FCA, Renault Ponder Merger

Fiat Chrysler Automobiles NV confirms it has proposed a merger with Renault SA that would combine the two companies under a Dutch holding company equally owned by each partner’s shareholders.

FCA is proposing “transformative merger” in which the partners would share technology, product development, production and supply chains. Renault’s board is meeting today to discuss the plan, which would create the world’s third-largest carmaker.

The Financial Times first reported in March that the companies were pondering a possible merger. FCA has been looking for a partner since 2015 as a way to reduce the cost of developing vehicles and technologies.

The two-company entity would be independent of Renault’s existing alliance with Nissan and its Mitsubishi Motors affiliate. Sources tell Bloomberg News that those companies would likely be invited to join the FCA-Renault partnership later.

In the meantime, Renault would shelve its desire to merge members of the 20-year-old Renault-Nissan alliance, a move the Japanese company has resisted. Renault owns a 43% voting stake in Nissan, and Nissan holds a 15% nonvoting stake in Renault.

A Renault-PSA alliance would create a company that sells about 8.7 million vehicles per year—more than General Motors or Hyundai-Kia. The Renault-Nissan-Mitsubishi alliance delivers more than 10 million cars and trucks per year, as do Volkswagen Group and Toyota Motor Corp.

The new partnership would give Renault access to PSA’s existing network of dealerships in North America, a market it abandoned 30 years ago.

Renault and the predecessors of FCA have ties that go back 40 years. In the late 1970s, Renault partnered with American Motors Corp., eventually acquiring a controlling 47.5% stake in the company and its iconic Jeep SUV brand. Renault later disposed of its AMC holding in 1987 by selling the company to Chrysler. FCA was formed in 2015 after Fiat completed its acquisition of Chrysler in 2014.