General Motors’ crosstown rivals Fiat Chrysler Automobiles may be in for a shakeup in the coming months after the automaker formally proposed a merger with French automaker Renault SA Monday.
Under the proposed agreement, FCA and Renault would each own 50 percent of the new business, which would be operated under a Dutch holding company. Renault is also in an existing strategic partnership with Nissan and Mitsubishi, which would also be included in the agreement.
The $37 billion merger would create the world’s third largest automotive alliance (behind Volkswagen and Toyota and surpassing GM), with combined sales of 8.7 million vehicles a year and combined annual revenue of €170 billion (about $190 billion USD).
In a press release, FCA said: “the proposed combination would create a global automaker, preeminent in terms of revenue, volumes, profitability, and technology, benefitting the companies’ respective shareholders and stakeholders.”
“The combined business would sell approximately 8.7 million vehicles annually, would be a world leader in EV technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis,” it added.
FCA also said the benefits of the Renault merger would not be “predicated on plant closures,” but rather on making more logical capital investments in shared global vehicle platforms, architectures, powertrains, and technologies.
This move is very much in line with late FCA CEO Sergio Marchionne’s 2015 prediction that automakers would have to consolidate to survive as research, development and production costs climb. Marchionne subsequently pushed for a merger for FCA, trying hard to shack his company up with General Motors and then Volkswagen.
A recent Forbes article pointed out that GM’s recent restructuring efforts, along with Ford’s, may be evidence that Marchionne was right. The eccentric Italian reasoned that today’s automakers were wasting billions developing different versions of things to performed the same task (ie. engines, transmissions, platforms etc.) and said such business practices were unsustainable.