FCA, Renault Merger Was Always Going To Be Difficult

The proposed tie up between FIAT Chrysler (FCA) and the Renault-Nissan-Mitsubishi Alliance was always going to be a long road to travel and a tough one to pull off. If it had happened, it would have put the new structure in second place to Toyota in market capitalisation terms, leapfrogging their European rival Volkswagen. The pressure to run with the idea came from two very important changes at the top of each grouping: the death of Sergio Marchionne and the removal of Carlos Ghosn from the top of the French/Japanese alliance.

Marchionne had realised years ago that the only that FIAT was to survive was to merge with another company. His help in saving Chrysler from bankruptcy after the Global Financial Crisis meant that the Italian company took over the American manufacturer and the plan was to use the Chrysler network to get the smaller FIAT and Alfa Romeo cars back into the US market with a possibility that Lancia could follow on their coat-tails. Europe would then get some larger SUVs and trucks from the US side. That didn’t really happen as planned thanks to economics and other factors. Daimler-Benz had learnt earlier that sometimes US and European cultures don’t mix when they owned Chrysler.

Marchionne then went after General Motors to see if he could merge with them, however, they had also been through a tough time with the Government bailing them out as well. At least FCA had given the US and Canadian Governments their bail-out money back from saving Chrysler.
Meanwhile at Renault, Ghosn also had a plan to rework the structure of the Alliance where Renault would buy the two Japanese companies and make Paris the headquarters – a great idea as far as the French Government was concerned because they owned a big chunk of Renault!

Nissan was concerned about what was going on because they were the ones making all the money yet thanks to the structure of the Alliance had far fewer votes on decisions affecting them. Ghosn and Marchionne even had talks about merging everything together with the Europeans controlling the Americans and Japanese.

With the Japanese incarcerating Ghosn on fraud charges, the Renault-Nissan-Mitsubishi Alliance lost the head of each group (Ghosn having all the roles) and appointed a separate one for each. Jean-Dominic Senard, who took over Renault met with John Elkann the Chairman of FCA to continue what Marchionne and Ghosn had started. However that spooked the Japanese who threatened to break the Alliance if the talks continued.

The Japanese Government have always been worried about the plans for Renault to swallow up Nissan and Mitsubishi and raised concerns with the French Government about the damage it could have to Nissan – a big employer in Japan. The French Government then pushed FCA to come up with a plan to protect the players in the Alliance and the Italian Government then raised concerns that jobs would be lost in their country if the vehicles could be made cheaper elsewhere!

To make it worse, the French Unions, who have a vote in anything to do with Renault, announced that they would vote against it. The Nissan representatives planned to abstain from voting however Renault has such a large parcel of votes, they could easily have pushed the deal on to formal negotiations. Doing that would have caused unrest on three continents with Governments, unions and others protesting various job losses and other issues. So FCA dropped the idea and put it in the “too hard” basket.

One of the issues that also got in the way was the structure of the Alliance between Renault and the two other partners. It was very unbalanced with Renault able to outvote the other two. With Ghosn pushed out of the picture – possibly on purpose – Nissan wanted to restructure the Alliance to have more say and whilst the media focus was on the possible FCA merger, they worked to restructure the Alliance management committees to improve decision making across the two continents. A merger would have set that process back and would have diluted their power further.

On paper it sounded great – Nissan has made headway in developing electric vehicles and Renault has a common architecture that could be shared across multiple brands giving massive cost savings – similar to the reason why Ford are using the Volkswagen MQB platform. It would have helped FCA far more than the others in the combined entity, yet would have been a difficult strategy to position each of the 16 marques into market segments without too much cannibalisation of sales.

Finally, historically, both Renault and Mitsubishi had agreements with Chrysler or earlier entities bought by Chrysler, namely American Motors Corp, Kaiser and Willys. Nissan had an agreement with Graham-Paige who were bought by Kaiser. Nissan also sold kits to Alfa Romeo for a while to get into a closed Italian market. The reality is that over the history of the automobile, everyone has been connected to everyone else!