FCA Proposes 50/50 Merger With Renault

Fiat Chrysler Automobiles (FCA) to merge with Renault Group? Maybe. What will then happen with the Renault-Nissan-Mitsubishi Alliance?

Fiat Chrysler Automobiles (FCA) today officially announced a 50/50 merger proposal to Renault Group, which could result in the creation of world’s 3rd largest car manufacturer (some 8.7 million cars per year). The French company confirmed receiving a non-binding letter and is currently analyzing it.

According to FCA, the merger would enable increased efficiency and save costs on synergies with Renault and the broader with Renault-Nissan-Mitsubishi Alliance, which already is the biggest automotive group by the number of cars sold per year. Will we see a FCA-Renault-Nissan-Mitsubishi Alliance?

Proposition in short:

  • Combined business to be 50% owned by FCA shareholders and 50% by Groupe Renault shareholders – balanced governance structure and majority of Board of Directors being independent
  • Combination would create the 3rd largest global OEM with 8.7m vehicle sales and a strong market presence in key regions and vehicle segments
  • Broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream
  • Combined company would be a world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving
  • No plant closures as a result of the combination
  • In excess of €5 billion estimated annual run rate synergies incremental to
  • existing Renault-Nissan-Mitsubishi Alliance (Alliance) synergies
  • Strong combined balance sheet allowing for flexible capital allocation and robust dividend policy
  • Significant benefits to the other Alliance partners including ~€1 billion of additional estimated run rate synergies

More from FCA

FCA says that there is no intention to close production plants after the merger, but we assume that the business will require deep restructuration. Currently, FCA’s profits come mostly from North American RAM and Jeep brands, while Fiat and its several brands seem to be struggling in Europe.

FCA-Renault for sure would be a very strong player thanks to coverage of almost all markets globally and broad offer in all segments. Renault’s EV experience could be a major gain for FCA.

“Fiat Chrysler has highly profitable businesses in North America, with its RAM trucks and Jeep brand, but has been losing money in Europe where it may also struggle to keep pace with looming carbon dioxide emissions curbs.

“The centre of gravity for the world’s seventh-largest carmaker has now shifted across the Atlantic. Fiat Chrysler’s North American operations, which include the Jeep SUV brand and the Ram truck, accounted for 85 percent of profits last year.”

The deal with FCA could be an interesting offer for Renault, especially because of the situation with Nissan, which seems to not be interested in merger/deeper relations.

It’s no secret that the only way for carmakers is to grow fast or consolidate to ultimately just several huge global manufacturing groups, probably with 10-20 million annual sales each. The smaller players will not be able to keep up with technological and emission changes as R&D costs will be too high per car sold to stay competitive.

Source: FCA, Renault, Reuters

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