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It’s official: Renault, FCA may create new Alliance (updated)

by David Zatz on

Forget Fiat Chrysler; a new alliance of Renault, Fiat Chrysler, Nissan, and Mitsubishi may be coming, creating the world’s third largest automaker with 8.7 million vehicles sold each year, ranging from mainstream to luxury.

Former Renault chief Carlos Ghosn had tied Nissan, Renault, and Mitsubishi together in a relatively loose partnership; this one will be more serious.

If you wanted to see FCA selling Dusters, this is one way to do it

FCA currently has a larger market capitalization than Renault, and is essentially run by the founding family, but would only take a 50% stake in a new combined company. The French government has indicated it would like to reduce or end its partial (roughly $2.6 billion, or 15%) stake in Renault, but may not want control to go to an (essentially but not legally) Italian company.

At this point, the deal stands with a non-binding letter delivered from FCA to Groupe Renault.

This would not be the first Renault alliance. Ha, ha.

The combined company would be owned 50/50 by FCA and Renault shareholders, with a balanced governance structure. There are no planned plant closures as an immediate result of the combination, but the company does expect over five billion euros in synergies and a stronger combined balance sheet.

Chrysler and Renault have had some dealings in the past; Renault had purchased a majority share of AMC, requiring AMC to jettison its military business (which became AM General, explaining why Humvees and Hummers both have slotted grilles). Chrysler bought AMC from Renault in 1987. Before that, former Chrysler Europe partner Matra, having been told to explore a Simca-based minivan by a Chrysler executive, shopped their vehicle to Renault, creating the Renault Espace—Europe’s most popular minivan for quite a while. The highly successful LH cars were loosely based on a Renault car which was partly engineered by AMC, as well.

There are numerous platforms FCA could share with Renault, including one that’s already shared: the Mitsubishi L200 compact truck platform. It’s already essentially rebadged as the Fiat Fullback and as a Ram.

Renault has a joint venture with the Russian government in AvtoVaz, while FCA has no meaningful presence in the country. Renault is less dependent on Europe for sales, with strength in Mexico (where FCA has struggled) and South America,  and, if one includes Nissan, India, the Middle East, and Africa.  Nissan also has an in-house finance company, which Sergio Marchionne felt was a bad idea, but which tends to generate stable revenues. That said, there is a good deal of pressure in Japan to end the Renault-Nissan alliance, even though Renault has a controlling stake in their Japanese counterpart.

Renault has been interested in U.S. sales for some time, but the U.S. is likely uninterested in Renault.

Within Europe, Fiat dominates A-cars with the 500 and Panda, but Renault leads the next larger series, B, with the Clio and Captur. They also appear to be the leaders in electric vehicles in Europe, albeit before Volkswagen’s well-publicized onslaught.

It’s possible that the Nissan alliance would break up, and that Renault, given its damaged relationship with the Japanese firm, would agree to sell its stake. Otherwise, the effects in North America could be far greater; Nissan competes with FCA in small and large cargo vans, large pickups (though Nissan has little impact), and crossovers. Given how low Nissan pickup sales are, there’s a potential to replace the VM diesels in Ram 1500s, which have not garnered the reputation they might have, with the small V-type Cummins diesels which Nissan uses.  

FCA’s own release pointed to Dacia and Lada as well-known low-end brands, Maserati and Alfa Romeo as high-end brands, and also noted Fiat, Renault, Jeep, and Ram. Renault has the highest-selling EV in Europe and a profitable financing business, RCI Banque. Synergies would come from purchasing, R&D, manufacturing, and tooling, with the potential to “reduce the combined number of vehicle platforms by approximately 20% and engine families by approximately 30%.” The combined company, excluding Nissan and Mitsubishi, would be #1 in Latin America, #2 in Europe/Asia/Middle East, and #4 in North America.

The FCA proposal would wind up with a Dutch parent company; the board would have four members from FCA, four from Renault, and one from Nissan. There would be no carried over double-vote rights, but all shareholders would be able to own loyalty voting rights. The combination, as yet unnamed, would be listed in Paris, Milan, and New York stock exchanges.

What about the name? Renault Fiat Chrysler might be most likely, or Fiat Renault Chrysler, or Fiat Chrysler Renault… but it could be something completely new, like InEXORable, EXORcise, Global Motors. It seems unlikely it would end up as just Fiat Renault (or the other way around), after the work put into keeping Fiat and Chrysler people on the same level.

Join the conversation in progress. 

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