Fiat Chrysler has decided against pursuing a merger with Groupe Renault. The General Motors rival initially proposed the hookup earlier last month, but now, the merger proposal is officially dead.
“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,” reads a press release from FCA. “However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”
The FCA merger proposal originally outlined a joint 50/50 ownership of the new business between FCA and Renault, operating under a Dutch holding company with Renault’s strategic partners, Mitsubishi and Nissan, roped in as well.
However, according to the Wall Street Journal, Nissan was not wholly supportive of the idea. Without Nissan’s support, the French government pulled back on the merger and proposed a postponement on final voting until Nissan had made a firm decision. In response, FCA pulled out of the deal outright.
The proposed $37 billion FCA merger was estimated to rake in 8.7 million units in annual sales, essentially creating the world’s third-largest automotive group behind Volkswagen and Toyota, surpassing GM in the process. Estimated combined annual revenue was pegged at $190 billion.
Late ex-FCA CEO Sergio Marchionne in 2017
The late FCA CEO Sergio Marchionne predicted in 2015 that consolidation was inevitable in the face of rising development and production costs. Previous FCA merger proposals included hookups with both General Motors and Volkswagen. In 2015, Marchionne rebuked a report from Standard & Poor’s that outlined “significant integration and execution risks” in his proposed merger with GM, and continued to push the idea despite seeing a “15-percent loss of synergies” after GM sold Opel. GM CEO Mary Barra flatly dismissed the idea of a merger with FCA on numerous occasions.
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Comments
This deal could have been a big mess. None of the partners are very strong and if the merger did not cut cost as hoped it could create a more critical money problem.
I give FCA flack but I’m a little glad it didn’t happen.
FCA just saved itself.
This is becoming a bit of a soap opera. The French government’s demands blew a chance for Renault to get the an unusually beneficial deal.
Chrysler would have been the biggest contributor and biggest loser because any reductions would not happen in Europe.
Nissan continues to dig a hole for itself. It is unlikely to attract another partner with deep pockets to buy out their investment held by Renault, except possibly from a Chinese investor. Continuing to frustrate their alliance without a viable exit strategy is simply stupid.