Fiat Chrysler, Renault Merger Will Create World's Largest Carmaker

Fiat Chrysler, Renault Merger Will Create World's Largest Carmaker

Fiat Chrysler Automobiles submitted a proposal Monday to merge with French automaker Renault in a multi-billion dollar deal that could create the world's third-largest automaker by volume. Exor NV, the investment vehicle of Fiat's founding Agnelli family, owns 29% of Fiat and would become the largest investor in the combined company.

Roughly half a million of those vehicles are produced in Canada at Fiat Chrysler's Windsor and Brampton plants, which employ about 9,700 people, while Canadian sales amounted to 225,000 vehicles or about 11.3 per cent of the domestic market previous year. There would be no plant closures as a result of the merger, it said.

Both FCA and Renault have small footprints in China, and pooled resources could jump-start both automakers in that market.

Fiat Chrysler estimated that Nissan and Mitsubishi would make 1 billion euros in savings a year from the deal, though it was not clear how the Japanese companies would respond to being in an alliance with a much larger partner.

As per FCA, the new business will be run by a new Dutch parent company whose board will comprise 11 members: four members each for FCA and Renault, one for Nissan and the rest independent.

Together, the two companies made about 8.7 million cars previous year, which would vault the pair past South Korea's Hyundai Motor Group and Detroit's General Motors.

Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate. Recently, France pushed Renault to solidify that relationship, but the Japanese government strongly resisted any such idea.

Both Fiat and Renault went through dramatic changes at the top a year ago after former Fiat chief, Sergio Marchionne, died and Carlos Ghosn, who was chairperson of the Franco-Japanese alliance, was arrested in Tokyo on charges of financial crimes.

Fiat Chrysler has made a "transformative" merger proposal for French carmaker Renault, the Italian firm said on Monday.

An announcement of the Fiat Chrysler-Renault partnership is expected as early as Monday.

"Nissan appears to be being kept out of the loop, which is unpleasant for Nissan and may create unnecessary distrust of Renault among Nissan people", analyst Satoru Takada at TIW, a Tokyo-based research and consulting firm, told AFP. Falling sales in the world's biggest markets - China, the USA and Europe - have brought fresh urgency to consolidate.

However, the tie-up with FCA could make Renault much more powerful, potentially further upsetting the balance in the Renault-Nissan-Mitsubishi alliance where Ghosn was pushing for much more say before his downfall.

The French government, which owns 15% of Renault, is cautious about the new merger idea.

During an earnings conference call earlier this month, FCA CEO Mike Manley told shareholders that he believed that there would be "significant opportunities" in terms of strategic partnerships or alliances in the next two or three years.

"Renault now has its hands full with its alliance partner Nissan; it's unthinkable that this partnership will be abandoned", Frank Schwope, an auto industry expert at German commercial bank NordLB, said in a research note.

A deal with Fiat could give Renault more weight in any discussions with Nissan.

FCA's proposal was the culmination of talks held over the weekend that escalated from joint projects all the way to full-blown merger.

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