Well....this one bears watching, folks. FCA has proposed a merger with Renault (which is not surprising, as they have been looking for a buyer for years...long before Marchionne passed away). if successful, they would become the world's third-largest automaker.

https://www.detroitnews.com/story/bu...al/1249509001/

Fiat Chrysler merger bid for Renault comes amid market upheaval

Fiat Chrysler CEO Mike Manley told employees in a memo that the proposed merger between Fiat Chrysler and French carmaker Renault could take up to a year to complete. (Photo: Getty)




A potential merger between Fiat Chrysler Automobiles NV and French automaker Renault SA — which could bring big changes to the Auburn Hills-based company's U.S. operations — is the latest move by a Detroit carmaker to reposition itself for the future.

In a bid to save some $5.6 billion (5 billion euros) annually through efficiencies in manufacturing, purchasing and R&D, Fiat Chrysler on Monday presented Renault's board of directors with a 50-50 merger proposal. FCA is proposing a new company with a new management structure that would be 50% owned by the Italian-American automaker and 50% owned by France's Renault.

The proposed FCA-Renault tie-up comes during a year of upheaval for the auto industry. Amid global trade tension, rising costs due to tariffs and the threat of an industry downturn, FCA's two Detroit rivals, General Motors Co. and Ford Motor Co., already are executing worldwide restructurings designed to cut costs and divert capital toward expensive electrification, autonomy and mobility efforts. The Italian-American automaker is also hoping to benefit from Renault's advancements in electrification — an area in which FCA is perceived to lag.

The potential combination also comes amid deepening strains in Renault's 20-year-old alliance with Nissan Motor Co. and Mitsubishi Motor Corp. following charges of financial wrongdoing against longtime CEO Carlos Ghosn. He's gone, but the bitterness remains in Japan over French efforts to consolidate the alliance into a merged company that likely would derive more profit from Nissan than Renault.

And Renault's crosstown rival, Groupe PSA SA, is aggressively seeking partners to build scale in Europe and possibly help enter the rich U.S. market — prompting new leadership atop Renault to consider the kind of merger FCA's legendary CEO, Sergio Marchionne, sought but could not achieve before his death last year.

"This is happening at a time when the industry is coming off peak car sales, and we are on the verge of transformation of the global auto industry," said Michelle Krebs, an industry analyst with *** Automotive. "Automakers are reckoning with how EVs, AVs and mobility will change how people acquire transportation. Those changes will cost a lot of money and nobody knows when payback will come."

The late Marchionne, whose 2015 "Confessions of a Capital Junkie" presentation to analysts imagined a merger not unlike the one FCA has proposed with Renault, said last year that FCA was going to begin participating more deeply in the technology-led transformation of the auto industry.

The automaker's plan to build a new Jeep plant in Detroit, which would not be derailed by the potential merger, is part of FCA's longer-term intention to pivot to hybrid and electric vehicles and to capitalize on the growing brand value of Jeep.

FCA and Renault have stressed that the merger would aim to cut costs without cutting jobs or closing plants. But it's unlikely the automakers would merge without any cuts to their global workforces considering FCA's struggles in Europe. The overlapping of European operations for both companies puts those workers more immediately in the crosshairs.

"I don’t think something like this works unless you have cuts," said Jeff Schuster, a Southfield-based industry analyst with LMC Automotive. "This is about scale and about costs and about leveraging each others' technologies to meet regulations. You don’t have overlap everywhere, you have pieces of overlap. Reducing costs is probably going to lead to reducing the overlap in lineup and potentially in manufacturing."

While Renault's board considers FCA's overture, it's still not clear where the operational headquarters of merged company would be located, who would lead the company and how that might affect the structure at Fiat Chrysler's Auburn Hills headquarters. It is also unclear how the merger would affect Renault's current Renault-Nissan-Mitsubishi Alliance that was formed in 1999.

The deal would create the third-largest global automaker by sales behind Toyota Motor Corp. and Volkswagen AG. With a potential combined 8.7 million in annual sales, it would surpass GM.

The proposed FCA-Renault tie-up comes as FCA and its two Detroit rivals prepare to negotiate a new contract with the United Auto Workers. The UAW said Monday it is monitoring the merger proposal and awaiting more details. In a memo sent to employees and obtained by The Detroit News, FCA CEO Mike Manley said it could take up to a year to form the new company.

FCA had 198,545 employees globally in 2018. That included 74,703 hourly employees and 22,326 salaried employees in North America, and 40,446 hourly employees and 24,170 salaried employees in Europe. The automaker has 36 plants in North America and 24 in Europe, according to the company website.

But FCA runs most of its North American plants at near 100% or more of their capacity. In Europe the company averages around 65%, according to Philippe Houchois, an equity analyst with Jefferies Group LLC.

"Not only do you have more employees per car, but you have lower average transaction prices," Houchois said. "That's the kind of situation that needs to be addressed. You can lose money for awhile, but eventually it needs to be addressed."

FCA has boasted strong profits in North America thanks to U.S. consumers' appetite for the high-margin Ram and Jeep brands. The automaker lost $21 million in Europe during the first quarter of the year compared to a $1.2 billion profit in North America during the same time. Last year, FCA made nearly $7 billion in North America compared to roughly $450 million in Europe.

Experts say the money is pushing this deal forward. Strict emissions regulations across Europe are pushing automakers there to improve the fuel efficiency of the already small, fuel-efficient cars they spent most of the last decade developing. Meanwhile, FCA spent 10 years under Marchionne getting the automaker's U.S. operations in shape; its European operations lagged.

Renault could help FCA right-size the European business. FCA would give Renault global scale and access to the American market.

"FCA has done quite a good job of turning around Chrysler in North America, but they have neglected Europe for a number of years," Houchois said. "Renault has had years and years of pretending to be global, but they are largely a European carmaker... It's those weaknesses that gets them together."

Near-term, the U.S. and North American operations shouldn't be affected by a merger targeting Europe, Houchois said. But the automakers must avoid the pitfalls and mismanagement that plagued DaimlerChrysler AG.

"When there is not a clear line of responsibility it can turn into nightmares," Houchois said. "The biggest challenge is to make sure that there is clearly somebody in charge, and responsibilities are defined, or else it can turn into a nightmare for the organization and the employees."

 

This could be an interesting deal.

 

YES! Sounds perfect to me - the company with the 2nd worst reliability merges with the #1. What could possibility go wrong?

 

Renault
Renault-Samsung
Nissan
Infiniti
AvtoVAZ (Lada)
Dacia
Fiat
Abarth
Alfa Romeo
Lancia
Chrylser
Dodge
Jeep
Ram
Maserati

That'd be a large alliance.

 

Jaguar/Land Rover also ranks down there at the bottom, depending on whose rankings you are looking at. But, in terms of a specific alliance between Fiat and Renault, I agree.....with vehicle reliability, you're likely to have a case of the blind leading the blind.

 

Beat me to it! Let's get all the crappiest cars under one ownership umbrella. Maybe they can rebadge the 500 as a new Le Car.

 

If true. I would expect massive US-Can layoffs down the road.

 

That's just what we need in the industry...more layoffs.

 

The auto industry is in decline. All over the world. Chrysler got hit very hard. Even well managed companies like Honda are reducing production of the Accord. Just part of the cycle. Those tariffs are not helping either.

 

Interesting that you would mention that. Not long ago, when asked if there was anything like the old Renault 5 (LeCar) still sold in the American market, I told them to check out a 500...clearly the closest thing they will find to it.

 

If FCA is in a hard search for a merger partner, what do you think will happen if they don't merge? (Hint: it won't be fewer layoffs).

 

If there are layoffs once the merger happens, it will likely come in Europe first.

FCA runs a profit in North America and its North American plants run near full capacity; but in Europe, FCA runs at a loss and its European plants run at only two-thirds capacity.

It has long been known that European automakers have a large overcapacity problem -- too many assembly plants for the demand. That is why GM bailed out of Europe -- GM Europe could not make money. And that is why Sergio Marchionne was long calling for mergers, to right-size the auto manufacturing environment in Europe.

 

I’m waiting for the Toyota-BMW-MB-AstonMartin alliance!

Soon there will be Only 3-5 mega-companies thanks to rediculuous environmental regulations......

 

I don't think that's entirely true, give that the Opel-derived Buick Encore (a rebadged European Opel Mokka) has been Buick's top seller for years, and has made the division a lot of money, even right here in the U.S. Chevy also sells a lot of Opel-derived Trax models, but not as many as the Encore.

Marchionne, before he passed away, (RIP) admitted he was looking for somebody else to help him pay the bills.

 

Sounds like this deal would alienate the Japanese even more. There is already a cultural gap between Renault and Nissan, they also want to add Italian and American into the mix.

I feel like like this new big entity will have no soul and will make expensive mistakes in the future (Carlos Ghosn wanted to go full electric very fast which made me doubt, I prefer the more conservative approach of Toyota).

If i were Renault I would try to be smarter (with Nissan) rather than bigger.

As a side note, Renault is not only the company you remember from LeCar, their small/urban vehicles have ok reputation in Europe.