Fiat Chrysler puts merger offer to Renault board

Ann Santiago
May 29, 2019

Fiat Chrysler (FCA) said on Monday its offer to merge with the French manufacturer would form the third-largest auto maker globally with 8.7 million yearly vehicle sales and a strong presence in most large markets.

Fiat Chrysler Automobiles (FCA) has delivered a non-binding letter to the Board of Groupe Renault, proposing a 50:50 merger of the two entities.

Fiat Chrysler and Renault together would have a combined market capitalization of more than 32 billion euros ($36 billion) and total global sales of 8.7 million vehicles.

It denied that plant closures would result frokm the proposed union but added that savings would be achieved rather "through more capital efficient investment in common global vehicle platforms, architectures, powertrains and technologies".

If the plan goes ahead, Nissan and the French government will own about 7.5% apiece of the new, merged company.

The combined group would forge the world's third-biggest automaker, making some 8.7 million vehicles a year and trailing only Volkswagen and Toyota.

Renault Chairman Jean-Dominique Senard presented an FCA-Renault merger plan to French Finance Minister Bruno Le Maire on May 24, Les Echos reported on its website.

"We need to have industrial giants in Europe" to compete globally, she said.

Auto makers have faced pressure to consolidate amid major industry shifts towards electric vehicles.

Renault already has an alliance with Japan's Nissan, in which research costs and parts are shared.


The Italian-American group said it expects annual run-rate synergies greater than 5 billion euros over time.

The French government says that any deal needs to protect all French jobs and factories, and preserve Renault's existing alliance with Nissan and Mitsubishi.

Speculation about the future of Fiat Chrysler, often seen as a potential M&A target, intensified after the sudden death of long-serving former CEO Sergio Marchionne nearly one year ago.

"FCA fits as well with Renault as it does with PSA", Jefferies analyst Philippe Houchois said in a note after news of the deal talks broke.

Now, questions are growing over the Renault-Nissan-Mitsubishi alliance, which is the biggest maker of passenger cars in the world.

The merger idea is the biggest corporate move so far by Fiat Chrysler chief executive Mike Manley, who took the position after the unexpected death past year of charismatic leader Sergio Marchionne.

Together, they would be worth nearly 37 billion euros ($40 billion).

The brand portfolio of the two groups would be "broad and complementary. and would provide full market coverage, from luxury to mainstream", it said.

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, government spokeswoman Sibeth Ndiaye said.

Fiat has history with French President Emmanuel Macron, whose support would be needed along with Italian officials for a deal that could involve major job cuts in France and Italy.

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