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McClatchy-Tribune  07/17/2014 3:10 PM ET
Fiat, top shareholder deny report of merger talks with Volkswagen [Detroit Free Press :: ]

July 17--Both Fiat and Exor, the Italian automaker's controlling shareholder, today denied a report Thursday that merger discussions have been held with Volkswagen.

"No merger discussions between Fiat and Volkswagen were held," said Andrea Griva, a spokesman for Exor.

"Fiat states that they have not held discussions with Volkswagen regarding a potential merger," the Italian automaker said in a statement.

Exor, an investment firm controlled by Fiat's founding Agnelli family, owns 30.05% of Fiat.

Volkswagen said no discussions are occuring now.

"There are currently no (merger and acquisition) projects on the agenda," a spokesman for Volkswagen said. "We are now focusing on boosting efficiency across the group."

Manager Magazin, a German magazine, reported that VW chairman Ferdinand Piech, part of the family that controls the German automaker, has held talks with members of the Angelli family.

Shares of Fiat rose modestly in afternoon trading in Milan, trading at 7.70 euros, or 1.3% higher than Wednesday's closing price.

Auburn Hills-based Chrysler, owned by Fiat, would be a key component of any takeover as Volkswagen seeks to extend its reach in the U.S.

However, Fiat and Chrysler are in the midst of completing a merger of their own five years after Fiat gained operating control of Chrysler.

Fiat shareholders will meet Aug. 1 to vote on the merger that creates Fiat Chrysler Automobiles. CEO Sergio Marchionne has said his goal is for shares of FCA to begin trading on the New York Stock Exchange by Oct. 1.

Max Warburton, an analyst for Sanford Bernstein, said a Volkswagen acquisition of Chrysler has some logic to it becasue it would give the German automaker instant scale in the U.S., a goal the German automaker has been aiming to achieve for years.

For Fiat, Warburton noted that the acquisition of Chrylser has been a huge success, but "Fiat still faces a complex future. The project is still a work in progress. The U.S. market is somewhere near peak, the Brazilian market's issues look structural and Fiat has no quick solutions for Europe."

Still, he doubts the controlling families of the two companies could come to an agreement and said it would trigger European and South American anti-trust concerns.

"A deal may just be a fantasy that will never be realized, but the acquisition of Fiat Chrysler does have some potential logic for VW in our view," Warburton said. "Piech isn't getting any younger, wants to run the world's largest automaker and loves premium brands. Acquiring Chrysler would give VW instant scale in the U.S."

Volkswagen is entangled with Toyota and General Motors for bragging rights as the world's largest automaker. Volkswagen sold about 48,000 more vehicles than GM through the first half of 2014, but Toyota is expected to reports its first-half sales exceeded VW's.

"Volkswagen has an urge to become the No. 1 global automaker, and an acquisition of that size would bring them to their target immediately," said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. "But real interest in Fiat as a whole is rather unrealistic and would entail many problems," including Fiat's struggles in Europe and potential antitrust issues in South America.

Many obstacles stand in the way of a merger, including a bad relationship between Piech and Marchionne.

At the 2012 Paris auto show, Marchionne challenged Piech and VW executives to a dawn showdown over various tensions between the two companies.

"If Volkswagen, through its chief executive, thinks that it needs to do something, tell them to show up tomorrow morning at 7 o'clock at our stand," Marchionne told reporters.

Among the issues at the time was VW's interest in Fiat's Alfa Romeo brand which Marchionne said repeatedly was not for sale.


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