News & Opinion | June 7, 2019 11:15 am

The Fiat-Renault Merger Is Officially Off. Here’s Why.

The new company would have been the third largest automaker

Fiat Chrysler and Renault Merger Falls Apart
Fiat Chrysler Automobiles has withdrawn its proposal for a merger with French automaker Renault.
Paul Hermann on Unsplash

Last week, we reported on a potential merger between Fiat Chrysler Automobiles (the parent company of Dodge, Jeep and others) and Renault, noting that such a deal would be bad news for GM. Truth is, it would have been bad news for a lot of people, including the French government.

On Wednesday night, the deal fell apart and FCA withdrew its proposal. And it turns out the French administration had a good deal to do with it, according to the New York Times.

The merger would have made Fiat-Renault the third largest automaker in the world, which sounds like a boon for Renault’s shareholders (the company is currently ninth), the largest of which is the French government with a 15% stake. But combining the two companies would have meant cutting shares in half; the government’s stake would have been halved to 7.5%, and so would their influence in decision making.

That’s a problem for France, which sees Renault as a “crown jewel” and wants to save good-paying jobs and finds itself in a less-than-favorable European car market. That anxiety led to demands, and eventually “French negotiators ‘pulled the elastic until it broke,’ said one person close to the talks,” reports the Times.

But the blame doesn’t rest on the government alone. (We are talking about a massive change in the automotive landscape with international implications, after all.) Longtime Renault partner Nissan and French labor unions both openly voiced concerns about the deal, which could have contributed to the disintegration.

In the end, it doesn’t matter so much how the deal ended as what comes next. Fiat has been interested in forming a strategic partnership for years, so what will be the lucky automaker they court next?

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