Groupe Renault has decided to "study with interest" a proposed merger with Fiat Chrysler Automobiles (FCA), a move that is said by the latter to "increase resources necessary" to grow footprint in the APAC region for both companies. On Groupe Renault's website, the company said that such a business combination complements its manufacturing footprint and creates additional value for its Renault-Nissan-Mitsubishi Alliance.
The proposal by Fiat Chrysler Automobiles suggested a 50-50 ownership by the companies' respective shareholders for a balanced governance structure. The FCA proposal follows initial operational discussions between the two companies to identify products and geographies where they could collaborate, particularly as they develop and commercialise new technologies.
The discussions "made clear" that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development, said the document. Additionally, the merger is driven by the need to take bold decisions "to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving".
The combination will create the third largest global original equipment manufacturer with 8.7 million vehicle sales and a strong market presence in key regions and vehicle segments. If the deal goes through, the combined entity is expected to provide full market coverage, from luxury to mainstream. It will carry premium brands, such as Maserati and Alfa Romeo, accessible brands such as Dacia and Lada, and well-known Fiat, Renault, Jeep and Ram brands as well as commercial vehicles.
While the proposal focuses on a combination of FCA and Groupe Renault, FCA said it also sees significant expected benefits to all parties, including Groupe Renault's partners Nissan and Mitsubishi. . "The additional synergies stemming from the merger of FCA and Groupe Renault that are expected to accrue to Nissan and Mitsubishi purely as members of the Alliance are estimated to be worth an incremental €1 billion annually," said the proposal.
FCA added that the combination would create a global automaker "preeminent" in terms of revenue, volumes, profitability and technology. Based on FCA and Groupe Renault’s 2018 global sales, the combined company’s annual revenues would be nearly €170 billion with operating profit of more than €10 billion and net profit of more than €8 billion. This places the merged entity in the fourth place in North America, second place in EMEA and top place in Latin America.
A further communication will be issued in due course to inform the results of merger discussions, in accordance with applicable laws and regulations, said Groupe Renault in a press statement on its website.
Last November, Nissan's director and chairman Garlos Ghosn was arrested for under-reporting his income by five billion yen over five years and used company assets for personal purposes.
Meanwhile, Renault-Nissan-Mitsubishi partnered Google in September to embed the Android operating system in vehicles sold by the automotive Alliance. Scheduled to start in 2021, this will provide intelligent infotainment and customer focused-applications across multiple models and brands. Under the technology partnership, vehicles sold by the Alliance members in many markets will provide turn-by-turn navigation with Google Maps.