Wednesday 21 August 2019

Chris Bryant: 'Soufflé on faces and a setback for car industry consolidation'

Stock image: AP
Stock image: AP

Chris Bryant

Well that was abrupt. Fiat Chrysler's decision to abandon merger talks with Renault has left all parties with soufflé on their faces.

The proposal that Fiat published a fortnight ago, sketching out the merger of equals, made it all sound so simple. Renault boss Jean-Dominique Senard and Fiat scion John Elkann should have known that the serenity of their private tete-a-tetes ahead of the deal's announcement wouldn't survive industrial politics.

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Proposing a merger with Renault was bound to further unsettle the French car-maker's Japanese alliance partner Nissan, which is still grappling with the issues laid bare by the downfall of the Renault-Nissan architect Carlos Ghosn. And Fiat was always going to have to reckon with the French state, which owns a 15pc stake in Renault.

Still, having done much of the painstaking groundwork and with the stock market reacting positively, Fiat's decision to walk away seems rash. Could the Italians not have waited a few more days?

This process has reminded investors that Fiat hasn't invested enough in electric vehicles and that the overall carbon emissions from its vehicles are too high.

Perhaps Fiat will pick up the pieces and make a third stab at an international merger. Peugeot could be a potential partner, although the French state owns a stake there too. Mr Elkann may prefer to give Paris a wide berth after this.

There's no question that it makes sense for manufacturers to pool the financial resources to invest in future technology. But savings can be achieved by loose alliances, such as BMW and Jaguar Land Rover's new tie-up over electric technology.

The failure of Renault and Fiat to reach the finish line might set back the cause of consolidation. In view of everything that can go wrong, and the inherent politics that bedevil big cross-border manufacturers, maybe that's inevitable.

Bloomberg

Irish Independent

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