[blackwasp]

According to a media report, Renault will restart merger talks with Nissan within the next 12 months and are looking to acquire another car company, which might be Fiat Chrysler Automobiles (FCA).

The Renault-Nissan-Mitsubishi alliance sold 10.76 million units, while FCA sales amounted to 5 million vehicles in 2018. The combined entity could take on the likes of the Volkswagen Group and Toyota. It is also reported that former Chairman Carlos Ghosn had initiated talks about the merger couple of years ago, but the French government, that holds a 15% stake in Renault, shot down the proposal.

John Elkann, chairman of FCA, is reportedly looking for deals to strengthen the carmaker. Elkann has reportedly met rivals including Groupe PSA to explore a potential deal. With the Jeep and Alfa Romeo brands, FCA has a market capitalisation of over Euro 20 billion. Meanwhile, the Renault-Nissan-Mitsubishi alliance is valued at Euro 50 billion.

It is also reported that all the 3 carmakers are expected to announce a new plan by the end of this year with revised targets to sell 14 million vehicles (combined) by 2020. The companies would also have a reshuffle of their boards with Nissan adding outside directors and Renault reducing the size of its board.



Source: Financial Times

Link to the Team-BHP News

[sajands]

First it was Hyundai that was looking at buying out FCA and now it's the french that are looking at taking over FCA got to watch how this pan's out

[GTO]

Originally Posted by sajands

First it was Hyundai that was looking at buying out FCA and now it's the french that are looking at taking over FCA

Hyundai was never serious. It doesn't need FCA for anything, except for the Jeep brand if it's sold separately. Even Renault will be looking at FCA just for two things:

- Entry in the USA market & FCA's wide network there.

- Brand Jeep.

[desdemona]

FCA has strengths besides the jeep brand and access to the USA market. FCA has Ram whose luxed up pickups command margins higher than most luxury car brands. It has Ram+Fiat Professional vans and heavy duty pickups in Europe as well as Latam. It is the only car firm that is consistently profitable in Latin America. And it has rear wheel drive high performance platforms and powertrains via Dodge, the new Alfa Romeo, and Maserati. Plus a profitable and dominant position in the European A-segment via the Panda and 500.

Its biggest cachet is that it is multi brand, with several brands that are arguably capable of further 'white space' growth on a pretty global basis, not just USA or Europe: Jeep, Alfa Romeo, Maserati. It also has huge engineering capabilities especially with high performance engines, 4×4 systems and via Magneti Marelli even in lighting, infotainment, and electric or hybrid drives. But it lacks sheer scale in many of these very domains of strength.

Renault lacks high margin globally viable high performance or luxe pedigree or potential, as does Nissan. Hyundai remains a margins constrained brand all over the world (barring India). Despite being such a heavy investor, with the result that its financial profile (stock market performance) has been deteriorating badly for too many quarters. Plus all firms are strained for scale economies with the new heavy investments for electric propulsion and autonomous driving, amid brutally expensive new regulations as well as over competition, commoditization and over capacity. All in all, there remains a large complementarity of FCA with several such firms.

A deal or several will indeed occur, but probably not before the onset of the next global downturn i.e., soon enough. FCA is very, very complementary to many firms since it has USA, Jeep, etc. Thing is, though, that it is now zero net debt and fairly profitable with a large and now financially strong again family controlling shareholder (Angelis, John Elkann). And so the financial terms of a large deal will be more onerous for, say, PSA, Renault or say Hyundai than was the case just a few years ago.

[indiaashish]

An interesting development in Fiat

Fiat Chrysler is in advanced discussions to forge extensive ties with Renault to join forces to tackle the structural challenges facing the global auto industry. Likely outcome - FCA could to join the Renault-Nissan-Mitsubishi Alliance in the future. The talks are focused on the potential for extensive co-operation between FCA and Renault, which is the dominant partner in the alliance with Nissan and is seeking to secure a future for the partnership following the arrest of longtime leader Carlos Ghosn eight months ago in Tokyo.

FCA has already been in discussions with Renault about sharing platforms, the manufacturing base that underpins a car, and is also holding similar talks with Peugeot. It is understood that talks with Renault have moved beyond simply sharing the technology, and that they advanced faster than those with PSA.

FCA already has a joint venture with PSA making light commercial vehicles, and has a more limited relationship with Renault, which contract manufactures some vans for FCA in France.

Although it is headquartered in Europe, FCA has most of its operations, sales and profits within North America — a region where Renault does not operate. It also includes premium brands Alfa Romeo and Maserati, a heavily profitable segment of the market that Renault does not compete in.

The future addition of FCA would also see the alliance become the largest global carmaker at a stroke, with 15.6m combined sales a year, far ahead of current leader Volkswagen, which last year sold 10.8m.

The alliance was formed in 1999 between Renault and Nissan as a way of combining forces to get the benefits of scale without requiring a full merger between the companies. Mitsubishi joined the alliance in 2016 after Nissan took a 34 per cent stake in the business.

(source:Financial Times - https://www.ft.com/content/5127ed50-...5-ad75bb96c849)

[vrprabhu]

The above link appears to be a paid subscription....

But a smaller news is here -

https://epaperlive.timesgroup.com/TO...7#display_area (See Page 13 last item)

Don't envisage any big benefit accruing to both in INDIA in case there is a merger - are the numbers of the combined entity significant?

FIAT has only three models to speak of. Renault has may be four or five - and most are identical to those of Nissan's? Don't think there is likely to be any positive impact on the customer given their service availability.

[ajmat]

Well, maybe there is a long term strategy here somewhere.

After wrestling Ghosn out, Nissan may not want the French in anymore. However, I dont see too much synergy

Europe - Some capacity utilised in Renault factories
North Africa - Renault builds some Fiats
South America - Fiat builds some Renaults
India - Either Oragadum or Rajangaon closes up and one factory builds them all
China - No one wins - Fiat is failing, Renault is fledgling
North America - Jeep builds and sells small SUV's from Fiat

[volkman10]

Renault confirms the proposal received from FCA, under consideration.

[tarik.arora]

It will be interesting to see how this will impact the Renault-Nissan alliance, that is already going through a rough phase. Renault already has some obligations towards Nissan because of the alliance and now FCA will also come into picture with a merger transaction. I think this move from FCA will clarify the alliance stand in the next couple of months. Renault-Nissan and Renault-FCA cannot go hand in hand. Either the alliance will break or there will be a complete merger in the months to come.

Imaging Nissan-Renault-Mitsubishi-FCA all merging together to form a giant that can only be challenged by a merged Toyota-Suzuki entity

Slightly OT: This was bound to happen. Huge technology investments, ever tightening norms and under-utilised capacities will give birth to many more such mergers. Consolidation is real and is the next big thing. I am still not sure if such moves are beneficial for the customers or not. On one side, we will see huge investments in technologies but on the other hand, many shared products will hit the market that will not have much mechanical differentiation. They will only be differentiated by looks and connectivity features.

[blackwasp]

Fiat Chrysler Automobiles (FCA) has proposed a merger with the Renault Group. As part of the proposal, each of the companies would own 50% shares of the combined business.

As part of the merger plan, a new Dutch parent company will be formed and both - FCA and Renault will receive equal equity stake. There will be 11 board members with 4 each from the French and Italian carmakers, one from Nissan and rest will be independent members. The parent company would be listed at the Milan, Paris and New York stock exchanges. Before the deal is closed, to maintain equality across different markets, FCA shareholders would get Euro 2.5 billion as a dividend and distribution of Comau’s shares to FCA or an incremental Euro 250 million dividend. Comau is a subsidiary of FCA, specialising in processes and automated systems that improve corporate manufacturing production.

The combined entity would result in the third largest carmaker with annual sales of 8.7 million vehicles. It is also expected that the merger would result in capital-efficient investments in global platforms, architectures, powertrains and technologies. FCA has estimated that purchasing savings, R&D efficiencies and manufacturing and tooling efficiencies would bring about 90% of the annually predicted Euro 5 billion synergies.



Link to the Team-BHP News

[GTO]

The Renault-Fiat guys obviously know better, but I think this isn't going to lead to a successful marriage. There are way too many similarities in them, in terms of strengths as well as weaknesses. In the short to mid-term, they might see some cost savings, but other than that, I'm not convinced about an alliance between Renault-FCA. With Toyota-Suzuki, one sees obvious benefits to both parties; here, I'm still scratching my head.

[GTO]

Sharing the full press release that just rolled in. Wow, the group could then have 6 big brands (Renault, Nissan, Fiat, Chrysler, Mitsubishi, Jeep) and an upcoming one (Datsun). Other than VW, I can't think of any auto group with so many major brands under the same umbrella.

One thing for sure, they'll need a genius like Martin Winterkorn, Ferdinand Piech or...Carlos Ghosn to run the show. This is big, BIG business.

FCA SUBMITS PROPOSAL FOR A TRANSFORMATIVE MERGER WITH GROUPE RENAULT TO CREATE PREEMINENT GLOBAL AUTOMOTIVE GROUP

Combined business to be 50% owned by FCA shareholders and 50% by Groupe Renault shareholders – balanced governance structure and majority of Board of Directors being independent

Combination would create the 3rd largest global OEM with 8.7m vehicle sales and a strong market presence in key regions and vehicle segments

Broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream

Combined company would be a world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving

No plant closures as a result of the combination

In excess of €5 billion estimated annual run rate synergies incremental to existing Renault-Nissan-Mitsubishi Alliance (Alliance) synergies

Strong combined balance sheet allowing for flexible capital allocation and robust dividend policy

28th May 2019- Significant benefits to the other Alliance partners including ~€1 billion of additional estimated run rate synergies Fiat Chrysler Automobiles N.V. has today delivered a non-binding letter to the Board of Groupe Renault proposing a combination of their respective businesses as a 50/50 merger.

The FCA proposal follows initial operational discussions between the two companies to identify products and geographies where they could collaborate, particularly as they develop and commercialize new technologies. These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development. The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving.

The proposed combination would create a global automaker, preeminent in terms of revenue, volumes, profitability and technology, benefitting the companies’ respective shareholders and stakeholders. The combined business would sell approximately 8.7 million vehicles annually, would be a world leader in EV technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis.

The benefits of the proposed transaction are not predicated on plant closures, but would be achieved through more capital efficient investment in common global vehicle platforms, architectures, powertrains and technologies. FCA has a history of successfully combining OEMs with disparate cultures to create strong leadership teams and organizations dedicated to a single purpose. Therefore, FCA’s Board strongly believes that this combination, which would have the scale, expertise and resources to navigate the rapidly changing automotive industry, would create new opportunities for employees of both companies and for other key stakeholders.

Under the terms of the proposal, shareholders in each company would receive an equivalent equity stake in the combined company. The combination would be carried out as a merger transaction under a Dutch parent company. The Board of the combined entity would initially be composed of 11 members, with the majority being independent and with equal representation of four members each for both FCA and Groupe Renault, as well as one nominee from Nissan. Further, there would be no carryover of existing double voting rights. However, all shareholders would have the opportunity to earn loyalty voting rights from the completion of the transaction under a loyalty voting program. The parent company would be listed on the Borsa Italiana (Milan), Euronext (Paris) and the New York Stock Exchange.

The benefits flowing from the combination of the two businesses would be shared, 50% by current FCA shareholders and 50% by current Groupe Renault shareholders. Before the transaction is closed, to mitigate the disparity in equity market values, FCA shareholders would also receive a dividend of €2.5 billion (see Appendix). In addition, prior to closing, there would be a distribution of Comau’s shares to FCA’s shareholders or an incremental €250 million dividend if the Comau spin-off does not occur.

Combining the businesses will bring together complementary strengths. The combination would create a brand portfolio that would provide full market coverage with a presence in all key segments from luxury/premium brands, such as Maserati and Alfa Romeo, to the strong access brands of Dacia and Lada, and would include the well-known Fiat, Renault, Jeep and Ram brands as well as commercial vehicles. Groupe Renault has a strong presence across Europe, Russia, Africa and Middle East, while FCA is uniquely positioned in the high margin segments in North America and is a market leader in Latin America. FCA’s evolving capability in autonomous driving, which includes partnerships with Waymo, BMW and Aptiv, is complemented by Groupe Renault’s decade of experience in EV technology where it is the highest selling EV OEM in Europe. Groupe Renault also has a well-established and profitable financing business (RCI Banque).

The combination would be highly value accretive for both FCA and Groupe Renault shareholders, delivering in excess of €5 billion of estimated annual run rate synergies, incremental to existing Alliance synergies. These synergies would arise principally from the convergence of platforms, the consolidation of powertrain and electrification investment and the benefits of scale. FCA estimates based on its experience, that approximately 90% of synergies would come from purchasing savings (~40%), R&D efficiencies (~30%), and manufacturing and tooling efficiencies (~20%). Included in these estimated savings would be the potential to reduce the combined number of vehicle platforms by approximately 20% and engine families by approximately 30%. The full run rate of estimated synergies is expected to be achieved by the end of year six following closing, with about 80% achieved in year four. Taking into account the impact of the approximately €3-4 billion in cumulative implementation costs, it is estimated that the synergies would be net cash flow neutral in year one and positive from year two onward.

Geographically, based on FCA and Groupe Renault’s 2018 global sales, the combined company would be #4 in North America, #2 in EMEA and #1 in Latin America and would have the increased resources necessary to grow its footprint in the APAC region. On a simple aggregated basis of 2018 results, the combined company’s annual revenues would be nearly €170 billion with operating profit of more than €10 billion and net profit of more than €8 billion.

While the proposal focuses on a combination of FCA and Groupe Renault, FCA looks forward – as part of a combined enterprise with Groupe Renault – to working with Groupe Renault’s Alliance partner companies on ways to create additional value for all Alliance members. FCA recognizes the standing and achievements of Groupe Renault’s partners and sees significant expected benefits to all parties from the expanded partnership. The FCA and Groupe Renault combination together with its Nissan and Mitsubishi partners would be the largest global OEM alliance, selling more than 15 million vehicles annually. The additional synergies stemming from the merger of FCA and Groupe Renault that are expected to accrue to Nissan and Mitsubishi purely as members of the Alliance are estimated to be worth an incremental €1 billion annually.

This proposal offers the opportunity to create the #3 global automotive company with broad, complementary and strong brand and geographic presence and important strengths in transforming technologies. It also confirms and enhances the value of the existing Alliance and its potential to become even stronger in the future. While there is no certainty that this proposal will result in a transaction, the Board of FCA has strongly supported and approved the proposal which will now be reviewed by the Groupe Renault Board of Directors. The definitive agreements for the proposed combination are subject to negotiation and to final review and approval by the FCA and Groupe Renault Boards. Completion of the proposed combination would also be subject to customary closing conditions, including approval by each company’s shareholders, as applicable, and the satisfaction of antitrust and other regulatory requirements.

Information related to the proposal will be made available from time to time on the FCA website (https://www.fcagroup.com/en-US/Pages/home.aspx).

[himanshugoswami]

Originally Posted by GTO

One thing for sure, they'll need a genius like Martin Winterkorn, Ferdinand Piech or...Carlos Ghosn to run the show. This is big, BIG business.

Actually, if they think out of the box, one person who may be very well suited is Anand Mahindra. Q is, can they convince him

[desdemona]

What will this merger likely mean in India? I suppose the risks of both Renault and Nissan winding up here are heightened. As it is: their accumulated losses in India are epic.

Carlos Ghosn was very indulgent in terms of return on investment, trying or rather punting expensively on a whole host of, it turns out in retrospect: poor prospects.

One imagines that will change: with his departure and with this renewed focus via mergers etc on capital allocation efficiency, a particular forte of FCA under Marchionne/Elkann.

With such already epic accumulated losses, and with the fresh investment load (caused by new fuel, crash, emmissions and CAFE regulations in India, not to mention an oligopolistic marketplace in India) being so huge: chances of a winding up of Renault, and /or Nissan here are imo rather high. A la GM, a la Fiat brand. How could they not be?

The merged FCA-Renault(-Nissan) can play this market via Jeep, via the fca manufacturing JV with Tata Motors and in the future via their high end performance brands (Alfa Romeo, Maserati, Infiniti.)

This large global scale merger will bear concerned watching from here for the above reasons!

[GTO]

Originally Posted by himanshugoswami

Actually, if they think out of the box, one person who may be very well suited is Anand Mahindra. Q is, can they convince him

With due respect to Mr. Mahindra who I admire, he would be in over his head managing the enormously large Renault-FCA group. I hope you were joking.

Here are two interesting articles on the merger. First, Peugeot left behind in the M&A dust. Then, how Nissan is getting a cheap ride.