Renault, Fiat Chrysler in tie-up talks

Renault, Fiat Chrysler in tie-up talks

Fiat Chrysler proposed to merge with Renault SA in a deal that would create the world's third-biggest carmaker.

Roughly half a million of those vehicles are produced in Canada at Fiat Chrysler's Windsor and Brampton plants, which employ about 9,700 people, while Canadian sales amounted to 225,000 vehicles or about 11.3 per cent of the domestic market past year.

FCA said there will be no plant closures as a result of the consolidation. Notably, the proposal also envisages association with Renault's alliance partners Nissan and Mitsubishi.

The Renault-Nissan-Mitsubishi combine now makes around 10.8 million automobiles, compared with Germany's Volkswagen and Japan's Toyota, both on around 10.6 million.

Both automakers would have equal representation on the board of directors of the merged entity and half the shares would be split among FCA's current shareholders and the other half among the shareholders of Renault.

Fiat Chrysler estimated that Nissan and Mitsubishi would make 1 billion euros in savings a year from the deal.

Both companies stand to gain tremendously from such a deal, with Renault accessing the North American market, while FCA would gain entry in the Russian market - a space now occupied by Renault with major sales. The move would create the world's third-biggest automaker and save billions of dollars needed to invest in the race to make new electric and autonomous vehicles.

A source close to the French government, which holds 15 percent of Renault, said the authorities have noted the reports but will be "vigilant on jobs, the impact on industry as a whole and the national interest". The company had considered options for the unit late past year, including a potential sale at a value of €1.5bn to €2bn, people familiar with the matter said at the time.

The Alliance between all three automakers was rocked a year ago with the arrest of former chairman and CEO Carlos Ghosn, who forged the deal to help save Nissan in the 1990s.

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Renault's board is holding a special meeting at its headquarters in the Paris suburb of Boulogne-Billancourt on Monday morning about the merger idea.

A Renault merger with Fiat Chrysler, however, could strengthen both companies' positions and put pressure on smaller companies like Ford in Europe.

The proposal indicated that Renault's existing alliance with Japan's Nissan and Mitsubishi could continue and that the companies would benefit financially from the deal through extra savings.

"FCA fits as well with Renault as it does with PSA", Jefferies analyst Philippe Houchois said in a note.

Prior to his November arrest in Japan, Ghosn had revived discussions about a deal to bring FCA into a reinforced Renault-Nissan alliance, sources have told Reuters.

The French government, which owns 15% of Renault, is cautious about the new merger idea.

Early areas for potential convergence include Renault's next electric auto platform being launched at its Douai site in France, the source said, adding all of Renault's board members backed the decision to study FCA's proposal with the exception of the leftist CGT union, which abstained. "We need giants to be built in Europe".

As part of the proposed deal, Fiat said it plans to spin off its robotics arm Comau through a distribution of shares.

Behind the scenes at the Yokohama-based firm, people believe it could further damage relations with Renault, which is already pushing for a formal merger between the pair against Nissan's wishes.

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