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FCA withdraws Group Renault merger proposal

From:Greg Kable 2019-06-06 16:43:50

Fiat Chysler Automobiles (FCA) has withdrawn its proposal for a $US37 billion merger with Group Renault, overturning plans to create the world’s third-largest auto maker.

In a statement issued to the media following six hours of talks between the two auto makers, FCA said it “remains firmly convinced of the transformational rationale of the 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”.

But it said it had “become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

FCA’s decision to pull out of the merger talks came as members of the Group Renault board refused to pursue a decision on a stock swap proposal.

The French government, which holds a 15 per cent stake in Group Renault, requested a delay in merger negotiations, forcing FCA to controversially cut off the talks.

Group Renault said it “was unable to take a decision [on the merger proposal] due to the request expressed by representatives of the French state to postpone the vote to a late council”.

The proposed merger called for FCA, which also controls the Alfa Romeo, Maserati, Jeep and Dodge brands, and Group Renault to each command a 50 per cent stake in a newly formed company, which would have boasted combined sales of up to 8.7 million vehicles per year – third largest on overall volume behind Volkswagen and Toyota.

According to French media reports, the only Group Renault board members who did not vote for the deal were the French state and a Group Renault union representative. Representatives of the Nissan brand, which is owned by Group Renault, also abstained from the vote.

The collapse of the merger talks leaves FCA and Group Renault facing an investor revolt.

The two auto makers had told investors a merger would reduce costs by up to $US5.6 billion or more per year. As part of the proposed deal, FCA stood to gain access to Group Renault’s electric vehicle technology, while Group Renault would have benefited from access to FCA’s SUV know-how through its Jeep and Dodge brands in North America.

It is unclear what the two auto makers will do next. FCA has confirmed it held inconclusive talks with Group Renault rival the PSA Group, parent company to Peugeot, Citroen and Opel. However, like Group Renault, it also has a French government shareholding.

Editor:Greg Kable