Fiat Chrysler contemplates on merger with Renault

The alliance will result in the creation of world’s third largest automaker

Fiat Chrysler and Renault, are considering a merge of vast swaths of their businesses - a move that demonstrates the growing desire among automakers to consolidate in an environment of increased regulatory pressure, sales declines and rising costs aimed at bringing next-generation technologies like self-driving cars to market. 

According to a proposal letter from Fiat Chrysler Automobiles released today, the combined business would be owned 50/50 between shareholders of FCA and Groupe Renault and a board of governors would hold a majority of independent directors. Yet, the merger still needs approval by the boards of both automakers.

If approved, however, the joint organisation would be able to generate estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer. Fiat Chrylser said the combined entity would also generate savings of €5bn annually and be “carried out as a merger transaction under a Dutch parent company.”

The press release from Fiat Chrysler added that there would be no plant closures as a result of the tie-up and the union should provide an opportunity to lead in the development of electric and autonomous vehicles.

The news signals that the French Automaker might be preparing to cut its ties with the Nissan-Renault-Mitsubishi alliance. Renault and Nissan hold stakes in each other, but that alliance has been strained since the arrest of Nissan-Renault CEO Carlos Ghosn late last year. Ghosn has been charged in Japan with committing financial crimes while serving as CEO of Nissan, charges Ghosn and his lawyers vehemently deny.

The announcement also comes at a time when new entrants in the motoring sector such as Tesla, as well as cash-rich companies developing driverless technology such as Amazon and Google-owned Waymo, are putting pressure on older and often heavily indebted carmakers to keep up. 

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