Fiat and Volkswagen deny merger talks

FRANKFURT, Germany, July 17 (UPI) -- Fiat and its controlling stakeholder, Exor, have denied reports by a German magazine that it is undertaking merger talks with German auto company Volkswagen.

German magazine, Manager, reported that VW Chairman Ferdinand Piech, part of the family that controls the German automaker held talks with members of Fiat's founding Agnelli family, who own 30 percent of Fiat. The Italian automaker said Thursday that it was not merging with Volkswagen and that it had not initiated any such talks.

"No merger discussions between Fiat and Volkswagen were held," said Andrea Griva, a spokesman for Exor.

The news article caused markets to react but many experts dismissed the deal as implausible.

"It makes sense only if you want to destroy Volkswagen," said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen in Germany who follows the automobile industry.

Volkswagen has been struggling to gain a foothold in the U.S. The acquisition of Chrysler, which is owned by Fiat, would put it in contention for third place with Toyota in the U.S. auto market, behind General Motors and Ford.

"Volkswagen could solve overnight the North American problem, but at what cost?" said Carlos Da Silva, an automotive analyst in Paris with IHS Automotive, a market research firm. "It would be very surprising."

It is surprising that Volkswagen hasn't come out and denied the report but that could be attributed to managers there being unsure whether Piech, known for being mercurial and ambitious, has held secret talks with Fiat.

Fiat shares jumped five percent in early trading but seemed to have settled down once the auto maker denied the reports.