In a statement, Renault said such a fusion could “improve Renault’s industrial footprint and be a generator of additional value for the Alliance” with Japan’s Nissan and Mitsubishi.
The proposed Fiat Chrysler-Renault merger would save both companies billions of dollars as the industry pivots to electric and autonomous vehicles.Credit:AP
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.
A deal would save €5 billion ($US5.6 billion) for the merged companies each year by sharing research, purchasing costs and other activities, Fiat Chrysler said. It promised the deal would involve no plant closures, but didn’t address potential job cuts.
The companies are largely complementary: Fiat Chrysler is stronger in the US and SUV markets, while Renault is stronger in Europe and in developing electric vehicles. Together, they would be worth almost €37 billion ($US40 billion).
“This operation will bring benefits to both countries,” Fiat Chrysler Chairman John Elkann told reporters in Italy, noting that it had been 10 years since Fiat’s takeover of bankrupt Chrysler, in exchange for small-car technology and management know-how.
The car market has shifted dramatically in the meantime, with Fiat Chrysler abandoning small cars in the United States in favor of SUVs.
Analysts at financial firm Jefferies said it was “hard to disagree with the logic” of the deal, as there is a strong fit in the markets each company covers and the brands they offer.
“The elephant in the room is who will run the entity,” analysts Philippe Houchois and Himanshu Agarwal wrote in a note to investors.
Mergers of equals can be difficult to manage over questions of who gets the top leadership positions and which brands are promoted and invested in most. A tie-up between Daimler and Chrysler in the 1990s was billed as a merger of equals, but it eventually collapsed amid cultural differences and recriminations.
Investors were nevertheless enthusiastic about Fiat Chrysler’s plan, pushing the company’s shares up almost 10 per cent and Renault’s 13 per cent in European afternoon trading.
The French government, which owns 15 per cent of Renault, said it was “favourable” to the idea of a merger but wanted to study the conditions more carefully, especially in terms of “Renault’s industrial development” and employees’ working conditions.
“We need giants to be built in Europe,” said government spokeswoman Sibeth Ndiaye.
Ghosn’s legal problems in Japan have left Renault vulnerable.
Ferdinand Dudenhoeffer, head of the CAR automotive research centre at the Duisburg-Essen University, said Ghosn’s plans to merge Renault with Nissan-Mitsubishi had “little appeal” for the Japanese.
He noted that Renault’s sales represented just 36 per cent of 2018 alliance sales – and the Japanese didn’t want to see the French carmaker drive a merger with those numbers.
A Renault merger with Fiat Chrysler, however, could strengthen both companies’ positions and put pressure on smaller companies like Ford in Europe.
Collaboration between automakers has taken on greater importance in recent years as they seek to build their technological capabilities in pursuit of electrical vehicles, net connectivity and artificial intelligence for vehicles.
Automakers are also under pressure from regulators, particularly in Europe and China, to come up with electric vehicles so they can meet tougher climate change regulations and after scandals over the amount of pollutants engines truly emit.
The merger idea is the biggest corporate move so far by Fiat Chrysler CEO Mike Manley, who took his position after the unexpected death last year of the charismatic leader Sergio Marchionne.
What happens to jobs is likely to be a source of concern.
France’s influential CGT union warned against cuts should a deal go through, and said it wants the French government to retain a blocking stake in any new company.
Matteo Salvini, the leader of Italy’s right wing populist League party and the deputy premier, said that “if Fiat grows, it is good news for Italy and Italians,” though he warned a deal should protect “every single job.”
In Tokyo, Nissan CEO Hiroto Saikawa wouldn’t comment directly on the merger idea but said, “I am always open to exchanging constructive views on strengthening the alliance.”