Fiat Chrysler and Renault, two automakers who are attempting to cut costs producing vehicles and pool their resources for developing the next generation of automobiles, are planning a merger to create the world’s third largest automaker.
According to a statement from Fiat Chrysler Automobiles, the combined business would be owned 50/50 between shareholders of FCA and Groupe Renault. There would be a board of governors who would hold a majority of independent directors.
Shares in Fiat Chrysler and Renault rose 13% and 11.5% respectively. Even though the merger still requires approval by the boards of both automakers.
The partnering organizations would produce estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer.
Fiat Chrylser said the combined company would generate savings of 5 billion euros annually ($5.6 billion) and be “carried out as a merger transaction under a Dutch parent company.”
The press release from Fiat Chrysler added that there would be no plant closures because of the union and that it should provide an opportunity to lead in the development of electric and autonomous vehicles.
During Fiat Chrysler’s most recent earnings call, CEO Mike Manley was asked about the possibility of merging with another automaker. He told analysts: “We are going into an environment where there are going to be opportunities.”
Fiat Chrysler’s partnership with Renault is completely separate from the Nissan-Renault-Mitsubishi alliance.
For Renault, the union with FCA renews speculation the French automaker’s alliance with Japan-based Nissan may not be for the long haul.
The two companies hold stakes in each other, but that alliance has been strained since the arrest of Nissan-Renault CEO Carlos Ghosn late last year. Ghosn has been charged in Japan with committing financial crimes while serving as CEO of Nissan, charges Ghosn and his lawyers vehemently deny.
Last year, Fiat Chrysler sold 4.85 million vehicles worldwide, and most of those were being sold in North America where Jeep and RAM Trucks are two of the most popular brands. Meanwhile Renault sold 3.81 million vehicles in 2018, with most of its business happening in Europe.