Fiat Chrysler Made A Merger Offer To Renault

If the merge happens it could create the world’s third biggest carmaker, but it seems that there are potential obstacles that could prevent it

Recently, a merge offer was received by Renault SA from Fiat Chrysler Automobiles NV (FCA), the plan was discussed this week at a meeting of the French group’s board early on Monday, and sent shares in both companies sharply higher. If the deal goes through, it would create a carmaker selling 8.7 million vehicles annually with a strong presence across key regions, automotive markets and technologies, according to FCA.

Moreover, if the merge happens it will alter the competitive landscape for rival carmakers from General Motors to Peugeot maker PSA Group, as well as have profound repercussions for Renault’s 20-year-old alliance with Nissan, already weakened by the crisis surrounding the arrest and ouster of former chairman Carlos Ghosn late last year.

Fiat’s proposed €33bn merger with Renault could meet some bumps on the road, since Renault does not want the transaction to look like an Italian takeover. The politics are too sensitive, so any deal between these national icons must be seen to divide the spoils equally. First of all, there is the issue of jobs, after a merger there is a need to slash costs which will most likely lead to people losing their jobs, something that France does not agree to. However, Italy’s reaction has been warm so far, FCA vowing to avoid plant closures, a move intended to allay political concerns.

Another aspect still unclear is if Renault would still have a seat on the board. The newly created merged company would be chaired by John Elkann, head of the Agnelli family that controls 29 percent of FCA, while Renault chairman Jean-Dominique Senard is rumored to become CEO. While Mike Manley, chief executive of FCA, is expected to be named chief operating officer.

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