Fiat Exits Merger With Renault Following French Government Interference

Fiat-Renault Merger
The logo of Fiat carmaker is pictured at a dealership (Photo: Reuters / Stephane Mahe)

The highly-publicized and closely-monitored mega-merger between Fiat Chrysler and Renault has now been derailed. The merger, which would have created the world's third-largest car company, collapsed after the French government intervened in the decision-making process.

The French government is currently Renault's largest shareholder, with a 15 percent stake in the company. The deal, estimated to be worth $37 billion, collapsed following the French government's request for a postponement of the board's voting.

After a board meeting that was held Wednesday, Fiat Chrysler announced that it was going to withdraw from the proposed 50-50 merger. However, the company mentioned in a statement that it was still convinced of the advantages that would have been gained from the merger.

Fiat still believes that the deal could have been a transformative one for both companies. The merger would have created a company that would have been bigger than General Motors with an estimated worth of around $40 billion.

The merged company would have had a production capacity of around 8.7 million vehicles per year. This would have completely changed the automotive landscape permanently.  Another big advantage of the merger would have been substantial savings for both companies of about $5.6 billion per year.

According to Fiat, the main reason for their exit from the deal is the "political condition" in France, which apparently isn't conducive to the particular deal. Meanwhile, France's finance minister, Bruno Le Maire, defended its decision and stated that the parties involved in the negotiations had not reached an agreement.

Renault was apparently not able to meet all of the government's conditions for the deal to proceed, which led to a disagreement and an eventual decision to postpone the vote.

Italy's Deputy Prime Minister Luigi Di Maio chimed in on the situation and stated that France's political interference was very detrimental to the deal. Maio believes that politics shouldn't have been included in the decision-making process.

 Due to Renault's confusing organizational structure, stakeholders likely had not reached an amicable agreement regarding the proposed merger. Apart from the French government, Nissan also holds a substantial stake in Renault. Renault currently holds a 43 percent stake in Nissan.

 Nissan reportedly voluntarily abstained from merger voting, stating that it still needed ample time to analyze it. The company's CEO Hiroto Saikawa also stated that it will be reviewing its relationship with Renault during the process.

In an official statement released this week, Renault expressed its disappointment in the collapse on the deal. The company also thanked Fiat Chrysler for its offer and its effort in trying to realize the merger.

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Sign Up for Newsletters and Alerts