FCA Drops Renault Merger Offer Over ‘Political Conditions’ In France

Reuters

Fiat Chrysler Automobiles (FCA) abruptly withdrew an offer to merge with French automaker Renault late on Wednesday, a shocking reversal of a deal that could have reshaped the global auto industry.

The French government, which owns 15% of Renault, held talks with Renault and Fiat Chrysler in recent days, and a government official told The AP the "dynamic is positive" and the merger "makes sense".

But FCA said late Wednesday that the "political conditions in France do not now exist for such a combination to proceed successfully".

Another big player in the merger, Nissan, has remained quiet during most of the deal and has gone as far as appearing distant and indifferent to the merger.

French finance minister Bruno Le Maire said on Thursday the government had engaged constructively, but had not been prepared to back a deal without the endorsement of Renault's current alliance partner Nissan. --Communication of Renault's Board of Directors Boulogne-Billancourt, June 5th, 2019 - Renault S.A.'s Board of Directors met today under the chairmanship of Jean-Dominique Senard, to continue reviewing with interest the proposal received from FCA (Fiat Chrysler Automobiles) for a potential 50/50 merger between Renault S.A. and FCA.

The tie-up would have resulted in the world's largest automaker, with 8.1 million sales a year of everything from tiny European city cars to hulking American pickup trucks.

A Renault employee familiar with the discussions said the board was moving in the direction of a deal Wednesday night, but provided no details.

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The French government, which controls 15 percent of Renault, gave the deal a conditional green light, with analysts suggesting it wanted more control over the combined group alongside Fiat's Agnelli family. The person didn't want to be identified because the Renault board was meeting at the time.

The three conditions all parties agreed to relate to keeping Renault jobs in France, ensuring a fair corporate governance structure, and a commitment to developing electric batteries with Germany.

The company said in its 2018 annual report it continued to cooperate but the investigations' "outcome is uncertain and can not be predicted at this time".

Just two weeks ago, the Italian-American auto company surprised the industry with plans to merge with Renault, which the latter considered.

Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate.

The merger proposal came at a time when Renault had already been facing challenges as part of an alliance with Japan's Nissan.

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