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FCA/Renault merger talks fall apart

No go: Plans of a merger between FCA and Renault have been scuttled.

Fiat Chrysler pulls out of Renault merger talks due to French ‘political conditions’

Fiat logo7 Jun 2019

FIAT Chrysler Automobiles (FCA) has announced it has withdrawn from merger talks with French manufacturer Renault, citing ‘political conditions’ in France as its reason to abandon the proposal.
 
The two companies announced their intentions to discuss a merger proposal last week, however FCA released a statement yesterday announcing the talks have been called off.
 
“FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties,” the company said in a press release. 
 
“However, it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”
 
FCA did not expand on what ‘political conditions’ mean, however shortly before the release, Renault issued a statement saying it was unable to come to a decision on the merger due to “the request expressed by the representatives of the French State to postpone the vote to a later Council”.
 
This comes despite admitting Renault’s Board of Directors were reviewing FCA’s proposal “with interest”, suggesting the board was seriously considering the proposal.
 
The French government owns a 15 per cent share in Renault Group, and was vocal about its desire to remove former CEO Carlos Ghosn last year in the wake of a financial misconduct scandal.
 
Upon receiving the information of the FCA withdrawal from merger talks, the Renault Board of Directors released another statement expressing their disappointment at the erosion of discussions between the companies.
 
The statement expressed thanks to FCA for their efforts regarding the merger, and Alliance partner Nissan, for its “constructive approach”.
 
A merger would have seen a 50/50 ownership between FCA and Renault, which in turn would make it the world’s third-largest global auto maker with roughly 8.7 million global sales.
 
According to FCA, the merger would have delivered over €5 billion ($A8.08b) of “estimated annual run rate synergies, incremental to existing alliance synergies”, with Renault alliance partners Nissan and Mitsubishi tipped to experience €1b ($A1.6b) of flow-on benefits.
 
The synergies would have come primarily from purchasing savings, R&D efficiencies and manufacturing and tooling efficiencies.
 
It would also result in a streamlining of platforms and powertrains.

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