MILAN / PARIS (Reuters) – Fiat Chrysler and Renault are set to confirm talks on a potential tie-up on Monday, with the board of the French carmaker called to an early morning meeting to discuss the situation.
FILE PHOTO: The logo of FIAT carmaker is seen on a steering wheel in Cairo, Egypt, May 19, 2019. Picture taken May 19, 2019. REUTERS / Mohamed Abd El Ghany / File Photo
It comes after news broke over the weekend that two of the world's leading car companies are in a comprehensive global partnership that could address some of the main weaknesses of both.
Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and expensive new technologies being developed for connected and autonomous vehicles.
Earlier this year FCA Chairman John Elkann – a member of Italy's Agnelli dynasty that controls the company – stressed the family's commitment to the automotive industry. But he also added that they were prepared to take a bold and creative decision to help build a solid and attractive future for the company.
A source said and announcement from Italo-American FCA could provide some concrete although initial details but added the situation was still "fluid".
A separate source with direct knowledge of the situation confirmed that the Renault board will meet on Monday morning at 0800 local time (0600 GMT) to discuss the issue.
The meeting was first reported by French newspaper Le Figaro.
FCA has a highly profitable North American RAM truck business and Jeep brand but has been releasing money in Europe, where it may also struggle to keep pace with loosening carbon dioxide emission curbs.
Renault, by contrast, is an electric car pioneer with relatively fuel-efficient engine technologies and a strong presence in emerging markets, but no US business.
Any tie-up would probably be face political and workforce hurdles, particularly in Italy. However, most of FCA's European plants are running below 50 percent capacity.
A tie-in between FCA and Renault would not preclude a consolidation of Renault's alliance with Japanese carmaker Nissan, a source customs Reuters on Saturday.
The Renault-Nissan partnership, underpinned by cross shareholdings, has been strained by the scandal surrounding former chairman Carlos Ghosn, who was ousted after his arrest last year.
Speculation about the future of Fiat Chrysler, often seen as a potential M&A target, intensified after the sudden death of long-serving forms CEO Sergio Marchionne almost one year ago. In October last year, just after three months he was picked up to replace Marchionne, new CEO Mike Manley agreed to sell FCA's car parts unit Magneti Marelli to Japan's Calsonic Kasnsei, owned by U.S. private equity firm KKR.
The sale was completed early this month for 5.8 billion euros.
According to reports earlier this year the manufacturer had also restarted talks with France's PSA Group – which has been a recurring theme over the years.
Fiat Chrysler and Renault together would have a combined market capitalization approaching 33 billion euros ($ 37 billion) and total global sales of 8.7 million vehicles.
A tie-up that included Nissan would vault the ensemble to the rank of global No.1 carmaker with 13.8 million annual sales. It would also maintain a foothold in China, where both FCA and Renault are marginal players.
Reporting by Laurence Frost, Gilles Guillaume and Inti Landauro in Paris, Pamela Barbaglia in London and Giulio Piovaccari in Milan; Editing by Keith Weir