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Possible merger between Fiat and Renault brewing hot

05/28/2019

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Going by recent happenings in the industry and some privileged information we have at Naijauto, the Italian auto maker FIAT Chrysler are currently courting the French auto giant Renault for a possible merger

1. The possible merger between FIAT Chrysler & Renault, worth $35 billion

There is a major auto industry merger currently brewing hot. Going by recent happenings in the industry and some privileged information we have at Naijauto, the Italian auto maker FIAT Chrysler are courting Renault for a possible $35 billion merger. This arrangement should see both companies own 50 percent of each other and most likely with voting power. Fait believe that this deal will generate about $5.6 billion in savings and do not expect any plants to be closed as a result of the merger or too many production line jobs to be lost.

Fiat-Renault-logos

FIAT Chrysler are currently courting the French auto giant Renault for a possible $35 Billion merger

Fiat as far back as 2004 has been in the market for a partner. Sergio Marchionne the Late former chief of the FIAT Chrysler had never hidden his desire for his company to have a partner. He went about his bid to woo auto manufacturers into a merger, but was unsuccessful after companies like General Motors and Volkswagen rebuffed several attempts. However, FIAT approach to the Renault group seems to be looking good, considering the body language of Renault who have recently endured some poor figures in global sales and this mergers offers a good channel for long term growth and opportunities. Renault recently released a statement where they maintained that they are currently studying the proposal, which is a very positive statement for the FIAT camp.

>>> What about the largest automotive alliance Renault - Nissan - Mitsubishi? The world’s longest and largest automotive alliance

2. The aim of FIAT Chrysler for business after the merger

FIAT Chrysler have just good intentions and strongly believe in the merger. In a statement release by the group, they believe that

"This proposal offers the opportunity to create the #3 global automotive company with broad, complementary and strong brand and geographic presence and important strengths in transforming technologies," FCA said. "It also confirms and enhances the value of the existing alliance and its potential to become even stronger in the future."

As would be expected, the proposed merger if successful will inadvertently result in a much bigger group. It is expected to leap frog most auto manufacturing groups like South Korea’s Hyundai Motors Corporation and climb into the top 3 global auto maker only going behind Toyota and Volkswagen. It should become the biggest in Latin America in terms of sales, as well as be the second largest in Europe, Africa and Middle East.

Fiat-car-plant

The merged company should become the biggest in Latin America in terms of sales

3. Implications of the FIAT Chrysler- Renault Merger

This merger will definitely make some people very uncomfortable and top on that list is the Japanese car manufacturer Nissan.

Nissan has been in partnership with Renault since 1999 in a deal that was brokered by Carlos Ghosn and own about 15 percent of Renault without any voting right while Renault on the other hand own over 43 percent of Nissan. Nissan has most recently showed unease in its relationship with Renault, blocking a proposed consolidation using the joint holding company structure as proposed by Renault early this year.

The expected merger between FIAT Chrysler and Renault will definitely make the management of Nissan very much concerned, as it will likely strengthen Renault who have plans of gaining deeper penetration into Nissans management.

The French government which is a major stakeholder in Renault owning as much as 15 percent of Renault will also be very concerned about the merger.

In fact, the French government has been getting constant briefings on the proposed merger and is known to be in support of any deal that will not diminish Renault’s value power. However, the French government will also consider the implication of the merger on jobs and industry implication on Renault as a French company. The French Governments position was made known by one of its spokesperson Sibeth Ndiaye, who stated this position while speaking to BFM TV: "We have large companies which have been built outside of Europe, and today we need big companies to be built within Europe"

>>> On another development, The Peugeot family indicates that they are open to merger with FCA group

4. Prognosis of the deal

This one looks likely to go through. Considering the not so solid position of Renault in the market, along with the seemingly subtle approval of the merger proposal by Renaults most powerful stakeholder being the French Government and FIAT Chrysler strong desire to pull through a partnership, as well as the Italian Government’s position on the deal which they made open through Matteo Salvini, the Deputy Prime minister who welcomed the deal , see this one making it to deal signing and handshakes.

Fiat Chrysler submits proposal for merger with Renault

However, for this to happen FIAT Chrysler are expected to sell off its Comau Robotic arm, as well as pay a unique dividend of 2.5 billion Euros to its shareholders as part requirement. It is expected that the new mega entity will have its business listed on the floor of the Paris, New York and Milan stock and will have its headquarters in Holland.

>>> Check Naijauto.com daily for latest updates in the auto industry in Nigeria & worldwide!

Henry Egan