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Volkswagen Wanted to Buy Fiat but Failed

Industry News / 122 Comments

The plan to create Auto Union is dead - for now.

A few weeks ago, there were rumors about a possible VW Group – Fiat-Chrysler merger. Then things got quiet. We never heard much about the subject again. Until now, that is. Autocar has just come out with a report claiming that earlier this year, VW was in fact quite serious about buying a controlling stake in Fiat. The combined company would likely have been called Auto Union. VW management was prepping the initial paperwork.

But then things ground to a halt. Why? Although profits are up as a whole, the core Volkswagen brand saw its profit margins slide too low in the first half of 2014. There's even a risk these margins will decrease further next year. Basically, VW Group was suddenly no longer in a position to buy Fiat. But if that weren't the case, a merger could have looked something like this: the Agnelli family, which holds a controlling stake in Fiat, would have likely kept Ferrari and Maserati, and sold off the rest, including Alfa Romeo. VW, in turn, would likely have killed off or sold Seat and shut down Fiat's South American operations. Future Fiats, such as the next Panda, would be underpinned with a VW platform.

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New Alfa Romeos would share things with Audi. Chrysler-Jeep vehicles would eventually switch to the MQB platform, which underpins many VW models, including the Golf. There are many other joint platform possibilities as well, but for now this merger won't happen. VW has to save its core brand first.