The deal is off.
A little more than a week after Fiat Chrysler Automobiles sent Renault a proposal for the two auto giants to undergo a "merger of equals," which would have resulted in the world's third-largest automaker, the Italian-American company has withdrawn the proposal, causing the deal to fall through.
FCA issued a statement in which it blamed unfavorable conditions by the French government for its withdrawn merger proposal. In case you need a refresher, the French government owns a 15% stake in Renault, making it the company's largest single shareholder. France was attempting to use its stake in Renault to secure a guarantee that the new combined entity would keep blue collar jobs in France.
But a promise was not enough. What France wanted was a seat on the board of the new company as well as voting rights on a board that would elect a new CEO for the company. While we have yet to get the full details, it appears that the deal's collapse centers around the fact that FCA did not feel like it could give the French government so much control of FCA-Renault.
"FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties," the company said in a statement. "However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."
According to Renault, FCA backed out because the French government wanted to delay Renault's decision to merge, which was apparently enough to make FCA back out of the deal. Renault's statement was much shorter. It read, "The Board of Directors 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."
There's still quite a bit to unpack about what this could mean for FCA and Renault going forward, but what is clear is that both companies still need to find a way to cut costs, enter new markets, and consolidate research and development efforts into autonomous and electric vehicles. How that will happen now is anyone's guess.