Opel, Peugeot and Vauxhall brands.

The alliance would allow the French group to return through the big door to the US market, where FCA, via Jeep brands and Dodge RAM pickups, holds significant market shares in segments with the most lucrative margins.

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FCA, for its part, needs a partner in Asia, where it has very little presence, and which consolidates its positions in Europe, where the group is less strong, recently explained to AFP Giuliano Noci, professor of strategy at the Polytechnic Business School in Milan.

The group, which lives mainly in Europe sales of the city car Fiat 500, saw its market share melt from 6% in 2010 to 4.6% last year, its range of vehicles has not been enough renewed.

"Both the FCA group and PSA need an alliance" and "this is not the first time that Elkann and Tavares are talking to each other," commented Tuesday evening the general secretary of the union Fim-Cisl, Marco Bentivogli , from the Italian agency AGI.

An alliance must also pool energy to facilitate the transition to electric vehicles, he added.

"We do not comment on market rumors," said a spokesman for PSA, contacted by AFP.

Even refusal to react at Fiat, in Turin. FCA could however communicate either Wednesday after an extraordinary board of directors, or early Thursday on the sidelines of the publication of its results, the source told AFP.

These talks come just months after an aborted merger project announced between Fiat Chrysler and Renault, the French number one car.

The Italian-American group had quickly thrown in the towel, unable to get a quick commitment from the French, curbed by the state shareholder.

The French state is also present in the capital of PSA, through the public investment bank Bpifrance which holds about 12%.

PSA, for its part, has never hidden its interest in consolidating the automotive sector.

Mr. Tavares said he was "open to any opportunity that may arise", even if no discussion was then underway.

"Everything is open, if we make money, we can dream of everything," he said in March at the Geneva Motor Show, when press articles were already throwing him into the arms of the Italian-American group.

In recent years, PSA has pursued a policy focused on sales profitability and operational efficiency, rather than seeking volumes at all costs.

© 2019 AFP