France Pushes Fiat Chrysler for Concessions to Support Renault Deal
June 03 2019 - 9:32AM
Dow Jones News
By Nick Kostov in Paris and Ben Dummett in London
The French government is seeking concessions from Fiat Chrysler
Automobiles NV in return for supporting the Italian-American car
maker's proposed merger with Renault SA. The demands range from
putting the combined company's head office in France to
guaranteeing Paris a seat on the board, according to people
familiar with the matter.
No concessions have been made and any merger also depends on
Renault's board accepting Fiat Chrysler's plan for a merger of
equals. Reuters first reported the French government's demand for
concessions late on Sunday.
The French government's active involvement in the talks shows
the political sensitivity of mergers involving big French companies
at a time when France's pro-business President Emmanuel Macron is
under pressure from antiestablishment opponents of the far-right
and far-left.
Fiat Chrysler last week proposed a merger to Renault to create
the world's third-largest auto maker by production, with a market
value of about $40 billion. Renault directors are set to meet
Tuesday afternoon near Paris to formulate their response to the
proposal. The French state owns 15% of Renault and has two seats on
its board. Nissan Motor Co. also owns 15% of Renault, but doesn't
have any voting rights.
French Finance Minister Bruno Le Maire spoke several times with
Fiat Chrysler Chairman John Elkann by phone on Friday, according to
a ministry spokesman. Mr. Le Maire's chief of staff met with Mr.
Elkann in Paris on Saturday, while on Sunday Mr. Le Maire met with
Renault Chairman Jean-Dominique Senard.
France's government sees merits in the deal, including the
creation of a European auto-sector powerhouse with a strong
presence in the U.S., people familiar with the matter said. But the
government is seeking strong guarantees that French jobs and plants
would be preserved, these people said.
French officials aren't expecting all of their demands to be
met, but see the deal as easier to sell politically in France if at
least some of them are agreed.
Fiat Chrysler said last week the merger would achieve EUR5
billion in annual cost savings for the two companies. It said the
savings didn't rely on job cuts and that no factories would be
shut.
Italy's government is also expected to seek guarantees on jobs
and factories before any deal is reached. Unlike France, the
Italian state isn't a shareholder in either company.
The various sides have reached a consensus that Fiat Chrysler
and Renault shareholders would each own 50% in the merged company,
the people familiar with the negotiations said, as proposed by Fiat
Chrysler last week. But a number of topics are still being
discussed, including guarantees regarding jobs, management
positions and board seats, these people said.
The French government has also asked that the merged company
preserve Renault's alliance with Nissan and Mitsubishi Motors
Corp.
Nissan's CEO Hiroto Saikawa said Monday that the proposed merger
would -- if realized -- "significantly alter the structure of our
partner Renault."
"This would require a fundamental review of the existing
relationship between Nissan and Renault," Mr. Saikawa said. "Nissan
will analyze and consider its existing contractual relationships
and how we should operate business in the future."
One sensitive issue being negotiated is where the merged
company's management would be based.
Fiat Chrysler's proposal calls for the combined company to be
legally domiciled in the Netherlands. That leaves the location of
the operational headquarters open. France's government is pushing
for the latter to be in France, but Fiat Chrysler is reluctant to
make Paris more important than Turin and Detroit, its current main
bases for operations, people familiar with the matter said.
The French government is also pressing for a guaranteed seat on
the board, and for the new group's chief executive, Mr. Senard, to
have an agreed term of at least four years. Fiat Chrysler's
proposal includes making Mr. Senard CEO of the joint company while
Mr. Elkann would become nonexecutive chairman, but it doesn't fix
the length their terms.
-- Eric Sylvers in Milan contributed to this article
Write to Nick Kostov at Nick.Kostov@wsj.com and Ben Dummett at
ben.dummett@wsj.com
(END) Dow Jones Newswires
June 03, 2019 09:17 ET (13:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Fiat Chrysler Automobile... (NYSE:FCAU)
Historical Stock Chart
From Mar 2024 to Apr 2024
Fiat Chrysler Automobile... (NYSE:FCAU)
Historical Stock Chart
From Apr 2023 to Apr 2024