A Fiat Chrysler Merger With Renault Would Create 3rd Biggest Car Maker

May 28, 2019
Originally published on May 28, 2019 7:25 am
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Fiat Chrysler is proposing a merger with the French automaker Renault. Renault says it's considering it. This merger would be a big deal. It would create the world's third biggest car company after Toyota and Volkswagen. Here's NPR's Camila Domonoske.

CAMILA DOMONOSKE, BYLINE: A merger this big would be striking but not totally surprising.

MICHELLE KREBS: Fiat Chrysler has been looking for a partner for a while, and there are limited partners available.

DOMONOSKE: Michelle Krebs is an analyst with Autotrader and Cox Automotive. She says meanwhile, the French Renault had a longstanding alliance with the Japanese automaker Nissan. That was working well...

KREBS: ...And then things went awry when the former CEO, Carlos Ghosn, was arrested in Japan for alleged financial misdeeds. And things have just been unraveling.

DOMONOSKE: Now, both Fiat and Renault are eyeing their options when it comes to who they'll partner with as they prepare for big changes in the industry. Many major automakers have already been partnering up over the last couple of years. There are two reasons.

First, after years of record growth, the auto industry is starting to slow down. And that decline is expected to continue, meaning fewer car sales, less revenue. At the same time, automakers need to be making big investments in the future - things like electric vehicles and self-driving cars.

MARK WAKEFIELD: And it's a tough one because you're investing in something that isn't profitable today, isn't going to be profitable tomorrow but might be profitable - it might be existential in 10 years' time.

DOMONOSKE: Mark Wakefield is an automotive consultant at AlixPartners. Upstart companies, like Tesla and even ride-hailing services like Uber and Lyft, they're bringing new competition. In response, established carmakers are...

WAKEFIELD: Closing ranks towards each other to be able to share costs and to be able to invest through this cycle. That's really what's driving a lot of these merger discussions and partnership discussions, too.

DOMONOSKE: Renault has been making electric vehicles for years, while Fiat Chrysler has been lagging behind. It's decided to focus on moneymaking brands, like Jeep and Ram, big pickups and SUVs. Plus, it has premium brands, like Maserati. Renault is pushing smaller low-cost vehicles. Fiat Chrysler thrives in the Americas, particularly in the United States. Renault doesn't sell cars in North America at all. But it's a major player in Europe and Russia.

That all sounds like a pretty good fit. One has small cars, and the other big trucks. One offers luxury vehicles, the other goes downmarket. But...

FELIPE MUNOZ: They still have a big problem, which is China.

DOMONOSKE: Felipe Munoz is an analyst at auto researcher JATO Dynamics. He says neither company has a foothold in the crucial Chinese market. Then there are the practical problems of merging.

MUNOZ: And adding another culture, another - more factories...

DOMONOSKE: That's more people to teach to work together, which Fiat Chrysler has to do already, since the merger that made it back in 2014.

MUNOZ: Fiat and Chrysler, which are Italians and Americans that are doing well, yes. But it's not an easy thing.

DOMONOSKE: And it would be even harder if you try to preserve the French Renault's alliance with Nissan of Japan. Another complication, Renault is part owned by the French government and has strong unions. They'll want to preserve local jobs. Fiat Chrysler says the deal, if it happens, would not result in any plant closures.

Camila Domonoske, NPR News.

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