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FCA and Renault Merger Put On Hold?

Written By, Brad R

Fiat Chrysler Automobiles (FCA) has reversed their choice to merge with Renault, a French automaker that is partially controlled by the government of France. The proposal was valued at $35 billion and would have formed the world's third-largest automaker in the world. Renault directors failed to arrive at a judgment during their May 27th board meeting, according to Renault in a statement. The board commented about how their indecision to come away with an agreement early before FCA decided to step away.  Recapping the course of events, let's start at the beginning of this on and off again relationship between two of the largest automotive companies in the world.

How the Large Merger First Came to Exist

FCA had been looking to find a company large as well as supportive enough to help grow their brands globally. FCA represents successful brands like Jeep, Ram, and Dodge. FCA had considered several large companies as partners before deciding to try their hand with France's Renault. Renault has a strong European presence, which was very attractive to FCA. Before former CEO Sergio Marchionne passed away, he considered taking FCA to new heights with a vision towards growing in the global market and the plan did not change after his untimely passing in 2018. Fiat Chrysler joining together with Renault was seen as more attractive due to the experience Renault has with electrification and hybrid vehicles. Despite the opportunity to add brands like Jeep, Renault's board was not certain about agreeing to terms after their initial meeting.

"(We were) unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later meeting," Renault wrote in a statement.

Tides Change For Renault

Renault remained interested and said so in a later statement. Fiat Chrysler knew that the French government, partner with a 15 percent stake in Renault, had voiced concerns and came out with a statement that showcased their frustration to come to an agreement. FCA was still hoping to persuade with their merger plan being made very evenhanded and fruitful for both companies going forward.

"It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully," FCA said.

France Comes On Board With Deal

As Renault board members gathered in Paris, Renault Chairman Jean-Dominique Senard joined with FCA Chairman John Elkann and representatives of the French government headed by finance minister Bruno Le Maire all agreed to have resolved all of their disputes to make the merger happen. News broke out on the merger being a certainty. The French government strained for enhanced authority over the merged company going forward. Fiat Chrysler's controlling shareholder, however, attempted to maintain the appraisal that had been given to their company and the original, potential cost profits on their behalf. The problem arose with Nissan after their representatives said they wouldn't sign off on the deal. Nissan had reached a partnership with Renault to join forces less than a year ago. The French government diplomats attempted to convince Nissan to approve the deal.

Realization of the Potential Problems

FCA knew their choice of Renault and the pitfalls of seeking such a merger without Nissan's full support would prove to be a rocky situation. As the final vote on the deal was made, the Nissan representatives refused, despite everyone involved with Renault agreeing. The only problem at that point? The French government was not on board and asked for more time to review the $35 billion deal. France’s lead representative on the board, Martin Vial, said finance minister Le Maire had to meet with Nissan in Tokyo before making a final vote. FCA was not going to wait any longer and thus came out with a statement to reflect their disappointment, but still has plans to continue growing globally and advancing their technology in their vehicles.

"(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."

Final Thoughts on the Deal

Renault was close to agreeing on the deal. Le Maire spoke with the representatives in mind and offered this statement after the deal was pulled by FCA. The French state wanted more influence over operations if the deal had gone through. They also aimed to have enhanced terms for Renault shareholders as a result of agreeing to the deal FCA had proposed. Despite the chance to help both companies cut operating costs and grow investments for 5 billion euros or more.

"An agreement had been reached on three of the four conditions. What remained to be obtained was the explicit support of Nissan," Le Maire added in a statement.

The final word ultimately came from FCA as they promised to "continue to deliver on its commitments through the implementation of its independent strategy." Time will tell if this deal will end up coming through at a later date and time.

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The good news for our readers is how this deal won't impact the savings they will find on our FCA vehicles we carry at NowCar. We're happy to offer many brands and unmatched pricing. Customers know they can shop online with us 24/7 and find exactly what they want. Build your next vehicle with us today at NowCar. Reach out to us on social media and let us know what you think about our selection, savings, and your experience!