Fiat Chrysler Automobiles withdraws offer for Renault merger

Daniel Fowler
June 7, 2019

Fiat Chrysler made the offer for Renault at the end of last month, describing it as a "transformative" proposal that would create a global automotive leader.

Both parties hinted that the French government's interest in Renault and its larger Alliance with Nissan and Mitsubishi was a major sticking point.

But people familiar with the situation said Nissan executives were blindsided by the merger proposal.

On Wednesday night, the state proved it was serious about its promise by refusing to approve a merger with Fiat Chrysler Automobiles without Nissan's full support.

"However, it has become clear that the political conditions in France do not now exist for such a combination to proceed successfully", stated FCA after the withdrawal.

The deal still looks likely, but faced new criticism Tuesday from Renault's leading union and questions from its Japanese alliance partner Nissan. The person added that the government found surprising Fiat's rushed move to withdraw its offer. An official with the country's economy ministry told A.P. on condition of anonymity that France has "closed no doors" on the potential of this deal.

Despite the verbal sparring that erupted after FCA's announcement, industry experts did not rule out talks being resumed. Fiat Chrysler stock opened lower in Milan, but later recovered its losses.

The merger had aimed to achieve 5 billion euros ($5.6 billion) in annual synergies, with FCA gaining access to Renault's superior electric drive technology and the French firm getting a share of FCA's lucrative Jeep and RAM brands.

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The French government owns 15% of Renault and is seeking job and investment assurances, a seat on the merged entity's board, and for operational headquarters of the merged company to be in France.

"An agreement had been reached on three of these conditions".

"Let's take the time to do things well", Bruno Le Maire said on BFM television.

Le Maire asked for five days to secure Nissan's support.

Nissan was another party to have a hand in complicating things as its CEO, Hiroto Saikawa, publicly expressed his concern with the deal earlier this week.

Shares in the French company plunged by nearly seven percent in early afternoon trades in Paris.

Relations in the partnership have been under strain since the arrest in November of former Renault and Nissan boss Carlos Ghosn, who awaits trial in Japan on charges of under-reporting his salary for years while at Nissan and using company funds for personal expenses.

The merger would have saved billions in purchasing costs and helped each company share costs of developing autonomous and electric vehicles. It is possible that the government may have said something about the deal which led to its eventual withdrawal.

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