Fiat Chrysler Automobiles came close to tying up with automaker Renault this year, but it appears another French automaker, PSA Groupe, will be FCA's merger partner instead. PSA is best known in the United States as the manufacturer of Peugeot automobiles.

The Wall Street Journal, citing sources, said the companies are moving forward with a merger, in a deal that would create the world's fourth largest automaker.

Reports that the companies were in talks began Tuesday, and both on Wednesday confirmed the discussions.

The companies issued separate, nearly identical statements, signifying a coordinated messaging strategy, with Italian-American automaker FCA adding that it had no additional comment.

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"Following recent reports on a possible business combination between Groupe PSA and FCA Group, Fiat Chrysler Automobiles N.V. ... confirms there are ongoing discussions aimed at creating one of the world‘s leading mobility Groups. FCA has nothing further to add at this time," the company said.

Despite the speed of developments and longtime desire of FCA's leaders for a tie-up, a final deal is not a certainty and any merger would take time and face regulatory scrutiny.

Reuters reported that a merger between FCA and PSA could create a "$50-billion giant better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry."

Details of the deal were not announced, but some possible aspects were leaked.

The Journal reported that the new company would be "legally domiciled in the Netherlands," with "operational headquarters in the U.S., France and Italy."

Additional details and any impact on employment are not yet clear, but experts did not see major changes for North America. FCA has plans to add almost 5,000 jobs as part of expansion on Detroit's east side to build SUVs. FCA is currently involved in contract talks with the UAW.

Morningstar Senior Equity Analyst Rich Hilgert said the merger would ultimately benefit FCA in Detroit.

“It leaves Chrysler in a very good position,” Hilgert said. “The Peugeot Group has been planning a return to the U.S. market. The established Chrysler/Dodge/Jeep/Ram dealer network would give Peugeot the platform it needs to re-enter the market.”

Reuters, citing sources, said FCA could pay a $6.12 billion (5.5 billion euro) special dividend to shareholders and "spin off its stake" in Faurecia, which makes auto parts. The wire service said FCA could divest itself of the Comau robotics division as part of a deal.

Renault deal fell through

FCA came close to a merger this year with Renault, but complications with the French government led FCA to withdraw.

FCA had proposed a 50-50 merger with Renault in May, saying it would create the world's third-largest automaker and save $5.6 billion annually. Since then, FCA Chairman John Elkann, whose family has controlling interest in the company, confirmed the group’s bid to pursue an alternative alliance, Reuters said.

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Global automakers face the prospect of a slowdown in demand coinciding with a need to invest in electrification and autonomy.

With that in mind, several analysts noted the deal's benefits.

Brian Moody, executive editor for Autotrader, noted that "each company has something the other wants. Fiat Chrysler could surely use some of Peugeot’s cash and/or existing platforms to help build out a fleet of fresh new cars, including electric and hybrid vehicles. On the other hand, Peugeot would love to have access to a vast dealership network as well as a way to capitalize on the success of brands and vehicles like Ram and Jeep."

Matt DeLorenzo, managing editor at Kelley Blue Book, said the companies' scale, portfolios and geographic presence complement each other.

"While FCA has a strong presence both in North America and Europe (thanks to Fiat), PSA has virtually no North American presence (other than its fledgling startup efforts) and as far as Europe is concerned FCA has got Italy cornered, while PSA is dominant in the French and German markets, the latter thanks to its acquisition of Opel. It also has a foothold in the UK with Vauxhall," DeLorenzo said.

He noted that CEO Carlos Tavares is a solid executive with experience running merged entities.

"I think his style will blend well with Mike Manley’s," he said, referencing the FCA CEO.

An FCA-Peugeot merger would create the world's fourth-largest automaker, behind Volkswagen, Toyota and the Renault-Nissan alliance.

Complementary strengths

Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor, said the merger makes “a lot of sense” because each company complements the other in terms of product strengths and weaknesses — from powertrains to commercial and personal vehicles to electrification.

“Any time you band together resources and enhance commonality, it makes your offerings to the consumers better,” she said. “You’re able to offer more in terms of products and at a better price point for the customer.”

Bailo noted that FCA is considered weak on the sedan side, “where PSA shines.” FCA made a much publicized bid to jettison its small car production in North America in favor of SUVs and trucks several years ago, ahead of GM and Ford. The French company also brings movement in the area of electrification, much like the Ford-Volkswagen partnership announced earlier this year.

“Automakers today are trying to provide that future portfolio the customer demands, and a way to bundle their development resources,” she said.

FCA, with U.S. operations based in Auburn Hills, was created out of the Chrysler bankruptcy of a decade ago, when American automakers crashed amid the Great Recession. In the years since, FCA has ridden the strength of its Jeep SUV and Ram truck brands to profits and growing market share in North America.

Both GM and Ford declined to comment on the merger.

Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrence. Staff writers Jamie L. LaReau and Phoebe Wall Howard contributed.