DETROIT – The Renault/Fiat Chrysler Automobiles merger effort appears to be dead, or at least on hold.
The board of the French automaker, after an apparently marathon-length meeting Wednesday in Paris, announced that it was postponing a vote on the proposal based on a request from the French government. FCA, for its part, said it was withdrawing its offer.
“The Board of Directors was unable to take a decision due to the request expressed by the representatives of the French State to postpone the vote to a later Council,” according to a Renault statement.
FCA countered by saying said it is withdrawing the offer because of “political conditions in France.”
“FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been carefully balanced to deliver substantial benefits to all parties. However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” according to an FCA statement.
More: Fiat Chrysler seeks 50-50 merger with Renault, whose board will study deal ‘with interest’
FCA thanked Renault Chairman Jean-Dominique Senard and CEO Thierry Bolloré as well as the company’s alliance partners Nissan and Mitsubishi for their “constructive engagement.” The company also pledged to deliver on its commitments through its “independent strategy.”
Wednesday marked the second day of meetings for the Renault board, which released its statement early Thursday morning Paris time.
An affirmative decision would have paved the way for the two automakers to begin exploring the details of what a merged company would look like. It would not represent a final vote on the merger, which could have taken more than a year to complete.
FCA proposed a 50-50 merger with Renault on May 27, saying it would create the world’s third-largest automaker and save $5.6 billion annually.
Concerns about maintaining a voice in the new entity from the French government, which owns a 15% stake in Renault, were said to be at issue, but Reuters reported Tuesday that a resolution had been reached. Tensions with Nissan had also flared, with that company’s CEO, Hiroto Saikawa, saying Monday that a full FCA-Renault merger “would require a fundamental review” of the Nissan-Renault relationship.
Worries about maintaining jobs has also been a focus for both government and labor leaders in Europe.
FCA’s proposal, however, said the deal’s benefits would not be dependent on closing plants but could be achieved through more efficient investments in vehicle platforms, powertrains and technologies. Experts, however, have questioned that, especially because many of the companies’ plants in Europe are operating below capacity.
“The problem is that a merger makes little sense without job cuts. Without cuts, the resulting company would be an inefficient, bloated hippopotamus of a company,” Erik Gordon, a law professor at the University of Michigan’s Ross School of Business, told the Free Press last week.
The UAW weighed in on the proposal Tuesday:
“As with any merger of companies, the UAW is first and foremost concerned how this will impact our members. FCA leadership has stated to us that this action will not result in any closure of our represented locations. We will continue to discuss with FCA what changes this merger will bring to the business and look forward to the upcoming negotiations later this summer,” according to a statement from UAW spokesman Brian Rothenberg.
The Free Press was told the proposal would not affect FCA’s planned major expansion in east Detroit, including a new Jeep plant and 5,000 jobs in the metro area.
Rebecca Lindland, an industry expert who writes at www.rebeccadrives.com, offered her take on the collapse of the merger effort.
“This is a missed opportunity for these manufacturers to consolidate costs and streamline businesses at a time when investments and costs are rising,” Lindland said.
After the proposal was announced last week, FCA CEO Mike Manley sold $3.5 million worth of his FCA shares, according to Automotive News Europe, which noted that “Manley declared the sale in a filing to the Dutch financial markets authority, AFM. FCA is a Dutch-registered corporation.”
The publication noted that “FCA managers are not formally obliged to keep shares for a certain time.”
Follow Eric D. Lawrence on Twitter: @_ericdlawrence.