Fiat Chrysler has proposed a merger with France’s Renault that would create the world’s third-largest carmaker and save billions needed to invest in the race to make electric and autonomous vehicles.
The merged company would produce 8.7m vehicles annually and save €5bn ($5.6bn or £4.4bn) each year by sharing research, purchasing and other activities, according to a statement released by Fiat Chrysler Automobiles (FCA). It said the deal would involve no plant closures but did not address potential job cuts.
The joint company would be 50% owned by Fiat Chrysler shareholders and 50% by Renault shareholders.
Renault’s board is holding a special meeting at its headquarters in the Paris suburb of Boulogne-Billancourt on Monday morning about the merger. The company would not comment on the proposal until after the meeting.
Shares of both carmakers jumped on reports of a merger, which comes on the back of global pressure for consolidation in the market amid the switch to electric vehicles.
The two are somewhat complementary: the Italian-American company Fiat Chrysler is stronger in the US and SUV markets, while Renault is stronger in Europe and on electric vehicle developments.
The proposal indicated that Renault’s existing alliance with Japan’s Nissan and Mitsubishi could continue and that the companies would benefit financially from the deal through extra savings.
The Renault-Nissan-Mitsubishi alliance has been troubled since the November arrest of its former boss and biggest champion Carlos Ghosn on financial misconduct charges in Japan. Together, the three companies are the biggest maker of passenger cars in the world.
The French government, which owns 15% of Renault, is “favourable” to the idea of a merger with Fiat Chrysler but wants to study its conditions more carefully, especially in terms of “Renault’s industrial development” and employees’ working conditions, the government’s spokeswoman Sibeth Ndiaye said on Monday.
Such a merger would show “our capacity to respond to European and French sovereignty challenges in a globalised context”, she said. “We need giants to be built in Europe.”
A separate government official told the Associated Press that France would prefer a tie-up within the existing Renault-Nissan-Mitsubishi alliance. She said the companies have been discussing a merger for weeks but the French government was only informed last week.
Investors welcomed the idea of a merger, pushing shares in Fiat Chrysler and Renault up 12% in morning trading.
Nissan’s chief executive, Hiroto Saikawa, would not comment directly on the idea of a Renault-FCA merger but said: “I am always open to exchanging constructive views on strengthening the alliance.”
Fiat Chrysler estimated that Nissan and Mitsubishi would make €1bn in savings a year from the deal, although it was not clear how the Japanese companies would respond to being in an alliance with a much larger partner.
Collaboration between automakers has taken on importance in recent years as they seek to build their technological capabilities in pursuit of electrical vehicles, internet connectivity and artificial intelligence for vehicles. Carmakers are also under pressure from regulators, particularly in Europe and China, to come up with electric vehicles so they could meet tougher pollution limits.
During an earnings conference call earlier this month, the Fiat Chrysler CEO, Mike Manley, told shareholders that he believed there would be “significant opportunities” in terms of strategic partnerships or alliances in the next two or three years.
Manley said Fiat Chrysler was taking action to address weaknesses in Europe.
