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| Fiat Proposes Merger With Renault to Create New Auto Giant | Fiat Proposes Merger With Renault to Create New Auto Giant |
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| Fiat Chrysler on Monday proposed a merger with its French rival Renault, a move intended to form a global partnership aimed at improving their chances of surviving the coming perilous and costly shift to electric and self-driving cars. | Fiat Chrysler on Monday proposed a merger with its French rival Renault, a move intended to form a global partnership aimed at improving their chances of surviving the coming perilous and costly shift to electric and self-driving cars. |
| If Renault agrees to the deal, the new company would displace General Motors as the third-largest car company in the world, behind Volkswagen and Toyota. Renault said its board would meet on Monday to consider the proposal and issue a statement afterward. | If Renault agrees to the deal, the new company would displace General Motors as the third-largest car company in the world, behind Volkswagen and Toyota. Renault said its board would meet on Monday to consider the proposal and issue a statement afterward. |
| Both companies had talked over the weekend about a strategic partnership. But the decision to seek a full-blown merger illustrates the urgency that automakers feel to find partners. | Both companies had talked over the weekend about a strategic partnership. But the decision to seek a full-blown merger illustrates the urgency that automakers feel to find partners. |
| Fiat said in a statement it was motivated by “the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving.” | Fiat said in a statement it was motivated by “the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving.” |
| A spokesman for Fiat said there had been no decision on a name for the merged company, nor a decision on a chief executive. Shares of both companies jumped following the announcement: Fiat’s stock rose as much as 19 percent, and Renault gained 17 percent in early trading. | A spokesman for Fiat said there had been no decision on a name for the merged company, nor a decision on a chief executive. Shares of both companies jumped following the announcement: Fiat’s stock rose as much as 19 percent, and Renault gained 17 percent in early trading. |
| There is a consensus among industry executives and analysts that carmakers must link up to share the cost of a transition away from internal combustion engines to avoid being run over by fast-moving tech industry challengers like Tesla or Uber. | There is a consensus among industry executives and analysts that carmakers must link up to share the cost of a transition away from internal combustion engines to avoid being run over by fast-moving tech industry challengers like Tesla or Uber. |
| Still, the lesson from past auto mergers is that they often founder on clashing corporate cultures or turf battles, and that predictions of the possible benefits prove overly optimistic. That was the case with Chrysler’s ill-fated merger with Daimler in the late 1990s. | Still, the lesson from past auto mergers is that they often founder on clashing corporate cultures or turf battles, and that predictions of the possible benefits prove overly optimistic. That was the case with Chrysler’s ill-fated merger with Daimler in the late 1990s. |
| The union of Fiat Chrysler and Renault could also destabilize the French company’s longtime alliance with Nissan of Japan, which is already troubled. A Nissan spokesman on Monday declined to comment. | The union of Fiat Chrysler and Renault could also destabilize the French company’s longtime alliance with Nissan of Japan, which is already troubled. A Nissan spokesman on Monday declined to comment. |
| [Read more: How Fiat Chrysler moved from a laggard to a leader in Detroit] | |
| This deal will be particularly tricky because it will inevitably draw the attention of political leaders in Italy and France, who will fight to preserve as many jobs as possible. | This deal will be particularly tricky because it will inevitably draw the attention of political leaders in Italy and France, who will fight to preserve as many jobs as possible. |
| The French government, Renault’s largest shareholder, views the proposed merger favorably, said a spokeswoman on Monday. “We must of course see in what conditions it will happen,” Sibeth Ndiaye told France’s BFM television. “They must be favorable to the economic and industrial development of Renault and its employees.” | The French government, Renault’s largest shareholder, views the proposed merger favorably, said a spokeswoman on Monday. “We must of course see in what conditions it will happen,” Sibeth Ndiaye told France’s BFM television. “They must be favorable to the economic and industrial development of Renault and its employees.” |
| A merger would create a needed European giant at a time of fierce competition in the global auto industry, she added. “Giants have been built outside Europe, we need giants in Europe.” | A merger would create a needed European giant at a time of fierce competition in the global auto industry, she added. “Giants have been built outside Europe, we need giants in Europe.” |
| By purchasing parts together, combining their manufacturing operations and sharing the cost of research and development, the partnership would eventually save 5 billion euros, or $5.6 billion per year, Fiat said. At the same time, Fiat said, the deal would not result in any plant closings. | By purchasing parts together, combining their manufacturing operations and sharing the cost of research and development, the partnership would eventually save 5 billion euros, or $5.6 billion per year, Fiat said. At the same time, Fiat said, the deal would not result in any plant closings. |
| The merger “would create new opportunities for employees of both companies and for other key stakeholders,” Fiat said. | The merger “would create new opportunities for employees of both companies and for other key stakeholders,” Fiat said. |
| It is hard to see how Fiat and Renault can avoid job cuts, though, when their factories are operating below capacity and the European auto industry is suffering a downturn. | It is hard to see how Fiat and Renault can avoid job cuts, though, when their factories are operating below capacity and the European auto industry is suffering a downturn. |
| Savings from simply combining some operations would not be enough to stay competitive over the long term with companies like Toyota that use their factories more efficiently. | Savings from simply combining some operations would not be enough to stay competitive over the long term with companies like Toyota that use their factories more efficiently. |
| Fiat Chrysler and Renault each have things to offer the other, partly addressing each other’s weaknesses. Renault and Nissan were among the first car companies to build electric vehicles for mass production, whereas Fiat is seen as a laggard. Together, the companies sold 8.7 million vehicles last year, ahead of G.M., which sold 8.4 million. | Fiat Chrysler and Renault each have things to offer the other, partly addressing each other’s weaknesses. Renault and Nissan were among the first car companies to build electric vehicles for mass production, whereas Fiat is seen as a laggard. Together, the companies sold 8.7 million vehicles last year, ahead of G.M., which sold 8.4 million. |
| Fiat Chrysler also offers Renault access to the United States market, where the French have no presence. But neither company is strong in China, which has become the world’s largest car market. | Fiat Chrysler also offers Renault access to the United States market, where the French have no presence. But neither company is strong in China, which has become the world’s largest car market. |
| One unanswered question was how the proposed merger would fit in with Renault’s partnership with Nissan and Mitsubishi, known as the Renault Nissan Alliance. Fiat said the new company would continue to work with Nissan, and that the Japanese company would receive one seat on the 11-person board of directors. | One unanswered question was how the proposed merger would fit in with Renault’s partnership with Nissan and Mitsubishi, known as the Renault Nissan Alliance. Fiat said the new company would continue to work with Nissan, and that the Japanese company would receive one seat on the 11-person board of directors. |
| Together, the four companies would be by far the largest carmaker in the world, with sales of 15 million vehicles a year and a major presence in virtually every corner of the planet. But such a monstrous corporation would be complex and even more difficult to manage than the Renault Nissan Alliance has been. | Together, the four companies would be by far the largest carmaker in the world, with sales of 15 million vehicles a year and a major presence in virtually every corner of the planet. But such a monstrous corporation would be complex and even more difficult to manage than the Renault Nissan Alliance has been. |
| The relationship between the French and Japanese has been tense since the arrest of Carlos Ghosn, the head of the alliance, in November on accusations of financial wrongdoing and his eventual ouster. Mr. Ghosn has said he is innocent. | The relationship between the French and Japanese has been tense since the arrest of Carlos Ghosn, the head of the alliance, in November on accusations of financial wrongdoing and his eventual ouster. Mr. Ghosn has said he is innocent. |
| The French have pushed to join Renault and Nissan more closely by putting them under the same holding company, but the Japanese brusquely refused that proposal. Nissan, which makes more cars than Renault and is a major player in the United States, has expressed discontent with French dominance of the partnership and sought more autonomy. | The French have pushed to join Renault and Nissan more closely by putting them under the same holding company, but the Japanese brusquely refused that proposal. Nissan, which makes more cars than Renault and is a major player in the United States, has expressed discontent with French dominance of the partnership and sought more autonomy. |
| Nissan and the Japanese government were informed about the merger talks, but appear to have played no significant role. Nissan shares rose modestly after Fiat’s announcement and closed 1 percent higher for the day. | |
| With Fiat Chrysler on board, the alliance will be tilted more toward Europe. At the same time, the French government would have less sway over the new company than it does over Renault. French government influence has been a sore point for Nissan. | With Fiat Chrysler on board, the alliance will be tilted more toward Europe. At the same time, the French government would have less sway over the new company than it does over Renault. French government influence has been a sore point for Nissan. |
| Under Fiat’s proposal, shareholders of both companies would receive 50 percent of the new company. In addition, shareholders of Fiat Chrysler would share a dividend of 2.5 billion euros, or $2.8 billion, that reflects the company’s higher value on the stock market. | Under Fiat’s proposal, shareholders of both companies would receive 50 percent of the new company. In addition, shareholders of Fiat Chrysler would share a dividend of 2.5 billion euros, or $2.8 billion, that reflects the company’s higher value on the stock market. |
| The company would be based in the Netherlands, known for its favorable corporate taxation rules. Shares of the new company would be listed on exchanges in Paris, Milan and New York. | The company would be based in the Netherlands, known for its favorable corporate taxation rules. Shares of the new company would be listed on exchanges in Paris, Milan and New York. |