By Giulio Piovaccari and Laurence Frost
MILAN / PARIS (Reuters) – Fiat Chrysler and Renault ] (PA 🙂 is negotiating a comprehensive global context that can address some of the major weaknesses of both car manufacturers, two sources of knowledge of the discussions with Reuters on Saturday.
The talks are at an advanced stage, the sources said. The Financial Times https://on.ft.com/2HRDghE previously reported that FCA and Renault discussed an agreement to pursue "extensive ties" to tackle the structural challenges facing the global automotive industry.
An FCA spokesman refused to comment on the report. Renault spokesman Frederic Texier said the French car manufacturer had no comment.
The pressure for consolidation among automakers has grown with the challenges of electrification, tightening of emission regulations and investment-intensive technologies for connected and autonomous vehicles.
FCA and Renault have a combined market value approaching 33 billion euros ($ 37 billion) and total global sales of 8.7 million cars. In addition to getting larger scale, a connection can help patch errors on both sides.
The FCA has a very profitable North American RAM truck business and Jeep brand, but has lost money in Europe, where it can also be difficult to keep up with threatening carbon dioxide emissions.
Renault, on the other hand, is a pioneer with electric cars, with relatively fuel-efficient engine technologies and strong presence in emerging markets, but no US business.
Any relationship will probably face political and labor force barriers, especially in Italy. Most of FCA's European factories run below 50 percent capacity.
It was unclear whether the FCA-Renault deal negotiations would conclude with success, the sources said.
The plan under consideration may involve a transfer of equity, a source said. "This is not just another partnership ̵
Both car manufacturers have also investigated the relationship with other partners.
While the FCA has recently revived discussions with the PSA group – which has been recurring over the years – Renault is seeking a merger with Nissan, its partner in a troubled 20-year-old alliance. [nL5N22Q90O]
A connection between FCA and Renault would not rule out a consolidation of the alliance with Nissan, one of the sources said.
The Renault-Nissan Partnership, backed by cross-linked stocks, has been strained by the scandal surrounding former chairman Carlos Ghosn, who was released in the wake of an internal investigation by Nissan.
A context that included Nissan would vault the ensemble to the rank of worldwide No.1 carmaker with 13.8 million annual sales. It will also maintain a foothold in China, where both FCA and Renault are marginal players.
Discussions follow the weakening of US automated demand which has led to a decline in several automakers. FCA reported a 29 percent decline in operating profit in the first quarter as sales and margins weakened in its North American earnings center. Sales fell 5 percent to EUR 24.48 billion. [nL5N22F3AD]
($ 1 = 0.8927 euro)
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