The auto world is stirring today as news has emerged of a potential merger between Fiat Chrysler (NYSE:FCAU) and Renault (OTCPK:RNSDF). The pair are looking to pool their resources and expertise—all the while lowering costs—in a venture that would see the combined business owned 50/50 between shareholders.
The markets are already reacting strongly to the proposition with shares of both companies skyrocketing.
Fiat Chrysler has jumped 13% on the Borsa Italiana exchange and Renault, 11.5% on the Euronext Paris exchange. Let’s check this out.
Fiat Chrysler and Renault Merger
If the merger goes ahead, the combined result would create the third largest automaker in the world. And with the plan to create the “next generation of automobiles”, the suggestion is that the pair can take on the EV market better together rather than as stand-alone companies.
As it stands, they complement each other: Fiat Chrysler has a stronger presence in the US and SUV markets, and Renault has a stronger presence in Europe and in the Electric Vehicle sector.
Further, the resulting company would have an estimated sale of 8.7 million vehicles a year. With this type of output, it would best General Motors and be third behind Volkswagen and Toyota. The other benefit of the joint organization is the estimated savings of €5 billion annually.
Fiat Chrysler and Renault Joint Venture
As stated, the combined business would be owned 50/50 between shareholders of FCA and Groupe Renault. The merger still requires approval by the boards of both the car makers.
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And further, the French Government, which is already “favorable” to the idea, owns 15% of Renault. It has stated that it wants to study the conditions more first especially in terms of “Renault’s industrial development” and the working conditions for employees.
But the press release from Fiat Chrysler has said that there would be no plant closures as a result of the tie-up and no workers should be affected by the union.
The merger would be “carried out as a merger transaction under a Dutch parent company.”
What do you think of this merger? Good idea?
Featured Image: Depositphotos © TKKurikawa
