FIAT Chrysler has abandoned its offer to merge with Renault, blaming French politics for scuttling what would have been a landmark deal to create the world’s third largest car company.
A source close to the French board told Reuters Fiat Chrysler made the move after France sought to delay a decision on the deal in order to win the support of Renault’s Japanese alliance partner Nissan.
French government officials had pushed for Nissan to support the merger, but the Japanese carmaker decided to abstain.
The French government, which owns a 15 per cent stake in Renault, had also pushed Fiat Chrysler for guarantees that France would not lose jobs, and for a dividend to be paid to Renault shareholders, including the government, people familiar with the talks said. Fiat Chrysler’s original proposal offered no special dividend to Renault shareholders.
“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” Fiat Chrysler said in a statement issued early Thursday from London.
Renault, in a separate statement, said its board was “unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later meeting.”
The collapse of merger talks leaves the two companies facing an array of issues, starting with the dismay of investors who bid up shares in both companies after Fiat Chrysler proposed a merger of equals just over a week ago. Shares of Nissan and Renault alliance partner Mitsubishi fell in early trading in Tokyo on Thursday.
The two companies told investors that a merger would cut operating costs and investments by 5 billion euros or more a year.
Fiat Chrysler stood to gain access to Renault’s superior electric drive technology enabling it to meet mandates for zero-emission cars.
Renault would have had a share of the Italian-American company’s lucrative Jeep SUV and RAM pickup truck franchises.
It is not clear what the two companies will do next to tackle the costs of far-reaching technological and regulatory changes.
Fiat Chrysler had held inconclusive talks with France’s PSA Group, which also has the French government as a shareholder.
The sudden end to the merger talks came after midnight in Paris, after Fiat Chrysler and French government officials had reached a tentative agreement that cleared the way for Renault’s board to consider moving forward, people familiar with the situation said.
The failure of the proposal to combine Fiat Chrysler and Renault is the latest blow to the French carmaker, already reeling from the fall of its longtime CEO Carlos Ghosn, who is awaiting trial in Japan on charges of financial misconduct as chairman of Nissan.
Ghosn has denied the charges and said he is the victim of treachery by Nissan underlings who opposed his plans to merge Nissan and Renault.
Fiat Chrysler’s decision to walk away is also a defeat for Senard, former head of tyre maker Michelin.
He invested heavily in the proposal to merge with Fiat Chrysler, and travelled to Japan last week to make the case personally to executives of Nissan and third alliance partner Mitsubishi that a merged Renault-Fiat Chrysler could work closely with them as well.
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