PARIS/MILAN – By creating the third largest automaker in the world, Renault would see a substantial increase in revenue while FCA would have the capacity to meet regulatory and technological challenges without “pricing themselves out”. That is what Michigan-based Fiat Chrysler hopes the French automaker will see in its pitch to their board on Monday.
If both boards approve the merger, the $35 billion-plus megabrand the merger would create may put enough pressure on General Motors and Peugeot to counteract. An FCA-Renault merger would also create the third largest automaker in the world, trailing only Volkswagen and Toyota.
FCA faces fewer challenges making the merger happen than Renault.
Renault’s current alliance with Nissan, coupled with the French government’s 15% stake in the automaker, could create issues in making a merger happen, analysts warn. A possible workforce cut and opposition from political parties could further complicate such a merger.
To help streamline the merger with the fewest complications, FCA offered an all-share fusion of equals that would be listed under a Dutch holding company. Current FCA shareholders would receive 2.5 billion euro in dividend payouts, and investors would receive 50 percent of the newly formed company.
Italian PM Matteo Salvini praised the possibility of a merger if Fiat saw growth from it, and jobs were preserved locally.
FCA has seen remarkable growth in its North American market with RAM and Jeep models but realizes much lower profits in Europe due to struggling plants that run at half capacity. New emissions laws may also thwart profitability in the European market, which a merger may solve.
Nissan would be given the opportunity to nominate a director to the 11-member board of the Dutch holding company due to Renault’s 43.4 percent ownership stake. Mitsubishi would also save roughly 1 billion euros annually from the merger, an FCA spokesperson added.
FCA Group has posted a full press release of the potential Renault merger which you can read here.