Possible Fiat and PSA Peugeot-Citroen Merger on the table

In the midst of increasingly poor auto sales in Europe, French automaker PSA Peugeot-Citroen SA and Italian car manufacturer Fiat SpA are considering a merger, according to the Milano Finanza newspaper. This news comes on the heels of a statement made by Fiat head Sergio Marchionne indicating his company needs a new partner in order to weather the storm.

A merger would combine the Peugeot and Citroen brands with Fiat, Ferrari, Maserati, Alfa Romeo, Abarth, and Lancia. The two companies' combined strength in small car sales makes business sense on its own, as Peugeot would like to share platforms and technologies to save money. Also, the two companies already have a partnership building minivans, commercial vans, and mid-sized commercial vehicles. If officially combined, the two companies would have produced 6.2 million cars in 2007, roughly the same volume as Volkswagen and Renault-Nissan.

The newspaper says the issue has been discussed by Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy, according to the paper. Berlusconi has yet to commit any type of bailout funds for Italy's automotive industry. John Elkann, vice chairman of the company, will meet with Berlusconi later this week.

If merged, Peugeot-Citroen and Fiat would become the fourth largest automaker in the world, behind Toyota, GM, and Ford/Mazda. Peugeot would not confirm the talks, but said they are open to deepening any current relationship. Neither Fiat nor Berlusconi commented on the report. Previously, Marchionne has said the car industry will consolidate until there are only six global auto companies.