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Fiat Chrysler-Renault Merger: What Happens Next

Industry News / Comments

Remember, it's only a "proposed" merger at this time.

Yesterday was big news. Announcements like this in this industry don't happen often. Fiat Chrysler Automobiles formerly announced a proposed merger with Renault. Both automakers would take a 50/50 share in what would become the world's third largest automaker, behind Volkswagen and Toyota. General Motors would be bumped down to number four.

Both automakers stand to gain a lot from this proposed merger as the newly combined portfolio would cover everything from affordable cars in emerging markets to ultimate luxury. While FCA is weak in electric vehicles, Renault is a world leader. While Renault is lagging behind with autonomous and mobility technologies, FCA is part of a global consortium, led by BMW, to further advance both areas. It's also in a partnership with Waymo.

On paper, everything sounds good for both sides, but nothing has been approved just yet. So, what happens next in order to make this happen? Sources have told Reuters the ball is now in the Renault board members' court. They are the ones who will decide what happens next week and whether FCA's proposal should be altered in some way. The Renault board is reportedly scheduled to informally meet next for what's described as "work sessions."

Those same sources claim this will be when the board decides whether to sign a non-binding agreement with FCA to proceed with the proposed merger, which will undoubtedly require some additional negotiations. FCA's so-called "merger of equals" proposal seems to be a fair deal for both sides, generally speaking. However, there could be some additional caveats to resolve, such as what's happening with the ongoing Renault-Nissan discussions.

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Remember, Renault-Nissan-Mitsubishi's former CEO, Carlos Ghosn, was ousted following allegations of financial wrongdoing. He's about to go on trial in Japan. Nissan wants to renegotiate its alliance terms with Renault because it believes it didn't have an equal role previously. FCA doesn't appear to be bothered by this. If its proposed merger is approved in current form, Nissan's bargaining position will likely be significantly weakened. It will have little choice but to go along with the merger because the alternative would be far worse.

In the meantime, we'll have to wait until the Renault board holds discussions to see what happens next. If FCA publically released such a detailed merger plan in the first place, then chances are negotiations are at an advanced stage.