Fiat Chrysler & Renault Join Forces
Two of the biggest names in the game have begun talks to create the world’s third-largest automaker in an effort to tackle increasing technological costs and higher regulatory hurdles. But can they do it?
The merger of equals has so far been valued at a whopping $35bn and could alter the automobile environment as we know it forever. The deal itself was proposed by Fiat Chrysler (FCA) and has sparked serious concerns for rivals, GM and Peugeot, whose recent talks with FCA came to nothing.
While Renault has yet to accept the deal, the company has said it is studying the proposal with great interest. Moreover, the investment community welcomed the potential upside of such a deal by flocking to buy shares of both companies, which skyrocketed 10% after the news broke.
The partnership will yield a productive capacity of approximately 8.7m vehicles per year and a whopping €5bn in savings…and we all know investors love cutting costs! However, it’s not all sunshine and roses, historically, very few mergers of equals in the auto sector have gone quite as planned.
Renault’s ties to Nissan, and the French state’s large stake in the company may cause disruptions in the process in the event of any planned cutbacks. Nevertheless, first and second place auto-giants, Toyota and VW will be watching closely to see how this deal progresses….And so should you!
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