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Fiat Chrysler announces plan to merge with Renault, making world’s third-largest carmaker

Fiat Chrysler and Renault potential merger, Auburn Hills, USA - 06 May 2014
Fiat Chrysler Automobiles signage at the Chrysler Group World headquarters in Auburn Hills, Michigan. The Italy-based automaker proposed Monday to merge with French automaker Renault.
(Rena Laverty / EPA/Shutterstock)
Bloomberg

Fiat Chrysler Automobiles is proposing a merger with Renault in a deal that would create the world’s third-biggest carmaker.

The transaction will be structured as a 50-50 ownership through a Dutch holding company, Italy-based Fiat said in a statement Monday, adding that there will be no plant closures. In a separate statement, Renault said its board will meet later in the morning to discuss the proposal.

The talks come as automakers worldwide face intense pressure to spend heavily on new technologies and adapt to trends such as car-sharing. Falling sales in the world’s biggest markets — China, the U.S. and Europe — have brought fresh urgency to consolidate. Fiat and Renault expect their joint “synergies” to amount to more than $5.6 billion, coming from areas such as purchasing power.

Together, Renault and Fiat had a combined market value of $36.5 billion as of Friday.

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Fiat and Renault have moved ahead without the French carmaker’s 20-year partner, Nissan Motor Co., and Mitsubishi Motors Corp., the other member of their three-way alliance. Both Fiat and Renault went through dramatic changes at the top last year after former Fiat chief Sergio Marchionne died and Carlos Ghosn, who was chairman of the Franco-Japanese alliance, was arrested in Tokyo on charges of financial crimes.

Together, the two companies made about 8.7 million cars last year, which would vault the pair past South Korea’s Hyundai Motor Group and Detroit’s General Motors Co. That’s still behind the world’s two biggest automakers, Volkswagen AG and Toyota Motor Corp., which both topped 10 million vehicles last year. Renault’s existing alliance, including numbers from partners Nissan and Mitsubishi, also reached this milestone.

Adding Fiat and Renault along with its Japanese partners would bring the total to more 15 million vehicles a year, with a strong presence in all major markets and premium brands such as Jeep, Maserati, Alfa Romeo and Infiniti under a common umbrella.

Fiat and Renault would have a “broad and complementary brand portfolio” covering markets from luxury to mainstream, Fiat said in its statement.

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Ghosn’s arrest widened a rift between Renault and Nissan, which has resisted proposals by the French company to merge in a holding-company structure.

The proposed deal between Fiat and Renault comes against a backdrop of an industry undergoing one of the biggest tectonic shifts in its history. Carmakers are being pushed by regulators to develop electric vehicles to lower emissions. They’ve also been forced to spend on self-driving technology or risk getting left behind by such deep-pocketed competitors as Alphabet Inc.’s Waymo.


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