Is Volkswagen eyeing Fiat?

In what is being suggested in Europe, a major consolidation in the global car business might be in the offing.

According to the German business publication Manager Magazin, the Volkswagen Group has held discussions on acquiring the Italian-American Fiat-Chrysler entity. Now, it is no secret that Volkswagen Group patriarch Ferdinand Piech is known as the quickest gunslinger in the automotive world for buying up brands with a swipe of his proverbial debit card.

It is also no secret that under his watch the Volkswagen Group has harboured ambitions to dominate the global automotive industry. So while the VW Group is well on its way to top proceedings this year well before its Mach 2018 mission programme as the world's largest car maker in volume terms, there has also been an audacity to go beyond the immediate which is what seems to be the case with this story so far.

It is said that the Agnelli family which founded Fiat and remain its largest shareholder (via its investment firm Exor) want to find ways and means to shift from doing the volume car business. They want to concentrate on the high tech, premium stuff where its jewel Ferrari more than holds it own against competition from many other rivals including Bugatti, Lamborghini and Porsche which are all VW-owned.

As such off-loading the Fiat-Chrysler ensemble could be seen as a correct step at the right time. However, both Fiat as well as Exor refused to say that talks have happened with VW while the German firm refused to comment on the matter.

Just like it tried to buy Suzuki for a presence in India in what could be potentially one of the largest car markets in the future, the same rationale holds true for the US where the VW brand hasn't enjoyed much traction over the last two decades. Chrysler could be the ticket for VW here and that could be the large juicy low hanging fruit VW could be after.

Of course, on the flip side is the overlap with Fiat with many VW models already fighting and winning the war in the small mini and compact car classes in Europe and Asia. Also with both VW and Fiat very strongly entrenched in South America, there could be potential monopoly issues for together they could end up controlling over 70% of the market in that continent.

This news of behind the scenes approaches and meetings comes as a surprise to some but not to many financial experts in Europe who remarked upon hearing this news that it was in the realm of possible.

Also given the public spat between Fiat CEO Sergio Marchionne and Ferdinand Piech over the latter's insistence on trying to spirit Alfa Romeo from Fiat's fold, this news adds more interest in the way deals are done in this industry.

The writer is editor-in-chief, www.zeegnition.com