Fiat Chrysler Automobiles NV, the Italian-American multinational auto manufacturer, is prepared to announce an operational linkup with Renault SA, the French multinational auto maker, on Monday, in a deal that could point to a full merger of the two auto giants to create the world’s third-biggest automaker.
See Also: News about the Nigerian automobile industry.
The Merger Between The Automakers Is Worth €33 Billion.
People conversant with the issue highlight that the deal could contain an initial trade of equity.
With this development, a French drive to forge closer ties with Nissan, which has resisted offers to join with Renault in a holding-company structure, has been put on hold. Bloomberg reported that Fiat conditioned the merger discussions on Renault concurring to not pursue a deal with Nissan in the short term. Talks between the companies have, however, hastened in recent days as representatives from both parties found a way to structure a deal. Renault’s board is scheduled to meet today.
Experts are of the opinion that a Fiat-Renault agreement would hold the possibility for massive cost savings in the struggling market through sharing investments. However, should a deal proceed, Exor NV, the investment vehicle of Fiat’s founding Agnelli family (with a 29% stake in the business) would become the company’s largest investor. Also, Fiat’s Chairman John Elkann, who currently owns more stake than the Agnelli family, would turn out to be chairman of the combined company; Renault Chairman Jean-Dominique Senard would become chief executive officer.
Pressure On Global Automakers As Sales Decline.
Sources said that talks with Fiat have moved ahead without Nissan, Renault’s 20-year partner. This indicates the intense pressure shepherding automakers toward combining efforts and investments as sales slow down in the world’s biggest car markets and the push toward electrification deepens.
The two firms, together, made about 8.7 million cars in 2018. This would have jumped the pair of South Korea’s Hyundai Motor Group and Detroit’s General Motors. However, with sales dropping in the US, China and Europe, manufacturers are being pressed by controllers to electrify and reduce fleet emissions. They’ve also been compelled to spend seriously on self-driving technology or risk getting left behind by new, deep-pocketed competitors such as Waymo.
Can This Merger Lead To Higher Profits For The Firms Combined?
Sources reported that Fiat would give Renault, which is 15% owned by the French government, access to the North American market, while gaining weight in Russia (Europe), its second-biggest market, which accounts for almost half its sales with its Avtovaz unit. Almost one-third of Fiat’s global work force of 198,500 was situated in the region at the end of last year, even though the company makes almost all of its profit in North America.
In general, Renault distributions fell by 5.6% to 908,348 vehicles in the first quarter, while Fiat Chrysler sales dropped by 14% to 1.04 million cars and light trucks.
France To Strengthen Renault Alliance, As Other Carmakers Look To Each Other For Savings.
According to those familiar with the matter, the French Government has been kept up to date with meetings between Renault and Fiat Chrysler and will think about the impact of any planned tie-up in terms of jobs, valuation and industrial footprint. They hinted that French officials would, however, prefer a contract that strengthens the prevailing Renault alliance by bringing in Fiat, and at worst a deal with the Italian-American carmaker would have to be alliance-neutral.
Meanwhile, other carmakers are looking to each other for savings. BMW AG and Daimler AG have pushed aside enmities to join forces in sharing services and autonomous cars. Also, VW has been in talks with Ford Motor Company to team up on electric cars and autonomous vehicles.