• Thursday, March 28, 2024
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Fiat Chrysler and Renault consider share swap as part of tie-up

Fiat Chrysler and Renault consider share swap as part of tie-up

Automakers Fiat Chrysler and Renault are considering an exchange of shareholdings or investment in each other as part of wide-ranging tie-up talks that will be confirmed on Monday, according to people close to both companies.

Renault has agreed to delay any plans to merge with Japan’s Nissan in the short term if an agreement is reached with FCA, a condition stipulated by the Italian-American carmaker for its co-operation, according to two of the people.

Discussions between the two sides about joining forces were first reported by the Financial Times on Saturday. A deal would help the companies pool resources as they battle to survive in an industry beset by falling sales and technological disruption.

The two carmakers are expected to announce that they are in talks to collaborate in several areas including connectivity, electric vehicle technology and manufacturing platforms, the people said.

The carmakers are also likely to say that discussions include the possibility of an exchange of shareholdings, which could take the form of a share swap or an investment in each other’s business, one of the people added.

The condition of Renault shelving plans to merge with Nissan, which is unlikely to be included in Monday’s expected announcement, would cool immediate tensions between the French and Japanese partners, which have fired up in the wake of former alliance leader Carlos Ghosn’s arrest eight months ago.

The delay to the merger would also allow the two companies to focus on their own businesses, rather than the internal politics of or possible changes to their alliance.

Discussions between Renault and FCA are ongoing and may not lead to a deal, people close to the talks cautioned.

However, an announcement is scheduled for early morning on Monday, with Renault expected to hold a board meeting immediately afterwards to discuss the proposals.

A tie-up with FCA would allow Renault to broaden its options as its global alliance with Nissan is grappling with deteriorating profits in the US and an industry-wide shift to self-driving electric vehicles.

The reason behind the talks was purely strategic and there was no intent of strong-arming Nissan over other potential scenarios, according to one person close to the French company’s senior management.

“It’s really a win-win for everyone. It’s not to hurt or to disavow anyone,” said another person briefed on Renault’s thinking.

Still, the talks are expected to put pressure on Renault’s longtime partner, Nissan, which was not directly involved in the discussions even though they may result in FCA joining the Renault-Nissan-Mitsubishi Alliance in the future, according to people close to the Japanese group.

Some Nissan insiders responded with scepticism to reports of the talks. They said they viewed the move as a tactic by Renault to put pressure on the Japanese group, as the French carmaker pushed for a full merger in the wake of the arrest and ousting of their former boss Mr Ghosn.

The same people said they believed there had been a specific attempt by Renault to advance its talks with FCA far enough before mid-June so the issue would be raised by Nissan shareholders before its annual meeting in the later part of next month.

Negotiations to add a new partner to the alliance were expected to further strain relations with Nissan as executives prepared to meet for their monthly alliance meeting in Tokyo on Wednesday.

The Japanese carmaker has repeatedly rebuffed formal merger talks with Renault, with its chief executive, Hiroto Saikawa, telling Renault chairman, Jean-Dominique Senard, and its chief executive, Thierry Bolloré, that Nissan was not yet interested in discussing a full merger in mid-April.

The alliance, which was formed in 1999, has a complicated structure, with Renault owning a 43 per cent stake in Nissan with full voting rights, while the Japanese group owns 15 per cent. Mitsubishi joined the alliance in 2016 after Nissan took a 34 per cent stake in the business.