Italian automaker Fiat on Friday denied press reports that its board was reviewing a plan to merge with French rival PSA (Peugeot-Citroen).
A statement issued by the group said Fiat ''is not presenting to its board of directors any merger plan with other companies in the automotive sector''.
''It is no secret that it is standard procedure for Fiat, like its competitors, to examine every opportunity for possible accords in order to achieve production savings and gain access to new markets,'' the statement added.
Speculation that Fiat would merge with PSA sent both stocks flying Friday morning but gains were later reduced after PSA also denied the merger possibility.
PSA said in a statement that the French automaker ''does not comment on rumors''.
According to the Italian financial daily Il Sole 24 Ore, the Italian merchant bank Mediobanca has drawn up a merger plan to merge Fiat's automotive division with that of PSA.
The daily said that while both automakers have denied such a possibility, the so-called 'Eiffel Plan' did exist and would be an expansion of the alliance which already exists between Fiat and PSA in the production of commercial vehicles which has produced savings for both companies.
Citing ''financial sources,'' Il Sole said the plan entailed Fiat maintaining its production structure in Italy while PSA would bear the brunt of job cuts in exchange for hosting in France the headquarters of the giant born from the merger of the two carmakers, which would have Fiat CEO Sergio Marchionne at the helm.
The daily said that a study by the Swiss bank UBS, of which Marchionne is a non-executive vice president, saw Fiat putting its automotive division, Fiat Group Automobiles, which represents about 45% of the group's earnings and is valued at 2.5 to three billion euros, into the new company in which it would have a stake of between 41% to 45% of a colossus valued at between six and 6.5 billion euros.
PSA, which is valued at 3.47 billion euros, is 30.22% controlled by the Peugeot family which maintains 45% of the voting rights and this appears to be the major stumbling block to a merger, the study said.
According to the UBS, the Peugeot family may give its blessing to the merger in exchange for a stake of between 16.2% and 17.8% in the new company. The division of voting rights, however, remained to be worked out, Il Sole added.
Fiat is currently in talks with American automaker Chrysler to acquire a 35% stake in the Detroit Number Three in exchange for Fiat's platforms for its fuel-efficient, small and medium-sized compact cars, which will fill a gap in Chrysler's range of models.
The accord is slated to be formalised sometime in April and would give Fiat access to Chrysler's assembly plants as well as its sales and service networks.
These are all necessary for the Italian automaker's goal of bringing Alfa Romeo back to the US market and introducing its popular new Fiat 500 city car there, both of which need to be produced in the US to be profitable.
Fiat is also reported to have an option to acquire a further 20% in Chrysler should the partnership prove successful.
The Italian automaker made itself even more attractive to potential partners earlier this month when it unveiled its new Multiair engine designed to reduce fuel consumption and CO2 emissions.
Aside from reducing consumption and emissions, respectively by 25% and 10%, the new engine is also 20% lighter than a conventional four-cylinder motor and is 25% smaller in volume.
During its presentation at the Geneva International Motor Show, Fiat said the new technology ''will be made available to all (Fiat's) current and future partners''.
