How FCA and Renault Merger Plan Evolved

The blockbuster merger proposal between Renault SA and Fiat Chrysler Automobiles NV was borne out of secret one-on-one meetings between the chairmen of both companies over the past few weeks.

Media reports say the pragmatism of FCA Chairman John Elkann and Renault Chairman Jean-Dominique Senard made the scheme, code-named Newton, possible.

Elkann and Senard began their discussions in earnest in early May after Senard concluded that Renault’s hope of merging with 20-year alliance partner Nissan Motor Co. was highly unlikely. Nissan has ramped up its objection to a merger since Carlos Ghosn, chairman of both Nissan and Renault, was arrested in November for financial wrongdoing. Ghosn was stripped of both posts several months ago.

At the same time, FCA’s exploratory talks about merging with PSA Group collapsed. Those discussions were abandoned when the two companies realized their overlapping products and markets would cause a political firestorm over inevitable plant closures and worker layoffs.

A Renault-FCA combination avoids major market overlaps, promises greater synergies for each partner and has enabled both companies to declare that their merger would result in no layoffs. The French and Italian governments have given their blessings for the deal because of that promise.

Reports suggests that Senard and Elkann were able to quickly construct a merger plan in large part by putting egos aside and focusing on practical results.

FCA’s former CEO Sergio Marchionne, who died suddenly last July, had long preached the need for carmakers to merge. He declared that consolidation was inevitable to reduce spending on new technologies and help survivors confront the changing nature of the auto industry’s underlying business assumptions about personal mobility.