Media Moves

Coverage: Fiat Chrysler proposes merger with Renault

May 28, 2019

Posted by Chris Roush

Source: Wikipedia

Fiat Chrysler pitched a finely balanced merger of equals to Renault on Monday to tackle the costs of far-reaching technological and regulatory changes by creating the world’s third-biggest automaker.

Giulio Piovaccari and  Laurence Frost of Reuters had the news:

If it goes ahead, the $35 billion-plus tie-up would alter the landscape for rivals including General Motors and Peugeot maker PSA Group, which recently held inconclusive talks with Fiat Chrysler (FCA), and could spur more deals.

Renault said it was studying the proposal from Italian-American FCA with interest, and considered it friendly.

Shares in both companies jumped more than 10 percent as investors welcomed the prospect of an enlarged business capable of producing more than 8.7 million vehicles a year and aiming for 5 billion euros ($5.6 billion) in annual savings.

It would rank third in the global auto industry behind Japan’s Toyota and Germany’s Volkswagen.

Nora Naughton and Ian Thibadeau of the Detroit News report the big comes amid market turmoil:

The proposed FCA-Renault tie-up comes during a year of upheaval for the auto industry. Amid global trade tension, rising costs due to tariffs and the threat of an industry downturn, FCA’s two Detroit rivals, General Motors Co. and Ford Motor Co., already are executing worldwide restructurings designed to cut costs and divert capital toward expensive electrification, autonomy and mobility efforts. The Italian-American automaker is also hoping to benefit from Renault’s advancements in electrification — an area in which FCA is perceived to lag.

The potential combination also comes amid deepening strains in Renault’s 20-year-old alliance with Nissan Motor Co. and Mitsubishi Motor Corp. following charges of financial wrongdoing against longtime CEO Carlos Ghosn. He’s gone, but the bitterness remains in Japan over French efforts to consolidate the alliance into a merged company that likely would derive more profit from Nissan than Renault.

And Renault’s crosstown rival, Groupe PSA SA, is aggressively seeking partners to build scale in Europe and possibly help enter the rich U.S. market — prompting new leadership atop Renault to consider the kind of merger FCA’s legendary CEO, Sergio Marchionne, sought but could not achieve before his death last year.

Angela Charlton and Colleen Barry of the Associated Press reported that Renault had wanted to merge with Nissan:

Fiat Chrysler’s offer comes at a key moment for Renault. The French manufacturer had wanted to merge fully with Nissan, but those plans were derailed by the arrest of boss Carlos Ghosn on financial misconduct charges in Japan.

Now, questions are growing over the Renault-Nissan-Mitsubishi alliance , which together make more passenger cars than any one company. While Fiat Chrysler says the merger with Renault would accommodate the alliance and lead to savings for them, it is unclear how the Japanese companies might react in the longer term to being tied to a much larger partner.

Automakers have collaborated more in recent years as they come under pressure to invest heavily in developing electric cars, self-driving vehicles and in-car connectivity. Regulators, particularly in Europe and China, are pushing automakers to produce electric vehicles and meet tougher climate change regulations, pressure that only grew after scandals over the amount of pollutants emitted by gas and diesel-powered engines.

A deal would save 5 billion euros ($5.6 billion) a year for the merged companies by sharing research, purchasing costs and other activities, Fiat Chrysler said. It promised the deal would involve no plant closures, but it didn’t address potential job cuts.

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