M&A

FCA Breaks Off Possible Renault Merger

The company withdrew its offer citing political conditions in France.
FCA Breaks Off Possible Renault Merger

Fiat Chrysler Automobiles (FCA) announced it has withdrawn its merger offer for Renault 10 days after the plan was officially announced.

In a statement, FCA said it remained “firmly convinced of the compelling, transformational rationale” of the $35 billion-plus merger between the carmakers. “However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” the company said.

In its own statement, the board of directors of Renault, which met for two days, said it 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 Council.”

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The French government owns a 15% stake in Renault.

According to a report from Dow Jones, the French government said it would not support the merger unless Nissan guaranteed it would continue its alliance with Renault.

Nissan is 43% owned by Renault and recently rejected a full merger proposal from the company. According to the Dow Jones report, Nissan’s two representatives on Renault’s board were withholding their support for the merger.

FCA and Renault said the merger would have saved $5.6 billion per year through more efficient investments in vehicle platforms, powertrains, and technologies, though some analysts questioned whether those savings could be achieved without job cuts.

“This is a missed opportunity for these manufacturers to consolidate costs and streamline businesses at a time when investments and costs are rising,” analyst Rebecca Lindland said.

Concerns about possible job cuts had a focus for government officials and labor leaders in Europe.

A spokesman for the United Auto Workers said the union would continue to discuss the implications of the merger as it goes into negotiations with FCA this summer.

The merger would have created the third-largest automaker in the world, behind Toyota and Volkswagen.