Are Fiat And VW Actually Talking Merger?

A lot of speculation in the auto-maker sector this week, just days after a German magazine reported talks were underway for a possible merger between Fiat FIATY and VolkswagenVLKAY – a move that, if consummated, would create the world's largest automotive company.

"The Volkswagen group is sounding out a takeover or partial takeover of rival Fiat Chrysler," Manager Magazin said on Thursday, according to a translation of the article by Agence France-Presse. "Various talks have already been held between VW's key shareholder Ferdinand Piech, and the Elkann and Agnelli families as main shareholders of Fiat."

The Agnelli family, according to the report, would then focus almost entirely on Fiat's Ferrari sports car unit – while the Chrylser Group, which finalized its merger with Fiat earlier this year, would assist VW in its U.S. operations.

Related: Google Brings Ex-Ford CEO Mulally On To Its Board

Analysts Weigh In

While some European analysts deem the merger news to be “realistic,” others remain skeptical.

"Volkswagen has an urge to become the number one global automaker, and an acquisition of that size would bring them to their target immediately," Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt, told Automotive News "

But real interest in Fiat as a whole is rather unrealistic and would entail many problems.”

Jack Nerad, executive editorial director and senior analyst for Kelley Blue Book's KBB.com, calls a potential Fiat-Volkswagen merger a “tantalizing possibility” that would take care of one of the biggest problems plaguing the European auto industry – too much production capacity.

Helping VW Conquer The 'Hitherto Unconquerable'

“A Volkswagen Group that includes Fiat could begin to work against overcapacity with the political benefit of not being an Italian company with intent on cutting Italian jobs.” he noted in an email to Benzinga.

> VW has already demonstrated its ability to manage formerly Italian companies,” he added – “Lamborghini, Ducati – so that part of the equation is easier to imagine than one might guess.”

Nerad says acquiring Fiat, and therefore Chrysler, would also help Volkswagen's efforts to gain more market share in what he calls “the hitherto unconquerable U.S. market where VW struggles despite its strong position in other areas of the world.”