Germany's Manager Magazine said on Thursday, Volkswagen Chairman Ferdinand Piech had held talks with the owners of Fiat Chrysler about buying all or part of the group that was formed this year from the merger of Italian and U.S. car makers.
The magazine cited unnamed company sources.
However, a VolksWagen spokesman said Europe's biggest car maker was focused on delivering improvements at its existing operations.
"There are currently no M&A (merger and acquistion) projects on the agenda," he said. "We are now focusing on boosting efficiency across the group."
The Agnelli family's holding firm Exor, which owns a 30-percent stake in Fiat Chrysler, denied any talks had taken place, as did Fiat Chrysler.
Shares in Fiat Chrysler jumped 5 percent to 7.98 euros on the report, but had retreated to stand up 2.2 percent by 1352 GMT. VolksWagen's stock was 1.8 percent lower.
VolksWagen Chief Executive Martin Winterkorn said in March the carmaker, though hoarding almost 18 billion euros ($24 billion) in cash, had no plans to expand the group through acquisitions as it was focusing on integrating its 12-brand network.
VolksWagen has since sealed a 6.7-billion euro buyout of minority shareholders at Swedish truck division Scania to forge a long-planned alliance of its truck brands.
The report could suggest "diverging views" between VolksWagen's management and the supervisory board about the carmaker's future course, said Arndt Ellinghorst, a London-based analyst at investment researchers ISI Group, at a time when Winterkorn, 67, and Piech, 77, are soon likely to face a debate over succession.
Rather than talking about further expansion, top managers at VolksWagen - concerned that profitability gains aren't keeping pace with the company's steadily-growing size - have been pushing a new efficiency programme that includes 5 billion euros of cost cuts per year at the core passenger-car brand.
Earlier this month, VolksWagen also denied a report it was planning a bid for U.S. truck maker Paccar next year.
INTERESTED IN ASSETS
"The risks from integrating Italian plants and managing a U.S. business are material and we do not believe that the potential benefits justify the risks," Ellinghorst wrote in a note to clients.
A person familiar with the situation told Reuters that VW would more likely bid for Fiat assets such as Magnetti or Alfa Romeo rather than the entire company.
A member of VolksWagen's supervisory board, which oversees the management board, said the 20-member panel had at no point of time had any discussions about a purchase of Fiat.
Still, Piech and Winterkorn have repeatedly expressed interest in Alfa Romeo despite rebuttals from Fiat CEO Sergio Marchionne.
Manager Magazin said VolksWagen was hoping to use Chrysler's U.S. distribution network to help solve its own problems in the world's No. 2 auto market where flagging sales of the VolksWagen brand in January sparked the ouster of VolksWagen's regional chief.
However, VolksWagen's U.S. troubles "are more image and pricing problems and not so much problems of distribution and manufacturing," an auto analyst said. "Buying Chrysler would not really help VolksWagen."
Fiat took full control of Chrysler at the start of 2014, creating the world's No.7 auto group, and plans to list the merged Fiat Chrysler Automobiles in New York later this year.
Chief Executive Sergio Marchionne has said he wants Fiat Chrysler to follow bigger rivals such as VolksWagen by building global brands and strengthening its position in the fast-growing and high-margin market for premium cars.
The company is counting on its founding merger and a U.S. listing to help foot the bill for its 48 billion-euro plan to grow net profit five-fold and sales by 60 percent by 2018.
While rumours of a potential Agnelli family exit have surfaced over the years in Italian press, Exor has repeatedly said the stake remained a strategic investment for the family.
Manager Magazin also said VolksWagen and Fiat Chrysler's owners were far from reaching an agreement about a possible price.