FCA and Renault announce a public rapprochement

MILAN / PARIS (Reuters) – Fiat Chrysler and Renault are expected to confirm Monday talks on a possible merger, the board of the French automaker convened to a morning meeting to discuss the situation.

Last weekend, we learned that two of the world's largest automakers are negotiating a global global partnership that could address their key weaknesses.

The pressure for consolidation of automakers has increased with the challenges of electrification, the tightening of emissions regulations and the development of costly new technologies for connected and autonomous vehicles.

Earlier this year, John Elkann, president of FCA – a member of the Italian dynasty Agnelli who controls the company – highlighted the family's commitment to the auto sector. But he also added that they were ready to take "bold and creative decisions" to help build a strong and attractive future for society.

A source said that an announcement from the Italian-American FCA could provide concrete but initial information, but added that the situation was still "fluid".

A separate source, knowing the situation directly, confirmed that Renault's board of directors would meet on Monday morning at 8:00 am (local time) (6:00 GMT) to discuss the issue.

The meeting was first reported by the French newspaper Le Figaro.

REGIONAL JUSTIFICATION

FCA owns a highly profitable North American RAM truck business and a Jeep brand, but loses money in Europe, where it may also struggle to keep up with the impending reductions in carbon dioxide emissions.

Renault, on the other hand, is a pioneer in the electric car with relatively energy-efficient engine technologies and a strong presence in emerging markets, but no activity in the United States.

Any rapprochement would probably be confronted with political and professional obstacles, particularly in Italy. However, most of FCA's European factories operate below 50% capacity.

A rapprochement between FCA and Renault would not prevent the consolidation of Renault's alliance with the Japanese manufacturer Nissan, a source told Reuters Saturday.

The Renault-Nissan partnership, backed by cross-holdings, was undermined by the scandal surrounding former president Carlos Ghosn, who was ousted after his arrest last year.

Speculation about the future of Fiat Chrysler, often seen as a potential target for mergers and acquisitions, has intensified after the sudden death of former longtime CEO Sergio Marchionne, there is almost a year.

Last October, after being chosen to replace Marchionne, shortly after three months, his new CEO, Mike Manley, agreed to sell FCA's auto parts unit, Magneti Marelli, to the Japanese company Calsonic Kasnsei, owned by US private equity firm KKR.

The sale was finalized earlier this month for 5.8 billion euros.

According to information received earlier this year, the manufacturer had also resumed discussions with the French group PSA, a recurring theme for years.

Together, Fiat Chrysler and Renault would have a combined market capitalization of around 33 billion euros ($ 37 billion) and a total global business figure of 8.7 million vehicles.

A partnership including Nissan would allow the whole to become the world's leading automaker with 13.8 million annual sales. This would also maintain a presence in China, where FCA and Renault are marginal players.