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Fiat Chrysler Withdraws Its Offer for Renault Fiat Chrysler Withdraws Its Offer for Renault
(about 3 hours later)
Fiat Chrysler late Wednesday abruptly withdrew a proposal to merge with Renault, walking away from a deal that could have fundamentally reshaped the global auto industry. PARIS — Fiat Chrysler late Wednesday abruptly withdrew its proposal to merge with Renault, walking away from a deal that could have fundamentally reshaped the global auto industry.
The stunning move came after two days of meetings in Paris in which Renault’s chairman, Jean-Dominique Senard, had sought to convince its board of the financial and industrial merits of a deal. In a statement Wednesday evening, Fiat Chrysler said it continued to believe that the merger proposal, worth 33 billion euros ($37 billion), was solid, balanced and beneficial to all parties. But it added, “It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”
In a statement Wednesday evening, Fiat Chrysler said it continued to believe that the merger proposal was solid, balanced and beneficial to all parties. But it added, “It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.” Two people close to the talks said Fiat Chrysler walked away after the French government, Renault’s largest shareholder, requested a delay in a final vote in order to consult with Nissan, Renault’s partner in the world’s biggest auto alliance.
Since Fiat Chrysler officially unveiled its proposal on May 26, the plan has faced resistance by some Renault shareholders who argued that the Italian-American conglomerate was undervaluing a crown jewel of French industry. France’s powerful labor union at Renault objected to a deal, warning that it could lead to layoffs. Fiat Chrysler saw the effort to postpone the vote as a signal that the deal might ultimately go nowhere, said a person with knowledge of that company’s negotiating position. But the sudden collapse appeared to take the government by surprise.
The negotiations were also complicated by Renault’s longtime alliance with Nissan. In a statement Monday, Nissan’s chief executive, Hiroto Saikawa, said a full merger with Fiat “would significantly alter the structure of our partner Renault.” He added, “This will require a fundamental review of the existing relationship between Nissan and Renault.” With a total output of 8.7 million vehicles a year, from Ram pickup trucks to tiny Renault Clios, a Fiat-Renault combination would have displaced General Motors as the world’s third-largest car company, behind Volkswagen and Toyota.
Fiat Chrysler’s bid underscored the urgency faced by global automakers to share the costs of a momentous industrial transition from internal-combustion engines to electric vehicles and self-driving cars. It would have put pressure on rivals to find partners or be left behind, while new challengers like Tesla and Uber are emerging.
Since Fiat Chrysler officially unveiled its proposal on May 26, the plan had faced resistance by some Renault shareholders who argued that the Italian-American conglomerate was undervaluing a crown jewel of French industry. France’s powerful labor union at Renault objected to a deal, warning that it could lead to layoffs.
The merger talks took a turn after General Electric announced last Thursday that it planned to cut 1,000 jobs in France — a legacy of its 2015 merger with the French energy company Alstom. The move was politically sensitive for President Emmanuel Macron at a time when other foreign companies, including Whirlpool and Ford, are cutting thousands of jobs in France.
At that point, the government’s team in the talks, headed by Finance Minister Bruno Le Maire, added new demands, including a pledge to make any job cuts in the United States and Italy before doing so in France, one person involved said.
Fiat Chrysler had already agreed to grant the government a seat on the new company’s board as well as a veto over appointments of future chief executives. It also agreed to base the company’s headquarters in Paris.
Fiat Chrysler did not consider those requests to be deal breakers, although it viewed its original offer as generous, given that Fiat Chrysler would be contributing more than Renault in profitability, production and market capitalization.
John Elkann, the Fiat Chrysler chairman, met with government officials in Paris over the weekend, promising that a deal wouldn’t lead to factory closures.
But a person briefed on Fiat Chrysler’s reasons for withdrawing said the company’s negotiators felt hemmed in by some of the government’s demands, including commitments on numbers of jobs.
And Mr. Elkann was intent on ensuring that a combined company would not be seen as politically influenced — a perception that had long plagued the relationship between Renault and Nissan. The government’s current 15 percent stake in Renault — the largest of any shareholder — was to be reduced to 7.5 percent in the combined company, a move meant to signal to investors that its board would place a priority on shareholders.
That stance rattled Renault’s French labor union, whose representative planned to abstain from a vote. The union earlier warned that stripping the government of its majority stake in Renault could give Fiat the power to favor operations in Italy over France. At least 22,000 jobs have been shed at Renault in France since 2005, the union said.
In two days of meetings at Renault’s headquarters in Paris, its chief executive, Jean-Dominique Senard, sought to convince its board of the financial and industrial merits of a deal. And earlier Wednesday, Mr. Le Maire said there was no need to rush the merger talks. “We should take our time to make sure that things are done well,” he told the French news channel BFM TV. “We want to do this merger.”
In the end, a crucial consideration was Renault’s 20-year partnership with Nissan. On Wednesday, the government requested a delay after Nissan’s two representatives to the Renault board said they intended to abstain if a vote were to take place immediately.
Mr. Le Maire was scheduled to fly to Tokyo on Thursday ahead of diplomatic meetings over the weekend. He proposed carving out time there to pursue discussions with Nissan. A vote on the merger proposal would then have been held by Renault next Tuesday. But moments after the suggestion was broached, Fiat Chrysler withdrew its offer, a person with knowledge of the French government’s position said, calling the reaction hasty and unreasonable.
Fiat Chrysler had been urging Renault and the government to do a deal as quickly as possible since making its formal offer, the person said, and in recent days had kept threatening to walk away.
Relations between Renault and Nissan had been tense since Carlos Ghosn, the former head of the alliance, was arrested last November in Tokyo on charges of financial wrongdoing, and the government wanted to ensure that no further strains would arise from the Fiat deal, said the person with knowledge of the government’s position.
The tensions revealed deep differences about the course of the alliance, which also includes Mitsubishi. Nissan’s chief executive, Hiroto Saikawa, said Monday that any deal would “require a fundamental review of the existing relationship” to ensure that the Japanese automaker’s interests were protected.
Nissan said it had no comment on the merger’s collapse.Nissan said it had no comment on the merger’s collapse.
Earlier on Wednesday, the French government said it would not approve a deal unless Nissan, with which Renault has had a formal alliance for 20 years, backed the offer. Nissan was expected to use the opportunity of a merger between Fiat Chrysler and Renault to press again for a change in the shareholding structure it now has with Renault. The French automaker holds a 43 percent stake in Nissan, something Mr. Saikawa has long fought to have reduced.
In a statement posted to its website on Wednesday, Renault said it was unable to make a decision because representatives of the French government, which has a seat on the board, had asked to postpone the vote. Mr. Saikawa on Monday said that the potential addition of Fiat Chrysler “as a new member of the alliance could expand the playing field for collaboration and create new opportunities for further synergies.”
A person with knowledge of the situation said the government had repeatedly asked to postpone a final decision, leaving Fiat to conclude that the two sides were not getting anywhere — despite eagerness by Mr. Senard and Renault’s principal leadership to strike a deal. But the full merger sought by Fiat “would significantly alter the structure of our partner Renault,” Mr. Saikawa added. “This will require a fundamental review of the existing relationship between Nissan and Renault.”
John Elkann, the Fiat Chrysler chairman, held a whirlwind of meetings with French government officials in Paris over the weekend, promising that a deal wouldn’t lead to factory closures. The issue is politically sensitive for President Emmanuel Macron at a time when foreign companies including General Electric, Whirlpool and Ford are cutting thousands of jobs in France. Earlier Wednesday, Mr. Le Maire said Renault would pursue legal action against Mr. Ghosn after a joint internal audit by Renault and Nissan turned up about 11 million euros’ worth of questionable spending, including payments for Mr. Ghosn’s air travel and other items, and gifts to nonprofit organizations.
A person briefed on Fiat Chrysler’s reasons for withdrawing said the company’s negotiators felt hemmed in by some of the French government’s demands, including commitments on maintaining employment levels.
With combined output of 8.7 million vehicles a year, from Ram pickup trucks to tiny Renault Clios, a combination of Fiat Chrysler and Renault would have displaced General Motors as the world’s third-largest car company, behind Volkswagen and Toyota.
The overture from Fiat Chrysler underscored the urgency faced by global automakers to share the costs of a pivotal industrial transition from internal-combustion engines to electric vehicles and self-driving cars. It would have put pressure on rivals to find partners or be left behind at a time when new challengers like Tesla and Uber are emerging.
Among the hurdles in the talks were concerns raised by the CIAM fund, which owns about 50 million euros’ worth of Renault shares. In a letter to the board Tuesday, the group questioned Fiat Chrysler’s motives in announcing a deal at a time when Renault’s stock price is at a historic low of around €55. Renault shares have fallen about 15 percent since Carlos Ghosn, the former chairman of Renault and Nissan, was arrested in Japan in November on charges of financial wrongdoing.
Under Fiat’s proposal, shareholders of Fiat Chrysler would have shared a dividend of €2.5 billion, or $2.8 billion, that reflects the company’s higher value on the stock market. But CIAM argued that Fiat stood to profit so much more than Renault that it should be paying the French automaker’s shareholders that amount — and more.
“We will strongly oppose this opportunistic takeover that not only undervalues Renault, but also offers no control premium if the price remains as planned,” the letter said.