VW-FCA unlikely, but worth considering image

Here’s a merger/alliance/buyout that could forever reshape the face of the automotive industry. While both VW AG and FCA openly denied any talks, the investors of both companies seem to have liked the idea.

This – if possible – would have been the deal of the century. Imagine the consequences for all parties involved. Volkswagen AG would be instantly propelled as the leader of the industry – both in sales and, most likely, in profit as well. The feebleness of the German automaker in the US would be soon compensated by the rising sales of the Chrysler Group. Then for FCA’s global ambitions, an alliance with the biggest European carmaker would have been like “quick silver” – elevating both Chrysler and Fiat and securing positions in such important markets like China – the world’s largest auto market. Also, the European problems for Fiat SpA’s brands would be over, buoyed by the financial power of VW AG, while Chrysler would gain a foothold in regions it hasn’t tapped yet.

“The simple deal logic is straightforward,” London-based analyst Arndt Ellinghorst of ISI Group wrote in a note to investors. “Chrysler — better Jeep and Dodge — could fix VW’s U.S. problems; Alfa could replace the ailing Seat brand; Fiat Europe is basically the 500 product family plus LCVs; Latin America could be sold, potentially to a Chinese buyer.”

Analysts and industry observers see many risks, but investors could be easily persuaded into the deal, if the last week report in Germany’s Manager Magazin actually pans out. The odds are against it, but only time will tell if this stays at the rumor level or if there would be also fire when the smoke comes out.

Via Automotive News Europe