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What the merger of Renault with Fiat Chrysler would mean

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The possibility that these two giants would unite would change the automotive world and create the third largest manufacturer in the industry

What the merger of Renault with Fiat Chrysler would mean

In October 2014, the Italian automotive house Fiat acquired its American counterpart Chrysler when it was in financial trouble. The resulting company acquired the name of Fiat Chrysler Automobiles (FCA), which today is the eighth largest automaker in the world with a portfolio of brands that includes, in addition to Fiat and Chrysler, Alfa Romeo, Dodge, Jeep, and Maserati. Now they could advance another merger to become the third largest manufacturer in the world, this time with the French house Renault.

Leer en español: Lo que significaría la fusión de Renault con Fiat Chrysler

According to data from the International Organization of Motor Vehicle Manufacturers (OICA), Renault is at the moment the ninth largest manufacturer. In addition, he owns the Romanian brand Dacia and forms one of the most powerful alliances in the industry with the Japanese manufacturers Nissan and Mitsubishi.

This week, FCA contacted Renault with a proposal for a fair merger, where each company would control 50% of a new company formed by both and that would reach annual sales of 8.7 million vehicles. Renault commented that it would "analyze the proposal with interest" and that it considers it friendly.

If the merger were successful, only Volkswagen and Toyota would outnumber the joint venture formed by FCA and Renault.

A mutually beneficial alliance

FCA's proposal arises from the need to adapt to a changing landscape for car manufacturers, which must quickly assume significant changes in automotive regulation, including entire countries with plans to discontinue the use of vehicles powered by fossil fuels.

Before the announcement of the possible merger, Renault shares appreciated more than 15% in Paris, and Fiat shares 11% in Milan.

The positive outlook in the stock market reflects what many investors consider a logical strategic move. FCA has a considerable delay in the manufacture of electric cars but is strong in the field of off-road, cargo and commercial vehicles. For their part, Renault and Nissan have advanced important projects in the field of electric cars and could benefit from the industrial capacity of FCA to manufacture them on a larger scale.

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In addition, while FCA comfortably performs in the US market, where it dominates with Dodge, RAM, and Jeep, it lacks a strong presence in Europe. Renault works to the contrary, without any presence in the United States, but with a solid position in Europe.

The agreement brings obstacles

While the two companies can complement their areas of action, the merger will do little to help them conquer the Chinese market, the largest and fastest growing, something that many of its competitors, including Mercedes, Audi, BMW, and Volkswagen have achieved. in recent years.

Another problem that could be seen, was referring to Nissan and Mitsubishi. Although Nissan maintains formal independence from Renault, it is closely intertwined with the French company because of the considerable shareholding among the companies. Nissan controls 15% of Renault's shares, while Renault controls 43.5% of Nissan's.

The three manufacturers met on Wednesday in Yokohama, Japan, to discuss the possibility of the merger with FCA, which resulted in a lukewarm but approving statement by Nissan saying that in general "they do not see any particularly negative aspect" compared to a possible fusion.

 

LatinAmerican Post | Pedro Bernal

Translated from "Lo que significaría la fusión de Renault con Fiat Chrysler"

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