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Fiat Chrysler Automobiles NV and French automaker Groupe PSA of the Peugeot brand said Wednesday they are in talks to create one of the world's largest automotive companies.

Fiat Chrysler "confirms there are ongoing discussions aimed at creating one of the world‘s leading mobility Groups," a statement from the Italian American automaker said early Wednesday morning. "FCA has nothing further to add at this time."

The combination of FCA, Detroit's No. 3 carmaker, and PSA, Europe's second-largest car manufacturer, would create a European powerhouse to rival Volkswagen AG and shake up the global auto industry. Combined annual sales from 2018 of 8.7 million vehicles would put FCA-PSA at No. 4 internationally, ahead of General Motors Co.'s 8.4 million.

"Neither FCA nor PSA, independently, are in a position to lead the industry in vehicle sales and product development," Karl Brauer, executive publisher at Cox Automotive, said in a statement. "But as a united front they are immediately back in the fight to compete for volume, market share and advanced technology with today’s more powerful automakers."

A deal could be announced as early as Thursday when Fiat Chrysler is scheduled to report its third-quarter earnings, according to Reuters.

Fiat Chrysler's shares were up less than 1% in pre-market trading Wednesday, though they closed Tuesday up 7.6% on the news of the talks first reported by The Wall Street Journal. Peugeot SA's were up more than 5%. The companies represent an approximately $53 billion market capitalization.

Under one recent proposal, PSA would acquire Fiat Chrysler and hold an advantage of board seats, one person familiar with the situation told Bloomberg. PSA’s board is holding a meeting Wednesday afternoon French time, two sources told Bloomberg. The companies have discussed keeping PSA CEO Carlos Tavares in the same role at the combined company while John Elkann, scion of Fiat’s founding Agnelli family, would be chairman, one person said.

The talks come after Fiat Chrysler in June revoked its offer to merge with French automaker Renault SA over challenges with winning the support of the French government, which holds a 15% stake in Renault, and the automaker's Japanese partner Nissan Motor Co. Ltd. Leaders at Fiat Chrysler and Renault, however, have said they remained open to a possible combination that could create the third-largest automaker in the world behind Volkswagen and Toyota Motor Corp.

French Finance Minister Bruno Le Maire had said that there was no need to rush merger discussions, part of a concerted effort by the government to guard against plant closings and job cuts frequently associated with industrial mergers.

PSA is no stranger to the French government's influence. Although the French state's investment agency owns the Renault shares, France's sovereign wealth fund, BPIfrance, is in a three-way tie for the majority shareholder of PSA. BPIfrance owns 12.23% of the company. The other two top shareholders are the Peugeot family and the Chinese Dongfeng Motor Corp.

"While there may be great benefits to partnering, time will tell if this deal sticks," Michelle Krebs, an analyst at Cox Automotive, said in a statement.

Speculation of a combination between Fiat Chrysler and PSA began in March, when PSA sent out advisers for a deal to turn the company into a global player, according to Bloomberg. Fiat Chrysler CEO Mike Manley said at the time he would look at "any deal that would make Fiat stronger." The company has been working to turnaround its European business, home to its Fiat namesake.

And PSA has a history of taking American brand businesses on the continent and turning them around: In 1978, it purchased the failing Chrysler Europe and assumed its debt as the U.S. parent firm faced financial troubles. In 2017, when GM was abandoning the European market, PSA bought its Opel and Vauxhall brands for $2.33 billion, making it Europe’s No. 2 automaker after Volkswagen. The brands represented $18.3 billion in revenue in 2018.

Before his death last year, Manley's predecessor, Sergio Marchionne, repeatedly predicted that global automakers would need to partner in order to survive a changing industry toward autonomous and electric vehicles — going so far as presenting his argument in 2015 in his "Confessions of a Capital Junkie." Some analysts agree.

"PSA is a big global automaker with a good European foothold and technologies FCA could benefit from," Akshay Anand, executive analyst for Kelley Blue Book, said. "FCA has a big imprint in the U.S., a market PSA is trying to get into. On the surface, it makes sense."

Meanwhile, Tavares has been seeking to have PSA re-enter the North American retail market after leaving it in 1991 in the midst of a recession. PSA has said introducing its Peugeot brand to Canada and the United States is a part of its 10-year plan, which it outlined in 2016.

PSA, however, has made one step into North America: It launched its free-floating ride-share service, Free2Move, last year in Washington, D.C. The service used Chevrolet Cruzes and Equinoxes, though it planned to use Peugeot models in the future.

Fiat Chrysler and PSA have had a standing working relationship since 1981 when they opened together their Sevel plant in Italy. In February, the companies extended the cooperation agreement to 2023 and increased production capacity. The Sevel plant makes the Fiat Ducato, Peugeot Boxer and Citroën Jumper large vans as well as additional versions for PSA's Opel and Vauxhall brands.

PSA is present in 160 countries and possesses 16 production sites across the world. It traces its roots to 1810, when the Peugeot company began in the metal industry. It introduced its first gasoline-fueled vehicle in 1890. In 1976, Peugeot merged with Citroën SA, which launched its first vehicle in 1919. The combined PSA Peugeot Citroën became Groupe PSA — Peugeot Society Anonymous — a name that dates to 1966.

In 2018, PSA posted revenue of $82.2 billion. Fiat Chrysler's was $128 billion.

bnoble@detroitnews.com

Twitter: @BreanaCNoble

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