cloudyn.png
Monday January 27th, 2020 2:23AM

Fiat Chrysler-Renault deal collapsed over Nissan role

By The Associated Press
Related Articles
  Contact Editor

MILAN (AP) — Fiat Chrysler's surprise decision to withdraw a merger offer with French carmaker Renault stunned the industry, collapsing Thursday on fundamental differences over when Renault's long-time alliance partner, Nissan, would be brought in.

The merger plan, which had sought to create the world's third-largest automaker, had been viewed positively across the industry since it was announced last week. And it appeared to be a done-deal when the Renault board met for a second day in Paris on Wednesday evening.

But Fiat Chrysler Chairman John Elkann decided to withdraw the offer as the Renault board meeting entered the early morning hours after the French government - Renault's top shareholder with a 15% stake - asked for more time to seek Nissan's blessing.

A person in Italy who has been close to the talks said both the French government and Nissan had agreed during the course of months-long negotiations that the Fiat Chrysler-Renault merger would happen first, and then the future of the alliance would be considered at a later stage.

The person said France essentially backtracked this week when it said it wanted the backing of Nissan before agreeing to start working on the details of a potential merger.

"A merger cannot be subject to external conditions," said the person, adding that withdrawing the offer was not a negotiating tactic. The person spoke only on condition of anonymity because details of the negotiations were not publicly disclosed.

In a statement, Fiat Chrysler cited "political conditions in France" for its withdrawal. The company said it had no hard feelings with either Renault or its alliance partner Nissan, thanking them both for their "constructive engagement."

The French government hit back by characterizing Fiat Chrysler's behavior as "pushy," blaming it for placing "massive pressure" to quickly take the offer or leave it. They later softened their tones, indicating there might be room for future negotiation.

"We have closed no doors," said an official at France's Economy Ministry who spoke on condition of anonymity to discuss the negotiations.

Renault said it was disappointed over the lost opportunity but also talked about the offer in the present tense, indicating there was still hope to revive it: "We view the opportunity as timely, having compelling industrial logic and great financial merit, and which would result in a European-based global auto powerhouse."

In Italy, a representative of the powerful metal mechanics union also expressed hope that the withdrawal was a tactic to restart negotiations, blaming Nissan and the French for complicating talks.

Analysts Philippe Houchois and Himanshu Agarwal from research firm Jefferies noted that the Fiat Chrysler statement was carefully worded in a way "to leave the door open to further discussion."

News of the plan's failure mainly hurt Renault's shares, which tumbled 7% to 52.45 euros, in early trading. Fiat Chrysler's share price recovered from an early dip trading flat at 11.65 euros.

From the time merger was proposed, it was clear that the French government's position and Renault's alliance with Nissan could be sticking points.

The French government said Thursday that it had placed four conditions on the deal during talks.

It demanded that any merger be completed as part of the existing alliance between Renault and Nissan, preserve French jobs and factories, respect the governance balance between Renault and Fiat Chrysler, and ensure participation in an electric battery initiative with Germany.

"An agreement had been reached on three of these conditions. It remained to obtain explicit support from Nissan," said French Finance Minister Bruno Le Maire.

Le Maire asked for five days to secure Nissan's support.

Nissan had earlier expressed reservations about the merger deal, saying it raised questions about its alliance with Renault. On Thursday, Nissan declined to comment on the latest developments.

Le Maire is traveling to Japan this weekend to meet with Nissan officials on a previously arranged visit.

Most industry experts praised the proposed 50-50 merger, saying each side bought strengths that covered up the other's weaknesses.

The combined company would have produced some 8.7 million vehicles a year, more than General Motors and trailing only Volkswagen and Toyota. It would have saved an estimated 5 billion euros ($5.62 billion) per year in purchasing expenses and costs developing autonomous and electric vehicles.

It would have been worth almost $40 billion. If Nissan had gone along, it would have created the world's biggest auto company.

Now, Fiat Chrysler and Renault must find a new way to address any shortcomings at a time when the auto industry is in the midst of a global sales slowdown and facing enormous expenses to develop future technologies.

Karl Brauer, executive publisher at Kelley Blue Book and Autotrader, said the merger talk was likely to have affected other boardrooms in the automotive industry, where tie-ups can lead to significant savings on investments in costly technology, especially as the industry faces the transition to electric powertrains and autonomous and semi-autonomous driving.

"A reassessment of partnership opportunities was likely initiated at every major global automaker in the past 8 days, and those assessments won't end with FCA's withdrawal from this deal," Brauer said.

____

Hinnant and Charlton reported from Paris. Tom Krisher in Detroit contributed to this report.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP Business, AP Business - Corporate News
© Copyright 2020 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
R. Kelly pleads not guilty to 11 more sex-related charges
Singer R. Kelly has pleaded not guilty to 11 additional sex-related felonies during a court hearing in Chicago
11:34AM ( 8 minutes ago )
Trump tells D-Day veterans they're among greatest Americans
President Donald Trump is lauding the heroism of American and allied service members who participated in the D-Day invasion that changed the fortunes of World War II, saying they "are among the very greatest Americans who will ever live."
11:34AM ( 8 minutes ago )
Talks resume as Trump's Mexico tariff deadline looms
U.S. and Mexican officials are heading into a new round of talks as Trump's 5% Mexico tariff deadline looms
11:31AM ( 10 minutes ago )
Associated Press (AP)
Texas couple stands by story after US cardinal pushes back
The Texas couple that accused Cardinal Daniel DiNardo of mishandling a sexual misconduct case against his former deputy is denying his office's claims that they fabricated quotes or demanded a $10 million payout
11:03AM ( 38 minutes ago )
Firm to reapply for permits to build northeast gas pipeline
An Oklahoma company says it will reapply to build a hotly contested pipeline that would carry natural gas from Pennsylvania through New Jersey, and under a bay and the ocean to New York
10:54AM ( 47 minutes ago )
Car buyers' best cost-saving move: shop for a loan first
With the cost to own a new vehicle rising, it's more important than ever to consider what you'll pay for a car loan and to shop for the best interest rate
10:41AM ( 1 hour ago )
AP Business
Fiat Chrysler pulls merger bid for Renault in surprise move
Fiat Chrysler's surprise decision to withdraw a merger offer with Renault has stunned the industry, but both sides emerged with careful language Thursday that raised the possibility of re-opening talks.
8:03AM ( 3 hours ago )
Recriminations as Fiat Chrysler pulls merger bid for Renault
The surprising collapse of a proposal to merge Fiat Chrysler and Renault is weighing heavily on the companies' shares on Thursday
4:49AM ( 6 hours ago )
Fiat Chrysler says French politics ended Renault merger
Fiat Chrysler abruptly pulled out of an offer to merge with French automaker Renault late Wednesday, a shocking reversal of a deal that could have reshaped the global auto industry
9:37PM ( 14 hours ago )
AP Business - Corporate News
R. Kelly pleads not guilty to 11 more sex-related charges
Singer R. Kelly has pleaded not guilty to 11 additional sex-related felonies during a court hearing in Chicago
11:34AM ( 8 minutes ago )
Trump tells D-Day veterans they're among greatest Americans
President Donald Trump is lauding the heroism of American and allied service members who participated in the D-Day invasion that changed the fortunes of World War II, saying they "are among the very greatest Americans who will ever live."
11:34AM ( 8 minutes ago )
Talks resume as Trump's Mexico tariff deadline looms
U.S. and Mexican officials are heading into a new round of talks as Trump's 5% Mexico tariff deadline looms
11:31AM ( 10 minutes ago )
US long-term mortgage rates fall; 30-year average at 3.82%
US long-term mortgage rates fall for 6th week; 30-year average at 3.82%
11:27AM ( 14 minutes ago )
R. Kelly to be arraigned on 11 new sex-assault charges
Singer R. Kelly has pleaded not guilty to 11 additional sex-related felonies during a court hearing in Chicago
11:24AM ( 17 minutes ago )