As per the sources today, Fiat Chrysler Automobiles proposes a merger with Renault and this deal would be observed closely for its bang on one of the world’s largest auto-making alliances. It is expected by the sources that Renault will hold a board meeting today. Fiat Chrysler Automobiles has submitted at fifty-fifty merger proposal to the Board of Renault. It is also expected that the new company that will be formed in the merger would have a single management structure which is yet to be discussed.
This merger between two automakers having their roots in Europe will offer the greater scale which is required to boost profit margins as well as invest in the expansion of self-driving and electric cars. The main objective is not for Renault to acquire FCA, however, to form a partnership, as supposed by the source.
Last year FCA, the maker of Maserati, Alfa Romeo cars and Jeep sold about 4.89 million vehicles worldwide. After adding to Renault’s volume, it makes up the total of approximately 8.72 million autos and surpassing General Motors of the US, which ranked 4rth prior year in global sales. On Wednesday last week, the proposal came as Renault readies for a meeting of the operating board for its alliance with Nissan Motor as well as Mitsubishi Motors in the Japanese city of Yokohama.
This tie-up would be expected to change the French automaker’s present alliance structure with Nissan and Mitsubishi. However, the representatives of both Renault, as well as Nissan, denied commenting. As per Nissan executive, the Japanese automaker had not heard anything in terms of negotiation amid Renault and FCA.
In case FCA will be interested in Renault- Nissan- Mitsubishi association, then the total yearly sale would top about 15 million vehicle s. They would easily surpass from Germany’s Volkswagen group which ranked at number one position preceding year with 10.83 million units. This Renault- Nissan- Mitsubishi alliance lacks behind in terms of luxury cars; on the other hand, FCA holds many high-end brands that includes Maserati and Alfa Romeo.
When taken into consideration FCA earnings totally depends upon its sales in North America and after the merger with Renault which acquires most of its earnings from European market will open up each other’s weaknesses. The benefits to FCA after building a closer relationship with Nissan and Mitsubishi will help them to make further inroads into Asian markets where they have limited presence at present.
This merger will also for sure benefit both carmakers in relation to investment as well as production in new areas counting artificial intelligence and electric vehicles. The expansion of autonomous, connected, shared as well as electric cars which are recognized as the main keys to the industry’s future is awfully capitals intensive. And automakers are connecting and pairing up with many businesses to get rid of overlapping investments.
For example, FCA merged with Alphabet unit Waymo and is in talks related to the production of cars carrying Waymo’s self-driving system. FCA is also working with BMW as well as Intel in terms of technology. But sadly FCA stands behind the industry leaders regarding electric vehicles and connected cars. This merger with Renault can prove to be a boost in these areas.
FCA’s CEO, Michael Manley, open up on 3rd May in an earnings briefing call with a possible merger with other automakers too, he said ‘we are expecting many options in a couple of years, and FCA will for sure take an aggressive move.’
This FCA- Renault merger will also affect discussions amid Nissan and The French Company. However, Renault proposed talks with Nissan regarding a merger in April only and is also expected to put more pressure on the Japanese automaker to evaluate their capital links following Nissan’s general shareholders in June.