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Fiat-Chrysler suddenly withdraws industry-rattling merger proposal with Renault

Renault Twingo
Ronan Glon/Digital Trends

Fiat-Chrysler Automobiles (FCA) has spent several years looking for a partner to merge with in order to save money on research and development. It looked like its search was finally over, it sent Paris-based Renault a proposal that outlined the terms of a 50/50 merger, but it suddenly withdrew its offer on June 5, 2019.

Renault was still examining FCA’s offer to create the third-largest automaker in the world when the Franco-Italian firm’s executives pulled their offer. “It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA wrote in a statement without elaborating. The French government owns a 15% stake in Renault, and this small but significant slice complicated the ongoing negotiations between the two parties.

French newspaper Le Figaro learned the French government wanted time to convince Nissan, one of Renault’s partner, to approve the merger. The deal didn’t need Nissan’s seal of approval, it has no say in how Renault runs its business, but government officials believed asking for Nissan’s blessing would preserve the 20-year-old alliance between the two automakers. FCA was in a hurry; it wanted to close the deal as quickly as possible. It allegedly left the negotiation table when the government officials asked Renault to delay its vote by five days.

What could have happened?

On paper, the deal would have saved both companies a tremendous amount of money without forcing them to take controversial measures like closing factories. In its statement, FCA explained a merger would have allowed the two automakers to build cars on common underpinnings, to jointly develop technology (notably, but not exclusively, for electric and autonomous vehicles), and to jointly purchase parts and materials from third-party suppliers. For example, Renault could have conceivably replaced its pocket-sized Twingo city car (pictured) with a model built using the same hardware and software found under the next-generation Fiat 500 expected to make its debut in 2020. Odds are the two cars would have looked nothing alike, but they’d have used many common parts under the sheet metal.

The point was to save money, not to create a Renault that looks like a Fiat, drives like a Jeep, and sounds like an Alfa Romeo.

FCA’s portfolio of brands includes Chrysler, Jeep, Dodge, Ram, Maserati, Lancia, Fiat, and Alfa Romeo. Renault — which hasn’t sold a car in the United States since 1987 — also owns a Romanian budget brand named Dacia, and it owns stakes in Nissan, Mitsubishi, and Russia-based Lada. The merger would have had a tremendous impact on all of these automakers, and it could have reshaped the pecking order in the global automotive industry, but car buyers likely wouldn’t have noticed the difference. The brands that would have ended up grouped under the same umbrella would have kept their respective identities. The point was to save money, not to create a Renault that looks like a Fiat, drives like a Jeep, and sounds like an Alfa Romeo.

The two companies complemented each other well; Renault is strong where FCA is weak, and vice versa. Renault notably has a sizable presence in Europe, and it has made big investments in electrification technology. FCA sells most of its cars in North America, and it has decades of experience in building pickup trucks, SUVs, and crossovers. Dacia is positioned lower on the new car market than any of FCA’s divisions, while Alfa Romeo and Maserati compete higher than any of Renault’s brands. Fused together, their portfolios would have covered nearly every segment of the new car and truck market around the world.

In an interesting twist of automotive history, Renault and Jeep have collaborated in the past. In 1979, Renault purchased a controlling stake in American Motors Corporation (AMC), which owned Jeep at the time. AMC manufactured two Renault models named Encore and Alliance, respectively, in its Kenosha, Wisconsin, factory and sold them through its American dealer network. As a trade-off, Renault distributed Jeep’s CJ-7 and Cherokee through its European dealer network, sometimes with its own engines. Renault sold AMC — including Jeep — to Chrysler in 1987.

Updated on June 5, 2019: Added information about FCA withdrawing its offer.

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