A report by German website Manager Magazin claims that Volkswagen patriarch and chairman of supervisory board, Ferdinand Piëch, floated the idea of a takeover during meetings with the Elkann and Agnelli families, who hold a controlling stake in Fiat Chrysler.
Sources indicated that should the takeover eventuate, the Agnelli family would exit the mass market car making business entirely, but would keep control of Ferrari.
For Volkswagen one of the key gains would be in the US, where Chrysler has a wide network of dealers, and a high profit margin range of SUVs and pick-ups. The German company's lofty sales ambitions in the States are unlikely to be met, and sales of the American-made Jetta and Passat sedans have recently stalled.
According to Automotive News, both Fiat and Exor, the Agnellis' holding company, have denied having any discussions with Volkswagen about a merger.
A Volkswagen representative talking to Reuters said, "There are currently no M&A [merger and acquisition] projects on the agenda... We are now focusing on boosting efficiency across the group". A member of Volkswagen's supervisory council told the news agency that there have been no discussions about taking over Fiat.
One source who spoke to Reuters said it was far more likely for Volkswagen to bid on specific arms of Fiat Chrysler, such as parts supplier Magneti Marelli and Alfa Romeo. Volkswagen chairman Ferdinand Piech has previously shown interest in Fiat Chrysler's Alfa Romeo brand, but was publicly and privately rebuffed by Fiat Chrysler CEO Sergio Marchionne.
Were Volkswagen to take over Fiat Chrysler, there might be regulatory concerns, especially in Latin America where both Fiat and Volkswagen have large market shares.
Both companies currently have a broad array of brands, and it's not certain what would happen to some if a merger took place. For instance, Volkswagen, Fiat, Seat and Skoda all have models which compete with one another.
Fiat Chrysler currently runs the Fiat, Alfa Romeo, Lancia, Chrysler, Dodge, Jeep and Ram brands, while Volkswagen's portfolio of marques includes Volkswagen, Audi, Skoda, Seat, Bugatti, Bentley and Lamborghini.