France, Italy eye Fiat-Peugeot tie-up - report

MILAN (Reuters) - France and Italy are considering a potential tie-up between automakers PSA Peugeot-Citroen SA and Fiat SpA, Milano Finanza newspaper said on Saturday.

The report comes just days after Fiat Chief Executive Sergio Marchionne said the Italian company needed to find a partner to survive the crisis besetting the car sector.

Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy have tackled the issue of a possible tie-up, Milano Finanza said, citing sources close to Berlusconi's office.

The issue coincides with Berlusconi's office examining possible aid to the auto sector, it said.

A Peugeot tie-up could be touched on when John Elkann, chairman of holding company IFI, Fiat's controlling shareholder, meets Berlusconi on Wednesday, the paper said.

A spokesman for Berlusconi's office said there was no official comment on the report. A Fiat spokesman had no comment.

Analysts have said a Peugeot-Fiat tie-up would make commercial sense since both have strong positions in small cars. They also have two joint ventures in commercial vehicles and mini-vans.

The companies combined made 6.2 million units last year, roughly the same as Germany's Volkswagen AG and France's Renault-Nissan.

The combined output would make a combined Fiat-Peugeot-Citroen the world's fourth-biggest automaker by production after Toyota Motor Corp, GM and Ford Mazda, at a shared podium with Renault-Nissan and VW.