STLA Stellantis NV

By Eric Sylvers and Ben Dummett 

MILAN -- Peugeot maker PSA Group approached Fiat Chrysler Automobiles NV earlier this year about combining the two car makers, according to people familiar with the matter, in a pitch to create a $45 billion industry behemoth that would reposition both companies in the U.S. and Europe.

Fiat Chrysler rebuffed the overture, as it had previous ones by the French car maker, according to these people. Fiat Chrysler has said it is open to a big deal with another auto maker if it fits the company's objectives. Its controlling family, the Agnellis of Italy, however, is opposed to a deal that would include accepting a large proportion of PSA stock in any transaction, according to one of these people.

Peugeot, which has telegraphed its interest in finding a partner, would likely need to fund any deal in large part with stock in order to keep its debt in check, according to this person. The French auto maker is still digesting its acquisition of General Motors Co.'s European business.

Executives at the two companies are no longer talking, according to people familiar with the matter. The approaches haven't been previously reported.

Fiat Chrysler declined to comment.

A Peugeot spokesman declined to comment specifically on any approach to Fiat. He said the two companies have a joint venture to make commercial vehicles, so executives are talking all the time about collaborations.

A spokesperson for the Agnelli family's holding company declined to comment.

Peugeot Chief Executive Carlos Tavares is eager to expand in the U.S., where the French brand has been absent for almost three decades. He has outlined plans to eventually reintroduce the nameplate in the U.S., but a tie up with Fiat Chrysler would give Peugeot greater access to the large American market, where Fiat Chrysler's Jeep and Ram brands are popular. It would also provide access to a vast dealer network where Peugeot vehicles might be sold.

A deal would give Fiat Chrysler more exposure to Europe, where Peugeot sold 2.5 million vehicles last year compared with one million for Fiat Chrysler; but the Italian-American company has tried in recent years to lessen its dependence on the continent. A combined Peugeot-Fiat Chrysler would sell almost as many vehicles in Europe as Volkswagen AG, the market leader with a 24% market share.

A combination would also lift Peugeot and Fiat Chrysler in the auto industry's global league table, offering it scale and potential cost-cutting opportunities. The two companies together sold 8.7 million cars last year, which would have ranked their combination at No. 4, just ahead of General Motors' 8.4 million vehicles sold.

Still, a combined Peugeot-Fiat Chrysler would lag some way behind the world's top three. Volkswagen sold 10.8 million vehicles last year, roughly the same as the alliance between Renault SA, Nissan Motor Co. and Mitsubishi Motors Co. No. 3 Toyota Motor Corp. tallied 10.6 million vehicles.

--William Boston contributed to this article.

Write to Eric Sylvers at eric.sylvers@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

March 22, 2019 14:41 ET (18:41 GMT)

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