Fiat Chrysler Automobiles Called off Contract with Renault: Here’s Why

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Renault Fiat Merger talks

Fiat Chrysler Automobiles (FCA) has declined its contract to partner with Renault following the French government ordered for the suspension of the agreement. The French state has an about 15 per cent share in Renault and the report claims that the Government, and the associations, were bothered concerning likely facility cessations at Renault.

There are some popular abroad firms in some commerce which have discarded works in France. The French state is the largest stockholder in Renault, reportedly delayed to progress with the 50-50 incorporation contract as it needed the assistance from Nissan Motor who is another influential sharer on Renault’s jury. It was assumed that the contract would have resulted in a huge impact on the worldwide automotive industry.

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If the contract would have been still on, then it could be the third-largest in the world. The companies aimed at cost economies that may have been formed by the contract. The working of both the companies differ, so the contract might have been successful, but it’s off now. The contract can bring together Alfa Romeo, Jeep, Maserati, Dacia and Lada, following in increasing of production of approx 8.7 million vehicles/ year.

Previously, in terms of financing, Fiat Chrysler Automobiles has intentionally weakened the European small car segment. Furthermore, FCA has also failed to invest in electric cars and self-driving vehicles. Renault is a powerful company with a good reputation, although requires to balance over higher stock estimates, and FCA can assist to increase estimates. According to the company, “it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully”.

This indicates that the French government’s alleged interference with the agreement is the reasonable basis for the alliance to be eliminated. Commenting on the condition of Renault, the French carmaker, in a separate statement, said that ‘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.’

The reason for the elimination of the deal is both French Government doubt and the Renault Nissan Alliance. The contract can be probably have hindered the French-Japanese alliance at a point while it is in struggle after the separation of the Alliance’s principal member, Carlos Ghosn.

Without a doubt, the merger decline comes as a major blow for Renault, as it had already been reeling under the severities of the arrest and prosecution of its CEO & Chairman, Carlos Ghosn. Undoubtedly, the merger would have been beneficial for both the companies in terms of production and new product development. Nevertheless, now, both firms have firms to face a problem as they have to clarify the situation to their existing stockholders.

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S. Vishwakarma

S. Vishwakarma

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