Fiat Chrysler Automobiles Submits a Proposal for a Merger with Groupe Renault
If the merger is completed, the combined company would be the third-largest automaker in the world
Fiat Chrysler Automobiles and Groupe Renault are two of the world’s largest automakers. A new proposal from FCA would result in an even larger automotive company.
Yesterday, FCA submitted a proposal for a merger with Renault. The result would be the third-largest automaker in the world.
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According to the proposal, 50 percent of the new company would be owned by FCA shareholders, while the remaining 50 percent would be owned by Renault shareholders.
The merger would play off of the strengths of both brand while addressing their weaknesses. FCA is currently a strong brand in the U.S. with plenty of SUVs, but its sales are trailing in Europe. Conversely, Renault has a stronger presence in Europe, but could always benefit from more SUVs and crossovers.
Renault is also a leader in the electric vehicle segment. Since FCA has minimal plans for EVs in its lineup, it could benefit from all of the advancements that Renault has made if it were to merge with the automaker.
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Working together, FCA and Renault would sell an estimated 8.7 million vehicles a year worldwide. This would make it the third-largest automaker in the world, behind only Toyota and Volkswagen.
The proposed merger would also help save both companies upwards of 5 billion euros ($5.6 billion) a year, thanks to the ability to share research and production costs. FCA said the merger should not result in any plant closures.
Renault is already partnered with Nissan and Mitsubishi. According to sources familiar with the matter, FCA’s proposed merger with Renault would be separate from the Nissan-Renault-Mitsubishi alliance.
For its part, Renault seems receptive to the idea of merging with FCA. Renault’s board stated that it would study the proposal “with interest.”
The French government, which currently owns 15 percent of Renault, also expressed interest in the idea of the merger. Still, the French government wants to study the proposal to ensure it aligns with desirable industrial development and employee working conditions.
The market response to the merger was immediate. Shares for FCA jumped up 13 percent, while Renault’s shares increased 11.5 percent.
“In Groupe Renault we found a like-minded partner who sees the future as we do,” wrote FCA CEO Mike Manley in an employee e-mail sent out Monday. We’ve worked well to get this far, and this would truly be a merger of like-minded businesses, on an equal footing to create a world-leading company.”
For years, former FCA CEO Sergio Marchionne attempted to secure a merger for Fiat Chrysler. Now, his successor may be making that goal a reality.
News Source: CNBC