Traffic jam

Peugeot, the French carmaker, said it was open to possible alliances and mergers. Fiat, its Italian peer, has made approaches to Peugeot about a possible deal in the past two years, but the French car maker was not interested, according to people familiar with the matter.

Peugeot and Fiat have an agreement dating back 30 years in which they share production facilities at three plants making around 300,000 vehicles a year. Peugeot also has alliances with Renault, Ford (diesel engines),

BMW (petrol engines), Toyota (small cars) and Mitsubishi (4x4, Russian factories and electrical vehicles).

Peugeot makes cars under the Peugeot and Citroën brands. Fiat Automobiles manufactures under the Fiat, Lancia, Alfa Romeo, Fiat Professional, Abarth, Maserati and Ferrari brand names.

Peugeot/Fiat: The moment looks ideal for another car deal. Fiat has been spurned by the German government in its pursuit of Opel and is looking for new friends. Thierry Peugeot, head of the controlling family of the namesake French car manufacturer, seems to be signalling a new attitude by saying that he's open to alliances or mergers - on the very day Philippe Varin takes over as the company’s chief executive. Could Fiat boss Sergio Marchionne use the opportunity to rekindle a merger between the two European car makers? Don’t hold your breath.

A deal to create Europe’s biggest carmaker ahead of Volkswagen has looked like a good match for three decades. On-off discussions between Fiat and Peugeot have taken place since 1978, when the Italian and French car makers established a joint venture in light vans.

But Thierry Peugeot added two conditions to his open door on merger talks. First, he would like the French company to remain independent. Second, he’d want the Peugeots to keep a “reference” stake in the new company. The current 30 per cent is the good option, he suggests. But he also notes that in the past Peugeots' stake has gone as low as 21 per cent after a major deal, which could happen again. Italy’s Agnelli family, by contrast, seems ready to dilute its 30 per cent control of Fiat.

In a merger of Fiat’s car business with Peugeot, both families would be down to a stake of about 15 per cent in the new entity, assuming the value of Fiat’s car operations is in the euro 5.5-6 billion range. This looks a bit short for the Peugeots - and would definitely not put them in the driving seat.

Peugeot doesn’t necessarily have Fiat in mind when it talks of mergers. Industrially, this would be just a cost-cutting deal. But strategically, such a transaction would pair two similar companies and do little to address Peugeot’s weaknesses, for example in emerging markets. A tie-up with a Japanese manufacturer such as Mitsubishi may be more complementary.

Politically, Peugeot just took euro 3 billion worth of aid from the French government in exchange for pledging not to close down factories at home. Financially, Peugeot's shares have doubled so far this year and the company’s owners may think they’re still looking up. All this at the very least implies that the Peugeots will take some time before they choose a suitor - or a target.