Will Renault and FCA merge?

Renault and Fiat Chrysler negotiate a merger to form one of the world’s largest car manufacturers. In the midst of talks, the French government, which has a 15% stake in Renault, has already some conditions though.

In addition to a job guarantee, France demands that the new group be a leader in the development of batteries for electric cars. Besides, the merger also includes Renault’s tie-in to Nissan and would need to be approved by the authorities.

+ + Kindly see our update below ++

If the deal goes ahead, it will make the new company the third-largest carmaker in the world ranked behind only Japan’s Toyota and Germany’s Volkswagen.

Reuters reports that the partners to be target 5 billion euros ($5.6 billion) a year in savings. Moreover, with FCA being notoriously behind in electrification, the company could hope to bank on the Renault Group’s electric vehicle range. In return, Renault could expect to get a foot into the North American market.

If the deal goes ahead depends on many stakeholders; however, not the least the unions as well as the French and Italian government.

In a first statement regarding the potential 50/50 merger between Renault and FCA, Renault stated the following: “After careful review of the terms of FCA’s friendly proposal, the Board of Directors decided to study with interest the opportunity of such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the Alliance.”

Update 6 June 2019: Fiat Chrysler Automobiles (FCA) announced that the merger with Renault will not go ahead for the time being in a somewhat fractious exchange between FCA and the French government.

FCA said via press release that: “FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties. However, it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

After the collapse of merger talks between the two companies, France’s finance minister insisted that the government had engaged constructively but failed to win the support of Renault’s Japanese partner, Nissan. France had also insisted on job guarantees from the beginning and to keep EV development at home.

reuters.com, renault.com, fcagroup.com (update FCA press release), reuters.com (update French govt. response)