Fiat Chrysler Automobiles, Renault to merge – reports

Despite the fact that Sergio Marchionne and Carlos Ghosn are no longer heading Fiat Chrysler Automobiles and Renault, the appetite for merger at both carmakers remain strong. Now, it has been reported by New York Times and The Wall Street Journal that FCA and Renault are set to merge, with an announcement due later today.

The weekend reports said that the two entities are in talks on a comprehensive global combination that could address some of the main weaknesses of both, Reuters gathered. According to a source close to the negotiation, the merger plan being talked about would involve some transfer of equity. The WSJ said that the two companies are considering a merger of equals, among other tie-up options.

The French government has a 15% stake in Renault and the carmaker’s chairman, Jean-Dominique Senard, presented an FCA-Renault merger plan to French finance minister Bruno Le Maire on Friday, Les Echos reported. The government would want guarantees covering corporate governance and employment.

Another source with direct knowledge of the situation confirmed to Reuters that the Renault board will meet on Monday morning (French time) to discuss the issue.

Any merger should strengthen the combined entity and allow the partners access to areas which they weren’t strong in. While FCA has a highly profitable North American business selling Ram trucks and Jeep products, it has been bleeding money in Fiat’s home market of Europe. It may also struggle to keep pace with looming carbon dioxide emissions curbs in the continent, the reports reason.

In contrast, Renault is an electric-car pioneer with relatively fuel-efficient engine technologies and a strong presence in emerging markets including Russia, but it has no presence in North America.

Automotive News reckons that saving costs in Europe is the main reason for the tie-up – almost one-third of Fiat’s global work force of 198,500 was located in the region at the end of 2018, even though the company makes almost all of its profit in North America. Renault counts on Europe for almost half its sales.

The big question and elephant in the room, for now, would be Nissan’s position in this developing story. Between long-time alliance partners Renault and Nissan, the latter is the larger of the two, but Renault owns 43% of the Japanese carmaker, which in turn owns 15% of Renault. Nissan’s stake in Renault comes with no voting rights, though.

Nissan has been resisting Renault’s plans to forge closer links via the creation of a holding-company structure, and this has been cited as the reason behind alliance boss Carlo Ghosn’s ouster and multiple charges in Japan.

If you take into account the combined sales of FCA and the Renault-Nissan-Mitsubishi Alliance, the entity will be by far the largest car group in the world, catapulting ahead of the Volkswagen Group and Toyota. Besides the two namesake brands, Fiat Chrysler Automobiles’ other marques include Abarth, Alfa Romeo, Dodge, Jeep, Lancia, Maserati and Ram Trucks. Ferrari was spun-off the group in 2015.

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