Fiat-Chrysler Looks Towards Possible Merger With Renault

by Denis Gurskiy
Renault Zoe

Fiat Chrysler Automobiles (FCA) have recently launched a proposal for a 50-50 merger with French automaker Renault. The merger would result in the world’s third largest car maker at around 8.7 million cars produced annually.

FCA has sent a non-binding letter to the Renault Group with the following highlights:

  • Combined business to be 50% owned by FCA shareholders and 50% by Groupe Renault shareholders – balanced governance structure and majority of Board of Directors being independent
  • Combination would create the 3rd largest global OEM with 8.7m vehicle sales and a strong market presence in key regions and vehicle segments
  • Broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream
  • Combined company would be a world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving
  • No plant closures as a result of the combination
  • In excess of €5 billion estimated annual run rate synergies incremental to existing Renault-Nissan-Mitsubishi Alliance (Alliance) synergies
  • Strong combined balance sheet allowing for flexible capital allocation and robust dividend policy
  • Significant benefits to the other Alliance partners including ~€1 billion of additional estimated run rate synergies

In response, the Renault Group has released a press release noting their interest in the merger:

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.

In terms of electric vehicles, the merger would be highly advantageous to FCA. Renault has over a decade experience with electric cars and is the highest selling electric European brand. In contrast, FCA has been lagging behind in not only electric development, but in carbon emissions in general.

FCA had paid Tesla a substantial sum to include their cars with Tesla’s fleet in order to avoid European emission fines. Additionally, the 2017 EPA Automotive Trends Report had found FCA to be at the bottom of automakers in regards to fuel economy and carbon emissions.

Getting access to Renault’s (and by extension, Nissan’s) electric car technology, would greatly help FCA make up for lost ground in term of electric cars.

Presumably it would be in Renault’s interest as well due to their lack of presence in North America. With such a merger, Renault might see a return to North America ahead of its French rival, Peugeot.

However for the time being, nothing is officially moving forward.

What do you guys think of the possible merger? Let us know down in the comments below.

Source: FCA, Renault

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