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MILAN / PARIS – Fiat Chrysler and Renault are expected to confirm their reconciliation talks on Monday, the French automaker's board has been called to a meeting early in the morning to discuss the situation.
Last weekend, we learned that two of the world's largest automakers are negotiating a global alliance that could address some of their key weaknesses.
The plan under discussion would involve some transfer of own funds, according to a source close to the discussions. The Wall Street Journal reported Sunday that the two companies were considering a merger of equals, among other reconciliation options.
Renault President Jean-Dominique Senard presented French finance minister Bruno Le Maire with a proposal for an FCA-Renault merger on Friday, Les Echos announced on its website. The French government holds 15% of Renault's capital.
The current agreement would include guarantees covering corporate governance and employment in France and Italy, the French daily reported.
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, 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 earlier that an announcement by the Italian-American FCA could provide some concrete details, although the first details, 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.
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.
An agreement between FCA and Renault would not prevent the consolidation of the alliance between Renault and the Japanese automaker Nissan Motor Co. Ltd., a source told Reuters on 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 selected to replace Marchionne, shortly after three months, his new CEO, Mike Manley, had agreed to sell the FCA's Magneti Marelli auto parts unit to the Japanese company Calsonic Kasnsei, owned by the US private equity firm KKR & Co. Inc.
The sale was finalized earlier this month for 5.8 billion euros.
According to information received earlier this year, the manufacturer had also resumed talks with the French group PSA, a recurring theme for years.
Together, Fiat Chrysler and Renault would have a combined market capitalization of more than 32 billion euros ($ 36 billion) and total global sales of 8.7 million vehicles.
Fiat Chrysler has a valuation of just under 18 billion euros and Renault about 14.4 billion
An alliance including Nissan would position the group as the world's largest automaker with an annual turnover of 13.8 million euros. This would also maintain a presence in China, where FCA and Renault are marginal players.
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