Sources have told the Financial Times that the move could create a combined group with a market value in excess of €44bn with a headquarters in the Netherlands, a neutral location, where FCA is already domiciled.
Discussions between top level executives have been going on for some time although they broke off recently during FCA’s attempted merger with Renault.
Four years ago FCA also discussed a possible merger with the Volkswagen Group.
The move would be a good fit given the geographic coverage of the French and US-Italian businesses. A combined group would cut administrative, logistics and manufacturing costs which there could be further savings in purchasing.
There are some hurdles, however. Automotive mergers have to deal with emotional attachments to brands for example.
More significantly, the French state owns 12% PSA and was blamed for the collapse of the merger attempt with Renault. It does not want to compromise French plants or the the governance of the new entity.
The potential merger illustrates how the automotive industry is dealing with disruption at high speed.
It is one example of the impact business and technological changes are having on the industry, and the economy at large, according to Gero Decker, Chief Executive and Co-Founder of business transformation solutions provider, Signavio.
He added: “We’ve all seen the disruption and decline of automotive manufacturing in some countries. The big players in the automotive sector know they have to move fast in order to survive.
“The winners will be the ones who can recalibrate and remain competitive in an age where process automation and innovation will be the key drivers of growth.”