Fiat is struggling, the company recently discontinued the Fiat 500 in the US territory due to low sales. The 500 sold just 5,000 models in 2018 and it underscores Fiat’s general malaise in the auto industry. In other words, not many people are buying Fiats worldwide at the moment. This consumer malaise has trickled down to other brands owned by the stuttering Italian-American auto giant. For a long time, Fiat has been looking to lean on a profitable partner to bail it out of trouble. However, Fiat is too risky to consider worth investing in.

Until now. The PSA Group which comprises of Peugeot, Citroen and Vauxhall confirmed that it is in talks with Fiat about forming a partnership. Note it is a partnership, not a buyout. Peugeot is currently ranked as Europe’s second-biggest carmaker in terms of sales. A partnership with Fiat would create a net worth of $47 billion dollars.

A PSA Group / Fiat Chrysler partnership would reduce capital expenditure, cut down development costs and help offset purchasing decisions as trade wars and a shift to electrification drains overall resources. Industry analysts agree that such a partnership could save 7bn euros by 2023.

Both companies have been hit by a sales slow down in China. It is widely acknowledged that the formation of a partnership would have no immediate impact on reviving either company’s China strategy. Had Fiat not acquired Chrysler it would be in serious trouble.

And Chrysler is what interests the PSA Group the most. PSA Group CEO Carlos Tavares is planning to return the company to the USA from 2026, a territory the brand exited in 1991. Chrysler performs strongly and is the glue holding a fragile Fiat together.

Fiat was in talks of a merger with Renault however Nissan vetoed the idea and talks subsequently collapsed. Fiat has fallen behind in the race to modernize from technology to production processes. A merger or partnership would save Fiat from itself.