Fiat and PSA Peugeot-Citroën talking about a possible merger

Fiat Group SpA has shut down most of its Italian plants for a month, laying of 48,000 blue collar workers for an extended holiday break due a drop in demand for new cars. The shutdown will be effective until mid-January and will affect 20 Italian Fiat plants.

According to InsideLine sources, Fiat and PSA Peugeot-Citroën have been talking about a possible merger. Fiat Group’s CEO Sergio Marchionne predicted at the 2008 Paris Motor Show that the European car market would drop 5 percent next year. Fiat’s sales have declined 30 percent year on year in November in Italy alone and things aren’t looking any better for Fiat’s worldwide markets.

However, PSA Peugeot-Citroën is doing well in France, reporting a 17 percent drop year on year.

Insiders say that an alliance between the two companies could work really well. “For one thing, both companies are expert in smaller and inexpensive cars. Also, Fiat is number one in Brazil, a big emerging market where the French are weak,” said the source.

Both automakers are considered to be on the cutting edge of R&D when it comes to diesels and small-displacement engines.

Source: InsideLine