Fiat Chrysler Automobiles submitted a proposal Monday to merge with French automaker Renault in a multibillion-dollar deal that could create the world's third-largest automaker by volume. The equity offer would merge the automakers equally and combine complementary vehicle lineups together into a giant that could produce nearly 9 million cars each year.
"While there is no certainty that this proposal will result in a transaction, the Board of FCA has strongly supported and approved the proposal which will now be reviewed by the Groupe Renault Board of Directors," FCA said in a statement.
Renault said Monday it would consider FCA's "friendly proposal." No timetable for a merger was discussed.
The mega-merger would result in an automaker slightly larger than General Motors, with home bases across Europe and North America, and rival Volkswagen and Toyota for sales supremacy across the globe. FCA's deficit in electric-vehicle development could instantly be resolved with the merger; Renault's lack of SUVs and trucks would be complemented by FCA's big-vehicle portfolio. Both automakers could shoulder together the significant cost of autonomous-vehicle development, which has proven to be very expensive with little returns so far. Both FCA and Renault have small footprints in China, and pooled resources could jump-start both automakers in that market. FCA estimated that the merger would save $5.6 billion annually.
FCA's proposal was the culmination of talks held over the weekend that may have escalated from joint manufacturing projects all the way to full-blown merger. Renault's tenuous position within its Alliance with Nissan and Mitsubishi is unclear, and potentially the most consequential for North American buyers. Renault owns more than 40 percent of Nissan, although Nissan's ownership share in Renault is much smaller. The Alliance between all three automakers was rocked last year with the arrest of former chairman and CEO Carlos Ghosn, who forged the deal to help save Nissan in the 1990s. Since then, Nissan in Japan has warily gone along with the Alliance; Nissan is far more profitable than Renault, but its voting stake is much smaller. Since Ghosn's ouster, the future of the Alliance has been increasingly unclear.
In its statement Monday, FCA said its proposed board of directors would include a nominee from Nissan, although it's unclear if Nissan was involved with negotiations between Renault and FCA. If the Alliance continued, and included FCA, it would create the largest automaker in the world by far and would also include several competing products and manufacturing facilities in North America, including big trucks and SUVs.
FCA could complement Renault with big vehicles from Jeep and Ram, and Renault could provide FCA platforms for small-car development, which FCA left behind in North America several years ago. Renault hasn't sold a car in the U.S. since the late 1980s and early 1990s, when it briefly owned a controlling interest in AMC. Electric vehicles could be the biggest boon for FCA in the deal—Renault was an early champion for electric-car development during Ghosn's tenure.
The deal could potentially finish what former FCA CEO Sergio Marchionne started several years ago. Marchionne publicly courted mergers with General Motors, and the automaker has sought partnerships with Chinese automaker Great Wall, French automaker PSA Group, and Volkswagen. Marchionne said consolidation among large automakers was crucial to long-term viability.