The non-existent merger talks between Volkswagen (VLKAY) and Fiat (FIATY)

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By jcameron on July 22, 2014 Consumer Staples

Fiat (FIATY), and their shareholder Exor, have both denied that there were no talks of a merger between Fiat (FIATY) and Volkswagen (VLKAY). Andrea Griva, a spokesperson from Exor, claimed that contrary to a report published today, Fiat (FIATY) and Volkswagen (VLKAY) did not discuss any merger between them.

Exor possesses 30.05% of the shares of Fiat (FIATY). It is an investment firm that is controlled by the founders of Fiat (FIATY), Agnelli family. Volkswagen (VLKAY) also claimed that there have been no such discussions. According to a Volkswagen (VLKAY) spokesperson, the company’s focus is on its efficiency, not on any acquisitions or mergers.

Manager Magazin, a publication based in Germany, however, has reported that the chairman of Volkswagen (VLKAY) arranged meetings with the Agnelli family. In Milan, today, Fiat (FIATY)’s shares increased by 1.4% to close at 7.71 Euros.

In the event of a merger, the key component would be Chrysler. Chrysler is based in Auburn Hills and is owned completely by Fiat (FIATY). Fiat (FIATY) is in the middle of completing its merger with Chrysler as it so happens.

The shareholders of Fiat (FIATY) are planning to meet on the first of August to discuss the merger that will produce Fiat Chrysler Automobiles. Sergio Marchionne, the CEO of Fiat (FIATY), has set his goal; he wants FCA to trade its shares in the NY Stock Exchange by October of this year.

Max Warburton of Sanford Bernstein said that if Volkswagen (VLKAY) acquires Chrysler then it will have a larger share in the U.S. market, this is something that the company has been looking to achieve for several years. He also pointed out that Chrysler-Fiat merger has definitely proved successful for Fiat (FIATY), however, it is still under progress and so the company has a complex future. Yet, he is in doubt that Piech and Agnellis would even come to any agreement.

Volkswagen (VLKAY) is competing with Toyota Motor Corp. (TM) and General Motors (GM) to be the world’s biggest automaker. VW achieved 48,000 more sales than General Motors (GM) but Toyota Motor Corp. (TM), whose report hasn’t been released yet, will definitely have achieved more sales than VW.

Juergen Pieper, Bankhaus Metzler analyst, said that VW wants to become the world’s largest automaker, and so if they acquire Fiat Chrysler, they would achieve their goals immediately. However, VW’s interest in Fiat (FIATY) will bring forth many problems for the German company. These problems include antitrust issues of South America and the fact that Fiat (FIATY) is struggling in the European market.

The executives of Volkswagen (VLKAY) as well as Peich were challenged by Marchionne at 2012 auto show in Paris, to a showdown between VW and Fiat (FIATY) over their issues and tensions. Marchionne said to the reporters that if CEO of VW believes that the company must do something then he should meet Marchionne at the Fiat (FIATY)’s stand. One of the issues was that VW was interested in the Alfa Romeo Brand of Fiat (FIATY), which the company is not willing to sell.