Economy

France wants FCA-Renault job guarantees, Nissan on board

France wants FCA-Renault job guarantees, Nissan on board

The transaction would be structured as a 50-50 ownership through a Dutch holding company, Fiat said Monday.

The combination of Renault and the FCA Group would produce a vehicle manufacturing giant which now produces 8.7 million vehicles a year that would immediately be installed as the world's third largest carmaker behind the Volkswagen Group and Toyota.

Seeking to soothe concerns, FCA said the deal plans "are not predicated on plant closures but would be achieved through more capital-efficient investment".

Renault is already a member of the world's biggest automotive alliance with Japanese automakers Nissan and Mitsubishi Motors, known as the Renault Nissan Alliance.

The merger would mean the creation of the world's third-largest automaker by sales, displacing Daimler from its current position behind Toyota and Volkswagen with an estimated 8.7 million deliveries.

Renault's board will hold informal work sessions within days and likely decide next week whether to enter an agreement with FCA to proceed with merger talks, two sources said.

For his part, Reuters notes that the pressure for consolidation among carmakers is rising in view of the challenges of electrification, the tightening of emission regulations and expensive new technologies developed for standard and stand-alone vehicles. Renault, with alliance partners Nissan and Mitsubishi, also reached this level.

FCA projected that approximately 90 per cent of what could ultimately be more than 5 billion euros in annual synergies would come from purchasing savings, as well as research, development, manufacturing and tooling efficiencies.

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Investors welcomed the proposal, pushing shares in Fiat Chrysler up 10% and Renault 14% in European trading.

The arrest and ouster of then-Chairman Carlos Ghosn in Tokyo last November put the alliance with Renault and smaller Mitsubishi Motors on rocky ground. A "yes" would open the way for a non-binding memorandum of understanding to open exclusive merger negotiations with Fiat Chrysler.

"Carmakers have invested 25 billion euros (R404bn) on electrifying their fleets over the past eight years, and it's going to be 10 times that amount, 250 billion euros, over the next eight years", said Laurent Petizon, an analyst at Alix Partners.

Those discussions between the two companies showed that collaboration would be a good use of resources as they look to develop and then commercialize new technologies, Fiat Chrysler said, adding that arguments for the merger were strengthened by "the need to take bold decisions" in an industry under great transformation, specifically in terms of autonomous driving, among others.

Le Maire said he had spoken to the Japanese personally about the proposed tie-up.

Fiat and Renault would have a "broad and complementary brand portfolio" covering markets from luxury to mainstream, the Italian company said in its statement.

Mr Dudenhoeffer said Renault's sales represented just 36 per cent of 2018 alliance sales, and the Japanese did not want to see the French auto maker drive a merger with those numbers.

Fiat has history with French President Emmanuel Macron, whose support would be needed along with Italian officials for a deal that could involve major job cuts in France and Italy.