Possible merger between Renault and FCA?
This morning Groupe Renault has confirmed receiving a 50/50 merger proposal from Fiat Chrysler Automobile. The board of directors of the group will unite in the morning and issue a statement afterwards.
The American newspapers The Financial Times and The Wall street Journal announced that possible negotiations were held between the two car manufacturing groups. In the beginning of the month, FCA CEO Mike Manley had reiterated his belief that “there were real opportunities for cooperation in the next 3 years”.
A possible intense collaboration or merger between the Alliance Renault/Nissan/Mitsubishi and Fiat Chrysler Automobile would create a total yearly producer of 16 million cars. By far the largest in the world, before Volkswagen Group and Toyota (both at 10,6 million approximately).
Renault (including Dacia, Lada, Samsung and Alpine) sold 3,9 million vehicles last year. Nissan sold 5,65 million around the world and Mitsubishi Motors 1,22. Fiat Chrysler Automobile reunites in total 13 brands and sold 4,8 million vehicles in 2018.
“Without a big partner, FCA can’t survive”, says the renowned German analyst Ferdinand Dudenhöffer. “They have no electrical vehicle, their model portfolio is aged, they are too dependent of the US market.”
Big investments have to be made in the car sector for electrification and the autonomous car. A merger lowers these costs. Furthermore Renault and Fiat both produce popular cars for which they can share many parts.
FCA can also benefit from the serious know-how about electrical cars the Allinace has accumulated during the latest decades.
On the other hand FCA opens a big part of the US market for the Renault Group. At the same time it has access to big SUV and pick-up technology, still very profitable at the moment and not a strong point at Renault.
And the Japanese?
At the moment there is no reaction yet on the announcement of Renault’s Japanese partners Nissan and Mitsubishi. Of course such a move would recalibrate the power ratio between the alliance partners in favour of Renault.
With the Ghosn debacle and the tensions it provoked within the Alliance, Renault tried to tighten the links between themselves and its two Japanese partners. The latter were not so keen on this tightening of bonds, especially because they felt that Renault was(too much) leading the dance.
Now FCA can possibly play the role of moderator. Renault and FCA together can negotiate at the same level with the Japanese.
Ironically, these negotiations between 4 different parties (Renault, Fiat, Nissan and Mitsubishi) Carlos Ghosn had also in its plans.
Of course there are also risks involved. Nissan can find the deal to complicated and hazardous. Renault chairman Senard will soon find out when he goes to Tokyo for board meeting of the Alliance.
Secondly, a merger of this size has to be executed nicely. Remember, for example, the Daimler-Chrysler debacle. That’s why some questions have to be asked and solved quickly. Who is going to take the lead, who owns who, what are the future aims?