Renault to Decide in Days on FCA Merger Talks

Renault SA’s board is expected to decide within the next several days whether to launch discussions with Fiat Chrysler Automobiles NV about merging the two carmakers, sources tell Reuters.

The French government, which owns a 15% voting stake in Renault, says it is “in favor” of a deal, as long as it benefits Renault employees and enhances the company’s growth.

FCA proposed the $35 billion deal, which would create the world’s third-largest carmaker (after Toyota and Volkswagen), late last week. The merger could save the partners €5.6 billion per year, according to FCA.

The plan would be completed by transferring ownership Renault and FCA to a Dutch holding company that would be owned 50:50 by shareholders of the two companies.

The holding company would be governed by an 11-member board. Its directors would include four each from FCA and Renault, and one from Nissan, which holds a 15% nonvoting stake in Renault.

This management structure would be similar to the one Renault has proposed to Nissan Motor Co. to further integrate their own 20-year-old alliance. Nissan, uneasy about Renault’s control of the alliance, is wary of a merger. Nissan also is grappling with the need for management oversight reform after the arrest last November of Chairman Carlos Ghosn on charges of financial wrongdoing.

Implicit in the FCA proposal is that Renault would suspend talks with Nissan about a merger, thereby easing tensions between the companies, sources tell the Financial Times. FT first reported the possibility of a Renault-FCA merger two months ago.