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Fiat Chrysler proposes 50-50 merger with Renault

One story dominates the auto news worldwide this morning. Fiat Chrysler Automobiles (FCA) has made a merger proposal to Renault. FCA confirms sending the proposed offer and Renault confirms receiving a potential 50/50 merger transaction between Groupe Renault and FCA.

It appears that the final proposal was agreed by FCA and Renault in talks that went on overnight. Renault’s Board of Directors will meet this morning to discuss this proposal.

If the the deal were to go ahead, it would have the potential to be a global leader with major presence in all the big markets, with line-ups of vehicles that largely compliment each other to fill out a near full portfolio to maximise market coverage.

Between Fiat Chrysler and Renault, they produced about 8.7 million cars last year, which would propel them past Hyundai Motor Group and General Motors into third place behind Volkswagen Group and Toyota, both of which top the 10 million builds per annum.

Renault owns 43.4 percent of Nissan, while Nissan owns 15 percent of Renault, with no voting rights in a partnership that began in 1999. Since 2016, Nissan has held a 34 percent controlling stake in its smaller Japanese rival, Mitsubishi.

So if you add Renault’s existing Japanese alliance members Nissan and Mitsubishi, they would easily be number one with about 15 million vehicle builds annually.

The proposal is to have the merger implemented through a Dutch-based holding company scheme similar to what Renault had earlier proposed for its full merger with Nissan, which the Japanese group has repeatedly resisted. Relations have deteriorated further between Renault and Nissan since Carlos Ghosn, who was chairman of their alliance, was arrested in Tokyo on charges of financial crimes.

FCA and Renault have moved ahead without the French carmakers alliance partners, Nissan and Mitsubishi Motors, and indeed other members of their alliance including Russia’s AvtoVAZ.

However, Nissan Motor President and CEO Hiroto Saikawa said this morning that he is open to discussions aimed at strengthening the Japanese carmaker’s alliance with Renault Group.

Renault’s top management will travel to Japan to attend a regular meeting of the Renault-Nissan-Mitsubishi alliance at Nissan’s Yokohama headquarters on Wednesday. Mr Saikawa expects to exchange opinions openly and have a constructive dialogue at that meeting.

According to FCA, the merger has the potential to generate 5 billion euros in annual savings. Gaining scale in the volume car business is usually very good, plus cost attribution for autonomous driving, electrification, ever lowering emissions requirements and many other new technologies are very costly to develop.

The merger would mean that Italy’s Agnelli family, which owns 29 per cent of FCA, and the French government, which owns 15 per cent of Renault, woukd be major shareholders. However, while both have enjoyed voting rights greater than their shareholdings in the respective auto giants, this advantage would would be diluted greatly if the merger goes ahead.

Fiat Chrysler Automobile’s portfolio includes automotive brands Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, FiatProfessional (LCV’s), Jeep, Lancia, Maserati, and Ram Trucks. Ferrari is not included, as it was spun off from the group in 2016.

Originally known as the Renault–Nissan Alliance, Renault and Nissan became strategic partners in 1999 with ten major brands now in their portfolio: Renault, Nissan, Mitsubishi, Infiniti, Renault Samsung, Dacia, Alpine, Datsun, Venucia and Lada.

Watch this space for more on this developing story…