Fiat Chrysler proposes merger with Renault, would be third-largest automaker - Fox News

Fiat Chrysler proposed on Monday to merge with France's Renault to create the world's third-biggest automaker and combine their investments in the race to make new electric and autonomous vehicles.

The merged company would reshape the global industry: it would make some 8.7 million vehicles a year, leapfrogging General Motors and trailing only Volkswagen and Toyota.

Shares of both companies jumped over 10% on the news of the offer, which would see each side's shareholders split ownership in the new manufacturer.

Renault welcomed the idea. The company's board met Monday at its headquarters outside Paris to discuss the proposal and said afterward that Renault will study it "with interest." In a statement, Renault said such a fusion could "improve Renault's industrial footprint and be a generator of additional value for the Alliance" with Japan's Nissan and Mitsubishi.

Fiat Chrysler's offer comes at a key moment for Renault. The French manufacturer had reportedly wanted to merge with Nissan, but those plans were derailed by the arrest of boss Carlos Ghosn on financial misconduct charges in Japan.

Now, questions are growing over the Renault-Nissan-Mitsubishi alliance , which is the biggest maker of passenger cars in the world. While Fiat Chrysler says the merger with Renault would accommodate the alliance and lead to savings for them, it is unclear how the Japanese companies might react in the longer term to being tied to a much larger partner.

A deal would save 5 billion euros ($5.6 billion) for the merged companies each year by sharing research, purchasing costs and other activities, Fiat Chrysler said in a statement. It said the deal would involve no plant closures, but didn't address potential job cuts.

The companies are largely complementary: Fiat Chrysler is stronger in the U.S. and SUV markets, while Renault is stronger in Europe and on electric vehicle developments. Together, they would be worth almost $40 billion euros.

Analysts at financial firm Jefferies said it was "hard to disagree with the logic" of the deal as there is a strong fit in the markets each company covers and the brands they offer.

"The elephant in the room is who will run the entity," analysts Philippe Houchois and Himanshu Agarwal wrote in a note to investors.

Mergers of equals can be difficult to manage over questions of who gets the top leadership positions and which brands are promoted and invested in most. A tie-up between Daimler and Chrysler in the 1990s was billed as a merger of equals, but it collapsed nine years later amid cultural differences and recriminations.

Investors were nevertheless enthusiastic, pushing shares in Fiat Chrysler up 11% and Renault 14% in European trading.

The French government, which owns 15% of Renault, said it is "favorable" to the idea of a merger with Fiat Chrysler but wants to study its conditions more carefully, especially in terms of "Renault's industrial development" and employees' working conditions, government spokeswoman Sibeth Ndiaye said.

Such a merger would show "our capacity to respond to European and French sovereignty challenges in a globalized context," she said. "We need giants to be built in Europe."

Collaboration between automakers has taken on greater importance in recent years as they seek to build their technological capabilities in pursuit of electrical vehicles, net connectivity and artificial intelligence for vehicles. Automakers are also under pressure from regulators , particularly in Europe and China, to come up with electric vehicles so they can meet tougher climate change regulations and after scandals over the amount of pollutants engines truly emit.

The merger idea is the biggest corporate move so far by Fiat Chrysler CEO Mike Manley, who took his position after the unexpected death of the charismatic leader Sergio Marchionne last year.

What happens to jobs is likely to be a source of concern.

France's influential CGT union warned against cuts should a deal go through, and said it wants the French government to retain a blocking stake in any new company.

Matteo Salvini, the leader of Italy's rightwing populist League party and the deputy premier, said that "if Fiat grows, it is good news for Italy and Italians," though he warned a deal should protect "every single job."

In Tokyo, Nissan CEO Hiroto Saikawa wouldn't comment directly on the idea of the deal but said, "I am always open to exchanging constructive views on strengthening the alliance."

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2019-05-27 13:02:50Z
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Huawei CEO rejects Chinese retaliation against Apple; ‘Apple is my teacher’ - 9to5Mac

The CEO of Huawei, a Chinese company subject to a US trade ban, says he would be the first to protest at any Chinese retaliation against Apple.

Ren Zhengfei says that neither company should be held responsible for the actions of their country’s governments, that politics and business are separate, and that he would personally refuse to even talk to President Trump …

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Ren made the comments about Apple in an interview with Bloomberg in response to reports that the worst-case Chinese response could cost Apple almost a third of its global profits.

Some speculate China might retaliate against the ban of Huawei — which may widen to include some of its most promising AI firms — by in turn barring America’s largest corporations from its own markets. Apple Inc. could relinquish nearly a third of its profit if China banned its products, Goldman Sachs analysts estimate.

Ren said he would object to any [Chinese retaliation against Apple.]

“That will not happen, first of all. And second of all, if that happens, I’ll be the first to protest,” Ren said in the interview. “Apple is my teacher, it’s in the lead. As a student, why go against my teacher? Never.”

That’s an interesting admission by a man who heads a company that has been accused of stealing intellectual property from US companies where networking products are concerned, facing lawsuits from Cisco, Motorola, and T-Mobile. But Ren denies that.

“I stole the American technologies from tomorrow. The U.S. doesn’t even have those technologies,” he said. “We are ahead of the U.S. If we were behind, there would be no need for Trump to strenuously attack us.”

He also rejected the idea that Huawei could be used as a bargaining chip in the Trump-initiated trade war between the US and China – and he made no secret of what he thinks of the current US president.

Ren said he wasn’t a politician. “It’s a big joke,” he scoffed. “How are we related to China-U.S. trade?”

If Trump calls, “I will ignore him, then to whom can he negotiate with? If he calls me, I may not answer. But he doesn’t have my number.”

In fact, Ren pulled no punches in going after a man he labeled “a great president” just months prior. “I see his tweets and think it’s laughable because they’re self-contradictory,” he quipped. “How did he become a master of the art of the deal?”

He also stated that he wasn’t concerned about the loss of trade with the US. Although currently dependent on US chips, Huawei stockpiled these after an earlier ZTE ban, and plans to make its own chips in the future. And selling to the US? Also not a concern, says Ren.

“The U.S. has never bought products from us,” he said, bristling. “Even if the U.S. wants to buy our products in the future, I may not sell to them. There’s no need for a negotiation.”

Photo: Shutterstock

Check out 9to5Mac on YouTube for more Apple news:

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2019-05-27 12:58:00Z
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Fiat-Renault mega-merger is born of desperation - Automotive News

When the U.S. auto industry was looking down a barrel in 2008, General Motors did the unthinkable and quietly proposed a merger with cross-town rival Ford Motor Co.

It didn’t happen – GM ended up filing for Chapter 11, while Ford managed to avoid a bailout. But the fact they even broached the matter spoke volumes about the pressures the Detroit 3 rivals were under.

Now Europe’s auto industry has its own pause-and-gasp-for-breath equivalent. On Monday, Fiat Chrysler Automobiles said it hopes to merge with France's Renault to form the world’s third-largest carmaker (or by far the largest if you include Renault’s alliance partner Nissan, which arguably one should).

There are attractions in collaboration, but this merger proposal goes well beyond a more limited alliance or partnership. So why is Fiat’s billionaire chairman John Elkann taking such a big risk?

Unlike their U.S. counterparts in 2008, neither Fiat nor Renault are unprofitable or facing imminent collapse. But both face painful industry upheaval: car sales are slowing, just as the costs to develop electric vehicles and comply with ever-stricter emissions targets are surging. Fiat thinks the answer is to achieve huge scale and thereby share the financial burden in meeting those challenges. Is it?

Due to its limited financial resources, Fiat is a laggard in EVs while Renault is an acknowledged leader. But thanks to its acquired Jeep and Ram brands, Fiat has a very profitable truck and SUV business in North America. By contrast, Fiat’s European operations are hardly profitable, which may explain why it picked Renault as a potential merger partner over Peugeot SA, whose sales are more heavily skewed towards Europe.

Cost savings?

Then there are the cost and investment savings, which Fiat estimates could total 5 billion euros ($5.6 billion) annually.

There are reasons to be skeptical about that figure. No factory closures are planned, which is typically one of the quickest and most painful ways to slash expenses. Instead, the savings are expected to come from common purchasing, shared vehicle platforms and r&d.

Factoring the lengthy timespan the synergies will take to achieve, plus integration costs, and that headline figure might be worth only about 3.5 billion euros of value creation to each side, by my rough calculations.

Before today, both companies were valued at just 4 times estimated earnings -- poor even by the standards of the auto industry. Doubtless, the merged entity would hope to enjoy a stock market re-rating which might improve the financial benefits of a deal to about 5 billion euros for each side.

For all that promise, Fiat and Renault each gained only about 2 billion euros of market value on Monday in European markets. That discount doubtless reflects the risk that the deal may not happen or deliver the promised benefits.   

Governance risks

Merging the two companies would create huge complexity and governance risks that the promised large slate of independent board members might still struggle to alleviate.

Neither side was likely to countenance being the junior partner in a tie-up. It’s fortunate, then, that Fiat and Renault’s market capitalization weren’t all far apart, so a merger of equals is possible, at least on paper. The slight valuation disparity would be offset by a cash payment to Fiat shareholders.

But mergers of equals rarely work, and automotive M&A especially has a poor track record. Fiat’s acquisition of Chrysler was a success, but Daimler’s earlier acquisition of Chrysler was a disaster.

It’s odd that Fiat has pitched a merger while Renault is in a tussle with its alliance partner Nissan. Perhaps the Japanese will view this as a helpful distraction that will stop Renault’s managers trying to deepen their alliance for the time being. A merger with Fiat would also dilute the influence of the French state, which currently holds 15 percent of Renault’s shares and even more of the voting rights. 

However, it’s also possible Nissan will see this is an attempt to swing the weight of the Renault-Nissan alliance even more toward Europe. As with the alliance, politics presents a huge challenge to this merger. Expect France and Italian interests to battle for every cent of investment spending. If job cuts become a necessity, things could get even more tense.

But politics also explains why this deal is even being discussed. By demonizing diesel vehicles while clamping down on carbon emissions, governments have backed carmakers into a corner. As in 2008, this is what happens when an industry gets desperate.

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2019-05-27 10:55:24Z
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StockBeat: The Spirit of Marchionne Lives on in FCA-Renault Deal - Investing.com

© Reuters.

By Geoffrey Smith

Investing.com -- Sergio Marchionne may be gone, but his spirit lives on.

The former Fiat boss would surely have applauded his successor’s plan for another transformative merger to address the problems of slowing demand and frighteningly large investment obligations as mobility becomes electric, autonomous and connected.

FCA's (NYSE:) strongest card is the extra efficiency such scale creates: it estimates annual synergies at over 5 billion euros, in addition to those that Renault (PA:) currently enjoys with its merger partner Nissan (T:). A combined FCA-Renault would be the world’s third-largest automotive group behind Toyota (T:) and Volkswagen (DE:). But – more importantly – it could also convince Nissan and Mitsubishi (T:) that there is no long-term alternative to deeper integration with Renault. That could enhance the efficiencies of scale still further.

But as with so many of Marchionne’s grand designs, Fiat Chrysler’s move on Renault risks being bogged down by the details – and by the sheer number of moving parts in the deal.

First, there is the promise of no plant closures. This comes after a six-month period in which – according to Bloomberg calculations – global carmakers have announced 38,000 job cuts. Of those, only 1,500 have come from FCA and none from Renault. The two companies are behind in the race to trim costs and this promise reduces their ability to extract the maximum benefit from the deal (although it’s conspicuous that there’s no promise about the safety of white-collar jobs)

Second, there's the ownership question: the Financial Times has cited an unnamed French government official as saying the government isn’t opposed to the deal, but the French state’s stake would be diluted in a merged company, and it would only be the second largest shareholder behind Exor, the Agnelli family holding company now run by Johann Elkann. FCA has tried to address concerns of control by proposing an 11-member board with four members each from FCA and Renault, with one more from Nissan.

Either way, markets have decided they like the idea, and have pushed Renault 13.7% higher on Monday morning, while FCA is up 9.9%. Peugeot (PA:), which could see its competitive position jeopardized, is down 2.6%. That’s helping the Italy lead Europe’s stock markets higher on a morning where the mood has been lifted by the reasonably strong showing of centrist parties in elections to the European parliament.

The is up 0.9%, while the French is up 0.3%. The benchmark , which includes a lot of U.K. stocks that aren’t trading today due to the local bank holiday, is up 0.4% at 377.32 as of 4.30 AM ET (0830 GMT).

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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2019-05-27 08:39:00Z
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Fiat Chrysler proposes merger with Renault to create carmaking powerhouse - CNN

Fiat Chrysler (FCAU) said Monday that it had submitted a merger proposal to French rival Renault. Each carmaker would control half of the merged entity, it added.

Renault (RNLSY) said in a statement that its board of directors would meet on Monday to discuss the proposal.

The companies had been discussing ways to cooperate on products and new technologies, but Fiat Chrysler said more could be gained from a merger.

"These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development," the company said.

Fiat Chrysler owns brands including Jeep, Dodge, Alfa Romeo and Maserati. It said a merger would create a company with annual vehicle sales of 8.7 million.

The proposal is the latest example of established automakers seeking partnerships to share the costs of developing new technologies including electric vehicles and autonomous driving systems.

Sherisse Pham and Saskya Vandoorne contributed reporting.

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https://www.cnn.com/2019/05/27/business/fiat-chrysler-renault-merger/index.html

2019-05-27 07:08:00Z
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Fiat Chrysler and Renault are in advanced talks to merge the automakers - CNBC

FILE PHOTO: The logo of FIAT carmaker is seen on a vehicle in Cairo, Egypt, May 19, 2019. Picture taken May 19, 2019. REUTERS/Mohamed Abd El Ghany/File Photo

Mohamed Abd El Ghany | Reuters

Fiat Chrysler and Renault are in advanced talks to merge the two automakers.

Sources say the talks, which have been happening over the last several weeks, have picked up speed in recent days and could lead to an announcement regarding a merger or partnership as soon as tomorrow.

The CEOs of both automakers have made it clear they are open to partnerships with other automakers that would give them the economies of scale to further cut costs both in terms of manufacturing as well as in developing vehicles. The move could be especially beneficial in Europe where auto sales overall are under pressure.

During Fiat Chrysler's most recent earnings call, CEO Mike Manley was asked about the possibility of merging with another automaker. "We have made it clear in the past that we want to be active and proactive to develop our business and improve the value for our shareholders," Manley told analysts. "We are going into an environment where there are going to be opportunities."

Meanwhile, under former CEO Carlos Ghosn, Renault was increasingly interested in a full merger with Nissan, its partner in an alliance that has delivered mixed results. When the two automakers first formed their alliance in the late 1990s, the combination helped Nissan cut losses and ultimately become a highly profitable automaker. These days there's growing tension between Nissan and Renault since the arrest and detention of Ghosn late last year. Japanese authorities have charged Ghosn with a number of crimes relating to his tenure as CEO of the Nissan-Renault alliance.

Whether Fiat Chrysler ultimately joins the Nissan-Renault alliance is unclear.

A partnership between Fiat Chrysler and Renault would also help the automakers pool resources for the development of electric and autonomous vehicles. Renault's EV program is considered to be more advanced than Fiat Chrysler's, but neither automaker is considered a leader in electric vehicles.

A spokesperson for Fiat Chrysler would not comment when reached by CNBC. Renault could not immediately be reached for comment.

CNBC's Meghan Reeder contributed to this report.

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https://www.cnbc.com/2019/05/26/fiat-chrysler-and-renault-are-in-advanced-talks-to-merge-the-automakers.html

2019-05-26 19:15:26Z
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Fiat Chrysler and Renault are in advanced talks to merge the automakers - CNBC

FILE PHOTO: The logo of FIAT carmaker is seen on a vehicle in Cairo, Egypt, May 19, 2019. Picture taken May 19, 2019. REUTERS/Mohamed Abd El Ghany/File Photo

Mohamed Abd El Ghany | Reuters

Fiat Chrysler and Renault are in advanced talks to merge the two automakers.

Sources say the talks, which have been happening over the last several weeks, have picked up speed in recent days and could lead to an announcement regarding a merger or partnership as soon as tomorrow.

The CEOs of both automakers have made it clear they are open to partnerships with other automakers that would give them the economies of scale to further cut costs both in terms of manufacturing as well as in developing vehicles. The move could be especially beneficial in Europe where auto sales overall are under pressure.

During Fiat Chrysler's most recent earnings call, CEO Mike Manley was asked about the possibility of merging with another automaker. "We have made it clear in the past that we want to be active and proactive to develop our business and improve the value for our shareholders," Manley told analysts. "We are going into an environment where there are going to be opportunities."

Meanwhile, under former CEO Carlos Ghosn, Renault was increasingly interested in a full merger with Nissan, its partner in an alliance that has delivered mixed results. When the two automakers first formed their alliance in the late 1990s, the combination helped Nissan cut losses and ultimately become a highly profitable automaker. These days there's growing tension between Nissan and Renault since the arrest and detention of Ghosn late last year. Japanese authorities have charged Ghosn with a number of crimes relating to his tenure as CEO of the Nissan-Renault alliance.

Whether Fiat Chrysler ultimately joins the Nissan-Renault alliance is unclear.

A partnership between Fiat Chrysler and Renault would also help the automakers pool resources for the development of electric and autonomous vehicles. Renault's EV program is considered to be more advanced than Fiat Chrysler's, but neither automaker is considered a leader in electric vehicles.

A spokesperson for Fiat Chrysler would not comment when reached by CNBC. Renault could not immediately be reached for comment.

CNBC's Meghan Reeder contributed to this report.

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2019-05-26 18:40:31Z
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