Howes: The death of an auto merger
Fiat Chrysler’s deal of the decade is dead.
Good ol’ French politics killed it this week – exactly what you get when the federal government in Paris controls 15 percent of the hometown Renault.
Yep, the celebratory champagne was chilling, the press releases were written and FCA’s brass bailed. That’s what happens when continued meddling by politicians gives business leaders a glimpse of things to come.
In a statement issued past midnight in London, Fiat Chrysler said, “The political conditions in France do not currently exist for such a combination to proceed successfully.”
What, exactly, did they expect?
This is the same government that had been pushing former Renault CEO Carlos Ghosn to more tightly merge Renault with its alliance partner Nissan. And that’s pressure the leaders of the larger, more profitable Japanese automaker deeply resented.
Why, then, expect some of the same politicians to cede any control and surrender to Fiat Chrysler’s industrial logic? They wouldn’t and didn’t, so the deal to form the world’s No. 3 automaker is off.
Look, so long as French politicians safeguard a government stake in Renault nothing will change. Not now, not six months into a cooling off period. Whoever seeks to merge with Renault will get French politicians with their own agendas trying to call the shots and set the terms for a global company wrestling with transformational challenges.
Whatever the strategic vision of Fiat Chrysler and Renault, you can bet it wasn’t shared by France’s finance minister and others anxiously pressing for guarantees to protect French jobs, plants, and boardroom influence at the expense of Italians and Americans. Not surprising in a country where routine corporate restructuring is met with social unrest clogging the streets of Paris and other cities.
Officially, Renault sought to delay a board vote until it could brief its alliance partner Nissan on the deal. Right. This from an automaker that spent the past couple of years trying to tighten Renault’s control over Nissan. If the Japanese partner mattered, it would have been in the room from the beginning – which tells you how consequential Paris considers Nissan.
Fiat Chrysler’s brass awoke in Paris back where they were on May 25: an independent automaker prepared to go it alone but open to “opportunities of all kinds.”
Staying independent, however, doesn’t answer Fiat Chrysler’s shortcomings. It has too much unused plant capacity in Europe, it's a huge drag on financial results, it remains a bit player in China, and the sum total of its Auto 2.0 strategy in autonomy and electrification is an agreement to provide Pacifica minivans to Google affiliate Waymo.
FCA has kinda’ been for sale for years, but its options are limited. A deal with a Detroit rival is fraught with political and anti-trust problems. German automakers don’t play well with others, and Volkswagen is nearly 20 percent owned by its state government. Asian players prize their independence as national champions.
That means Fiat Chrysler is back where it started – again.
Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.