Together, they’ll create the 3rd largest OEM in the world.
American-Italian automotive concern Fiat-Chrysler Automobiles has put forward a proposal to French automotive firm Groupe Renault to merge in what would form a ‘transformative merger’ that would push the two companies together to damn-nearly the very top of the global automotive tree. FCA’s long & drawn-out hunt for a strategic partner may finally be at an end it seems, with the company looking to cosy-up to Renault and explore synergies and operating parallels that it says would improve cost efficiencies for both firms significantly.
“Combining the businesses will bring together complementary strengths. The combination would create a brand portfolio that would provide full market coverage with a presence in all key segments from luxury/premium brands such as Maserati & Alfa Romeo, to the strong access brands of Dacia & Lada, and would include the well-known Fiat, Renault, Jeep, and RAM brands, as well as commercial vehicles. FCA’s evolving capability in autonomous driving is complemented by Groupe Renault’s decade of experience in EV technology, where it is the highest-selling EV OEM in Europe.” – Merger Proposal, Fiat-Chrysler Automobiles
By joining forces with FCA, Groupe Renault would be better equipped to tackle one of the biggest challenges on its plate: Gaining a foothold in North America. As one of the world’s largest car markets, Renault’s lack of activity in the region has long been downplayed with the usual rhetoric of a Europe-focused strategy. But in light of the ‘rebirth’ of the automotive industry to include things like zero-emissions mobility and autonomy, it’s no longer possible for Groupe Renault (or indeed any company) to continue to play the fool and let critical markets go unserviced.
FCA posits that working with just Groupe Renault, they’d be able to enjoy run rate synergies in excess of €5-billion a year, coming from purchasing savings, R&D efficiencies, manufacturing & tooling efficiencies, and the potential to reduce the number of vehicle platforms & engines by 20% and 30% respectively. These cost efficiencies are, according to FCA, achievable by the end of year 6 following the merger, with 80% total efficiency by just year 4.
The “friendly proposal” put forward by FCA has been received by the executives at Renault, who have responded by saying that it will be thoroughly looked over and evaluated based on its merits and the opportunity it presents. The Groupe Renault board of directors will “study with interest… such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the [Renault-Nissan-Mitsubishi] Alliance.”
What this will mean to the average person on the street like yourself and this writer is that the global automotive landscape may change near-irreversibly very soon, with both FCA & the Renault-Nissan-Mitsubishi Alliance famed for their ruthless cost and operating efficiencies. If the tie-up goes through as FCA proposes there could be some very serious, and very wide changes on the horizon as both parties seek to make full use of the synergies offered up by the merger.
It’ll be interesting to see where and how synergies will be identified & leveraged upon, though of course, this could all just be an academic discussion and Groupe Renault could pooh-pooh this all the way into next week.