FCA-Renault merger: deal collapses following French government intervention

A proposed merger between Fiat Chrysler Automobiles (FCA) and Renault has collapsed following an intervention by the French government.

Under the €33bn (£29.2bn) deal, FCA and Renault would each have owned 50% of what would have been the largest motoring group in the world, with a combined 8.7 million annual car sales, the Financial Times reports.

But Renault says that the French government, which holds a 15% stake in the company, requested a delay to the merger on Tuesday, amid concerns that the new group might cut jobs in France.

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A six-hour meeting was held at Renault’s headquarters in Paris on Wednesday, with the carmaker announcing that it was “unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later council”, says the newspaper.

FCA then announced that the Italian-America motoring group would be withdrawing from the proposed merger, adds Forbes.

“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” an FCA spokesperson said. “FCA will continue to deliver on its commitments through the implementation of its independent strategy.”

What does the collapse mean for the two carmakers?

The merger could have been vital to both manufacturers, with an increasing number of carmakers combining forces to strengthen their positions in the industry.

As The Guardian notes, car manufacturers are facing growing “pressure to invest in electric and self-driving vehicles”. According to FCA estimates, the merger would have saved the new group some €5bn (£4.4bn) a year by “sharing research”, as well as split “purchasing costs and other activities”, the newspaper reports.

FCA insisted last week that the deal would not result in any factory closures, but did not rule out job loses. This was a sticking point for the French government, which wanted guaranteed job security for Renault staff.

Meanwhile, rival carmakers are negotiating their own tie-ups.

Earlier this week, BMW announced a deal with Jaguar Land Rover to develop electric motors and transmissions, the BBC reports.

And in January, Volkswagen struck an unlikely partnership with key rival Ford that will see the two companies collaborate on “electric vehicles, autonomous cars and mobility solutions”, says Auto Express.

Have FCA and Renault shares been hit?

Renault shares tumbled by 7% shortly after the FCA announced its withdrawal from the merger, while shares in the Italian-American firm dropped by 3%, the FT reports.