Fiat Chrysler Automobiles announces planned merger with Groupe Renault

Fiat Chrysler Automobiles (FCA) and Groupe Renault (encompassing Renault, Dacia and Alpine) have announced plans for a merger that would create the world’s third largest automotive conglomerate behind the Volkswagen Group and Toyota.

Together, the two automotive giants are hoping to get a handle on the increasing costs many manufacturers are battling through in the European market due to fast changing legislation, and increasing pressure to incorporate widespread electrification.

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The deal has been ruminating behind closed doors between FCA’s recently appointed chairman John Elkann and his counterpart at Groupe Renault, Jean-Dominique Senard. Both are relatively new in their roles, taking over from industry giants like the late Sergio Marchionne and the recently embroiled Carlos Ghosn, and together plan to bring the two European manufacturing giants together.

No plant closures or job losses will be effected in the merger, a key deliverable as both companies are part-owned by their respective French and Italian governments. Instead the move will give each company stronger buying power, and shared development of new modular platforms, powertrains and electrification – an area in which FCA is particularly vulnerable.

Foundations of this merger only really came into focus over the last few weeks, with Renault officially surrendering its proposed merger with Nissan. The pair currently operate within their own partnership, yet remain two separate financial entities. But Nissan will still have a substantial voice in the merger thanks to its 15 per cent stake in the French company, something that is becoming more complicated as a consequence of the controversial detaining of the partnership’s ex-CEO Carlos Ghosn in Japan, and so hence his removal as Groupe Renault’s CEO.

Regardless of the politics, this merger is sure to improve the fortunes of FCA and Groupe Renault, both of which have been at the mercy of the stagnant European market in recent years. A merger might also herald some new thinking, and fresh investment behind iconic European brands on both sides that could benefit from shared development and components – but more importantly should safeguard both as the industry moves into an unknown and potentially unstable future.