Fiat Chrysler shares spiked amid rumors China’s Guangzhou Automobile Group was to enter a merger with the London-based automaker, Forbes reports.
Early on Wednesday, a report from Il Giornale indicated that GAC was to buy a majority stake in FCA. It wasn’t the first time such rumors had swirled, however this time around the talk was taken rather seriously, with FCA shares jumping about 3% following the publication of the report before dropping back down close to even.
In the past, FCA CEO Sergio Marchionne has been vocal about his desire to merge FCA with another company. The Italian-Canadian attempted to court General Motors for a merger, however GM CEO Mary Barra promptly shut the idea down. Volkswagen and Toyota have since also been floated by the CEO as potential partners.
FCA is currently in a manufacturing venture with GAC to produce the Jeep Renegade in China. It’s not clear if the partnership could become anything more, however GAC general manager Wu Song recently stated that since GAC helped FCA enter the Chinese market, they’d appreciate it if FCA did the same for them in entering the U.S. market.
One factor working against FCA in regards to it finding a partner, Forbes says, is its massive debt. If GAC were to merge with FCA, it would be adopting its $5.6 billion in net industrial debt. FCA profits are expected to climb in coming months amid the global expansion of the Jeep brand, however, so now might not be a bad time for GAC to get in on FCA’s ground floor.