Fiat Chrysler Automobiles (FCA) abruptly withdrew an offer to merge with French automaker Renault late on Wednesday, a shocking reversal of a deal that could have reshaped the global auto industry.
The Italian-American automaker blamed its move on France’s government, saying that the country’s political climate would stop the tie-up from being successful.
The French government owns 15 percent of Renault and would have had to approve the merger.
“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA said in a statement. “FCA will continue to deliver on its commitments through the implementation of its independent strategy.”
Officials on each side blamed the other for making demands that caused the deal to fall apart with little hope of revival.
Italian Deputy Prime Minister Luigi di Maio yesterday said that FCA’s pullout showed that political interference can be harmful.
“When politics tries to intervene in economic procedures, they don’t always behave correctly, I don’t want to say any more,” Di Maio, who is also minister for economic development, told Italian radio.
FCA and the French government had reached a tentative deal on merger terms earlier on Wednesday, but it was scuttled later as Groupe Renault’s board met for six hours outside of Paris.
The board postponed any action on the merger at the government’s request, Renault said.
Fiat Chrysler late last month proposed the 50-50 merger, saying it would save more than 5 billion euros (US$5.62 billion) per year in purchasing expenses, and costs developing autonomous and electric vehicles.
Nissan Motor Co, which has an alliance with Renault, expressed reservations about the deal.
“FCA clearly saw too many obstacles, primarily Nissan’s reluctance,” said Kelley Blue Book executive publisher Karl Brauer. “Given the longstanding relationship between Renault and Nissan, it’s hard to imagine the merger working without Nissan’s full support.”
A person with ties to FCA said the talks were going great until the French government got involved, continuing to push job security and other demands even after the initial deal was reached.
The person did not want to be identified because details were not included in FCA’s statement.
The person said Renault and its partners Nissan and Mitsubishi Motors, were “all in” on the deal.
However, a French government official gave a different take, saying its demands were made public early on and did not change.
The government sought guarantees that no French factories would be closed and no jobs would be lost. It also wanted support from Nissan and parity in corporate governance between RCA and Renault, said the official, who also requested anonymity because the government had yet to make an official statement.
FCA abruptly yanked its offer after the government said it wanted to wait until Tuesday to make a decision so it could meet in Japan with Nissan representatives, the person said.
French Minister of Finance Bruno Le Maire yesterday said that the government had engaged constructively, but failed to win the support of Nissan.
“With FCA pulling its merger offer, one has to wonder how much the French state is set on limiting Renault’s strategic and valuation opportunities despite having only a 15 percent stake,” analysts at brokerage Jefferies wrote in a note.
Additional reporting by Reuters and Bloomberg
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