Skip to main content

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.

Related Videos

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.

Editors' Recommendations

Former Fiat-Chrysler CEO Sergio Marchionne dies at 66
fca boss sergio marchionne steps down due to health problems dies 66

Former Fiat-Chrysler Automobiles (FCA) CEO Sergio Marchionne has died at 66, the company confirmed in a statement. Marchionne resigned from his position on July 21, less than a year before he was scheduled to retire, due to significant complications following shoulder surgery. The automaker's board of management appointed Mike Manley, who previously ran the Jeep and Ram divisions, as Marchionne's replacement during an emergency meeting.

Outspoken and influential, Marchionne had surgery on his right shoulder in early July. His recovery took an unexpected turn for the worse on July 21. Though FCA never released specific information about Marchionne's health, Italian publication Lettera43 wrote he suffered a stroke during an operation to remove a tumor and fell into a coma. Doctors speaking off the record called his condition -- and the brain damage caused by the stroke -- irreversible.

Read more
Not-so-happy holidays for Ram owners as Fiat Chrysler recalls pickup trucks
2017 Ram 2500 Off-Road Package

Getting a new car for the holidays would be something of a dream. Having your existing car roll away, on the other hand, would be a nightmare. Unfortunately, owners of Ram pickup trucks are running the risk of that nightmare now that Fiat Chrysler has announced that 1.8 million of these vehicles can be inadvertently moved out of the park position.

On Friday, the carmaker announced a recall of these pickup trucks, noting that seven people had suffered minor injuries as a result of the alarming malfunction, and further, that a "small number" of crashes may be a result of the problem. Apparently, the hiccup is related to a part called the brake transmission shift interlock, which when functioning properly, disallows a car from moving out of park until the driver steps on the brake pedal. Unfortunately, Fiat Chrysler found that in some situations, heat buildup around the gearshift causes the shift interlock to fail. That means that even if your foot remains on the brake, your truck might move of its own volition.

Read more
The race toward autonomous cars heats up as Fiat joins Intel, Mobileye, and BMW
Pogea Racing Fiat 500 Abarth

Fresh off Intel's completed acquisition of Mobileye, the race toward a self-driving future has accelerated once again. On Wednesday, August 16, Fiat Chrysler announced that it would be joining these two companies and BMW in order to help develop autonomous vehicles. As more and more carmakers recognize the importance of driverless technology as a prerequisite for staying relevant in the digital future, FCA's move certainly seems like the strategic choice.
“In order to advance autonomous driving technology, it is vital to form partnerships among automakers, technology providers, and suppliers,” FCA CEO Sergio Marchionne noted in a news release. “Joining this cooperation will enable FCA to directly benefit from the synergies and economies of scale that are possible when companies come together with a common vision and objective.”
Indeed, FCA doesn't necessarily possess the capital needed to embark upon a self-driving journey on its own, so joining the BMW, Intel, and Mobileye consortium helps. When BMW and Intel created their partnership in 2016 alongside Mobileye, they noted that they were open to having new members join in order to accelerate the development of the technology as well as its implementation.

As James Hodgson, senior analyst at ABI Research, told Digital Trends, "This is a good move for Fiat Chrysler Automobiles (FCA) and much needed to help reduce its severe innovation deficit in autonomous vehicles, with the brand having very little to show to date compared to direct, mass-market competitors such as Ford and GM."

Read more