PSA Group, the French owner of Peugeot, is exploring a merger with its US-Italian rival Fiat Chrysler, it has been confirmed.
A deal between the two carmakers would create a business with a combined market value of nearly $50bn (£39.9bn).
It is Fiat Chrysler's second attempt at a merger this year after it pulled out of an agreement with Renault in June.
On Wall Street shares in Fiat Chrysler jumped 7.5% on the reports.
The potential merger, first reported by the Wall Street Journal, would face significant political and financial hurdles.
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