Fiat Chrysler and Renault: Merger cancelled – Paris fights crosswise?

As recently as 27th of May Fiat Chrysler publicly announced its intention to merge with Renault. The third largest car manufacturer in the world would have been created. Today the cancellation. Fiat Chrysler officially declares that it will no longer merge. Curiously: At the same time it is written that they are still convinced of the merger idea.

But in our article from 27th of May we already wrote (what an anticipation) quote “Ohhh, do we mean? Will the proud French go along with it? Hard to imagine.” And yes, that’s how it’s going to be. By “French” we don’t mean the management of Renault rather the French state. For hundreds of years France has been an extremely state-heavy economy. The state is actively involved favoring large companies that are also under state influence. And if large French companies merge with foreign competitors France usually insists that the headquarters and know-how remain in France. Airbus is just the best example (to put it simply).

And so it comes as it had to. Fiat Chrysler withdraws the merger offer to Renault because it had become clear that “there is currently no political climate in France for the merger to be successfully implemented”. To put it clearly: The French state, which holds 15% of Renault’s shares, is probably shooting cross-fire. Should the new corporate headquarters and the development departments etc. be located outside France? Unimaginable at the industrial policy raison d’être in Paris. French Economics Minister Bruno Le Maire told the TV station BFMTV just yesterday that it would be a good idea to take time during the talks to “do things right”. So he probably insisted on the new corporate headquarters in his own country in the spirit of France?

Here Fiat Chrysler in the original wording (decisive points are marked bold):

The Board of Fiat Chrysler Automobiles N.V. (“FCA”) (NYSE: FCAU / MTA: FCA), meeting this evening under the Chairmanship of John Elkann, has resolved to withdraw with immediate effect its merger proposal made to Groupe Renault. FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties. However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully. FCA expresses its sincere thanks to Groupe Renault, in particular to its Chairman and its Chief Executive Officer, and also to the Alliance partners at Nissan Motor Company and Mitsubishi Motors Corporation, for their constructive engagement on all aspects of FCA’s proposal. FCA will continue to deliver on its commitments through the implementation of its independent strategy.

Elysée Palace in Paris. Here is probably the problem. Photo: Remi Mathis CC BY-SA 3.0

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