A Fiat-Renault marriage? Wait a minute, not so fast

Well, that didn’t last long. It was only Monday when news reports emerged that Fiat Chrysler Automobiles and Groupe Renault disclosed they were heavily in discussion about a possible merger, which due to Renault’s existing alliances, would have also involved Nissan and Mitsubishi. Whatever synergies were noted, it nonetheless took just days for it all to unravel, as FCA and Renault both announced that any deal was off. The merger would have been a blockbuster and would have created the world’s third-largest automaker but in the end, the parties simply could not come to terms.

It all reminded me of the ill-starred 1960s merger between the New York Central an Pennsylvania railroads, which created an entity that was so big it couldn’t succeed and soon collapsed into a record-setting bankruptcy. Renault’s association with Nissan was already having problems following last year’s arrest of chairman Carlos Ghosn on charges of financial crimes. Automakers throughout the world, even the biggest, are examining heretofore unimaginable partnerships as the global industry careens toward the widespread adoption of electric and autonomous vehicles. Somewhere in the middle of all this, there’s going to be an enormous shakeout when it comes to the number and variety of suppliers and workers that will be needed in the future. On paper, the FCA-Renault deal looked like a winner for both companies, a merger that would have put brands ranging from Ferrari to Jeep under the same ownership. It also would have given Renault access to the U.S. market and the SUVs it will need to survive there, plus allow FCA to tap into Renault’s extensive lineup of electric vehicles including the ZOE subcompact. Had it happened, the merger would have inexorably meant job cuts, including at Renault. That appears to have been the deal’s major initial stumbling block, given the fact that Groupe Renault’s largest shareholder is the French government, with 15 percent of the company’s stock. This lashup didn’t work, but expect more of these deals to be proposed or consummated. In its reporting on the FCA-Renault collapse, The New York Times underscored how profoundly the car business is likely to change: The ride-sharing network Uber has a higher market valuation than FCA and Renault combined, despite losing a billion dollars over the past year.

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