Fiat Chrysler proposes merger with Renault, would be the third largest automaker

On Monday, Fiat Chrysler proposed to merge with France's Renault to create the world's third largest automaker and combine its investment in the race to create new electric and autonomous vehicles.

The merged company would reshape the global industry: it would make about 8.7 million cars a year, leapfrogging General Motors and subsequently just Volkswagen and Toyota.

Shares in both companies skipped 10% on the news of the offer, which would see that each side's shareholders split ownership in the new manufacturer. 19659004] Renault welcomed the idea. The company's board met on Monday at its headquarters outside Paris to discuss the proposal and afterwards said that Renault will study it "with interest". In a statement, Renault said such a merger could "improve Renault's industrial footprint and be an added value generator for the Alliance" with Japan's Nissan and Mitsubishi.

Fiat Chrysler offers a key figure for Renault. The French manufacturer had eventually wanted to merge with Nissan, but these plans were spearheaded by the arrest of chief Carlos Ghosn on Japan's financial default charges.

The questions now grow over the Renault-Nissan-Mitsubishi Alliance, which is the world's largest producer of passenger cars. While Fiat Chrysler says the merger with Renault would accept the alliance and bring about savings for them, it is unclear how the Japanese companies can react in the longer term to be associated with a much larger partner.

An agreement would save $ 5 billion ($ 5.6 billion) for the merged companies each year by sharing research, purchasing costs, and other activities, said Fiat Chrysler in a statement. It is said that the agreement would not involve any closure of the facility, but it did not apply to possible work reductions.

The companies are largely complementary: Fiat Chrysler is stronger in the US and SUV markets, while Renault is stronger in Europe and on the development of electric vehicles. Together they would be worth almost $ 40 billion.

Analysts at the finance company Jefferies said it was "difficult to disagree with the logic" of the deal as there is a strong fit in the markets each company covers and the brands they offer.

"The elephant in the room is who will drive the unit," analysts Philippe Houchois and Himanshu Agarwal wrote in a note to investors.

Merger of peers can be difficult to handle over issues of who gets top management positions and which brands are promoted and invested in most. A connection between Daimler and Chrysler in the 1990s was billed as a merger of equals, but it collapsed nine years later among cultural differences and recruitments.

However, investors were enthusiastic and pushed shares in Fiat Chrysler by 11% and Renault 14% in European trade.

The French government, which owns 15% of Renault, said it is "favorable" to the idea of ​​a merger with Fiat Chrysler, but wants to study the conditions more closely, especially with regard to "Renault's industrial development" and its employees. working conditions, Prime Minister Sibeth Ndiaye said.

Such a merger would show "our ability to respond to challenges in European and French sovereignty in a globalized context," she said. "We need the giants to be built in Europe."

Co-operation between automakers has become more important in recent years as they seek to build their technological capabilities in the search for electric vehicles, network connectivity and artificial intelligence for vehicles. Car manufacturers are also under pressure from regulators, especially in Europe and China, to come up with electric vehicles, so they can face tougher climate change and after scandals over the amount of polluting engines really emit.

The merger idea is the biggest corporate move so far by Fiat Chrysler CEO Mike Manley, who took his position after the charismatic leader Sergio Marchionne's unexpected death last year.

What happens to jobs is likely to be a source of concern.

France's influential CGT union warned against cuts should go through an agreement and said it wants the French government to retain a blocking stake in any new company.

Matteo Salvini, head of Italy's rightwing populist party and deputy, said that "if Fiat is growing, it's good news for Italy and the Italians," even though he warned that an agreement would protect "every job."

In Tokyo, Nissan's CEO Hiroto Saikawa did not want to comment on the idea of ​​t He is acting, but said, "I am always open to exchanging constructive views on strengthening the alliance."

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