It won’t have a major impact in Australia but elsewhere in the US, Europe, and especially Japan and China, the fallout from the mooted Fiat Chrysler-Renault tie-up will be dramatic.
If it happens it will create a new third-ranked global manufacturer behind VW and Toyota.
Fiat Chrysler Automobiles (FCA) proposed a full merger with Renault in worth €33 billion that could add new life to Renault’s alliance with Nissan.
The new company could have combined sales of 8.7 million vehicles a year, making it larger than General Motors but smaller than Toyota or Volkswagen.
If Nissan and Mitsubishi link up the group could produce around 15 million vehicles a year.
Last year, Fiat Chrysler sold 4.85 million vehicles worldwide, with most being sold in North America. Renault sold 3.81 million vehicles in 2018, with most being made in Europe.
Shares in Fiat Chrysler and Renault jumped 13% and 11.5% respectively in early trading in Europe last night.
FCA said the deal would generate 5 billion euros in estimated annual savings.
Nissan, which is 43.4%-owned by Renault, would be invited to nominate a director to the 11-member board of the new combined company, under the plan.
But Nissan’s role and that of its affiliate Mitsubishi remains uncertain, especially given the estrangement of Renault and Nissan over the Carlos Goshn affair and the charges in Japan against him.
FCA reckons that one billion euros in savings would accrue to Nissan and Mitsubishi.
The deal also faces political and workforce hurdles in Italy, and potentially also in France. Most of Fiat Chrysler’s European plants are running below 50% capacity.
Fiat said the planned cost savings would not depend on plant closures.
The “broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream,” it added.
If successful, the FCA-Renault tie-up would alter the competitive landscape for rival carmakers from General Motors to Peugeot maker PSA Group, which recently held inconclusive talks with FCA.
The deal has the cautious approval from the French government which wants more details, especially on cost savings and any plant closures. The rightwing-dominated Italian government says it might take a stake in the merged company to offset any French influence.
Analysts say that while there is potential upside for Nissan and Mitsubishi from the deal, opposition from both companies (especially Nissan) and the Japanese government and some key departments.
Nissan though has been weakened by the crisis surrounding the arrest and ouster of former chairman Carlos Ghosn late last year. Its sales and profits are falling and its losing market share in most markets.
The FCA-Renault plan would see the two carmakers merged under a listed Dutch holding company. After payment of a 2.5 billion-euro dividend to current FCA shareholders, each investor group would receive 50% of stock in the new company.
It would be chaired by John Elkann, head of the Agnelli family that controls 29% of FCA. Renault chairman Jean-Dominique Senard would likely become CEO, Reuters reported last night
