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FCA confirms merger talks with Renault

Togetherness: FCA believes joining forces with Renault would position the new entity as a world leader in the rapidly changing auto industry, including with electric and autonomous vehicles.

Proposed merger deal between FCA, Renault to create world’s third-biggest auto-maker

27 May 2019

FIAT Chrysler Automobiles (FCA) has this week confirmed merger talks with Groupe Renault, with a 50/50 joint ownership proposal developed by the American-Italian auto-maker now on the table at the French motor giant for consideration.


FCA and Renault have moved ahead with the proposal – delivered in the form of a non-binding letter from FCA to the Group Renault board – without Renault’s alliance partners Nissan and Mitsubishi, although the Japanese partners are integral to the plan.


In a statement, FCA said the combined business would be 50 per cent owned by shareholders of both FCA and Renault, creating the third-largest global auto-maker with 8.7 million annual vehicle sales “and a strong market presence in key regions and vehicle segments”.


“The FCA proposal follows initial operational discussions between the two companies to identify products and geographies where they could collaborate, particularly as they develop and commercialise new technologies,” FCA said.


“These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development.


“The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving.”


FCA said no plant closures would be made as a result of the merger, but cost reductions achieved “through more capital efficient investment in common global vehicle platforms, architectures, powertrains and technologies”.


The new entity would, according to FCA, deliver more than €5 billion ($A8b) of “estimated annual run rate synergies, incremental to existing alliance synergies”, with the flow-on benefits to Nissan and Mitsubishi estimated at €1 billion ($A1.6b) a year.


Rather than shut factories, FCA said it expects 90 per cent of the “synergies” to come from a mix of purchasing savings (40%), R&D efficiencies (30%) and manufacturing and tooling efficiencies (20%).


Included in this would be reducing the number of vehicle platforms by about 20 per cent and engine families by around 30 per cent.


“The combined business would sell approximately 8.7 million vehicles annually, would be a world leader in EV technologies, premium brands, SUVs, pick-up trucks and light-commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis,” FCA said.


“Combining the businesses will bring together complementary strengths. The combination would create a brand portfolio that would provide full market coverage with a presence in all key segments from luxury/premium brands, such as Maserati and Alfa Romeo, to the strong access brands of Dacia and Lada, and would include the well-known Fiat, Renault, Jeep and Ram brands as well as commercial vehicles.


“Groupe Renault has a strong presence across Europe, Russia, Africa and Middle East, while FCA is uniquely positioned in the high-margin segments in North America and is a market leader in Latin America.


“FCA’s evolving capability in autonomous driving, which includes partnerships with Waymo, BMW and Aptiv, is complemented by Groupe Renault’s decade of experience in EV technology where it is the highest selling EV OEM in Europe. Groupe Renault also has a well-established and profitable financing business (RCI Banque).”


FCA also added that it recognised “the standing and achievements” of Renault’s alliance partners.


“The FCA and Groupe Renault combination together with its Nissan and Mitsubishi partners would be the largest global OEM alliance, selling more than 15 million vehicles annually,” FCA said.


“FCA has a history of successfully combining OEMs with disparate cultures to create strong leadership teams and organisations dedicated to a single purpose.


“Therefore, FCA’s board strongly believes that this combination, which would have the scale, expertise and resources to navigate the rapidly changing automotive industry, would create new opportunities for employees of both companies and for other key stakeholders.”

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