Wednesday 26 June 2019

France and Fiat Chrysler in blame game after Renault merger collapses

Fiat chairman John Elkann
Fiat chairman John Elkann
Bruno Le Maire, France's finance minister,

Tommaso Ebhardt, Ania Nussbaum and Daniele Lepido

Fiat Chrysler and the French government blamed each other for the sudden collapse of talks to combine the Italian-American car-maker with Renault, even as both sides tried to keep the door open to an eventual deal.

Fiat's surprise withdrawal of its offer came after an hours-long Renault board meeting on Wednesday night ended with no decision on the plan to create the world's third-largest car manufacturer. Fiat took direct aim at the French state, Renault's biggest shareholder, for scuppering the deal with a sudden request to postpone board deliberations.

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Both Fiat and the French government held out the possibility for the deal to come back, with a French official stressing that the administration "did not close any door".

That said, finger-pointing in the aftermath of its collapse made it harder for either side to give ground.

French officials sought to justify the last-minute intervention by suggesting the deal was being rushed and more time was needed to win over Renault's alliance partner Nissan.

That stance enraged the Italian side, which saw the move instead as a fresh attempt by French finance minister Bruno Le Maire, pictured, to renegotiate a pact that was on the verge of board approval. After weeks of discussions, Fiat had seen Nissan as playing a constructive role in the talks, despite the Japanese car-maker's plan to abstain from voting.

"It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully," Fiat said in a statement.

The fundamental issue that caused Fiat to walk away was France's repeated attempts to change conditions for its support, said a person familiar with the matter. While the France's stake in the new company would have halved to 7.5pc, it left the impression of wanting full control of the combined entity, a demand that was unacceptable to Fiat.

A French official said that all of its demands were met - on valuation, governance, protecting jobs and industrial sites - but France needed five more days to convince Nissan to support the deal. Nissan's two representatives at Renault's board were planning on abstaining.

"We are gratified by the constructive approach of Nissan and wish to thank FCA (Fiat Chrysler Automobiles) for their efforts," Renault said in a statement. "We view the opportunity as timely, having compelling industrial logic and great financial merit, and which would result in a European based global auto powerhouse."

What happens next is unclear. By using the word "currently" in its statement, Fiat left open a return to the bargaining table. But it would take a strong signal from the French government to eventually lure Fiat chairman John Elkann back to talks with Renault.

Mr Le Maire is scheduled to be in Japan for G-20 meetings in the coming days and will meet with Japanese economy minister Hiroshige Seko. French budget minister Gerald Darmanin said yesterday the government would be open to a new approach from Fiat for Renault in the future.

"Maybe tomorrow or the day after tomorrow or next week we could talk again with this Italian giant," Darmanin said on France Info radio.

Shares of Renault fell as much as 8pc, the most since November. Fiat gained 0.2pc in Milan, reversing an earlier decline. A deal would have created a company with a market value of about €35bn.

As it stands Elkann, the 43-year-old scion of Fiat's founding Agnelli family, has little incentive to revive talks, pending a change of heart from Nissan and a healing of the rift with France.

What's more, tension with the French government means any chances for an alternative deal with Peugeot maker Groupe PSA, which also counts the state as an owner, are likewise nil.

A salvage operation could potentially fall to Renault chairman Jean-Dominique Senard. The former Michelin chief has good relations with the French government and was brought in to lead Renault partly for his diplomatic skills in the aftermath of the Carlos Ghosn affair, which strained relations between Renault and Nissan.

Criticism of the proposal had gathered steam in recent days as Le Maire multiplied public comments on conditions the French government was attaching to an eventual deal.

Nissan, which wasn't formally part of the Fiat deal, nevertheless would have had an important role as Renault's 20-year alliance partner, sharing technology to develop new models, purchasing components cooperatively to gain discounts, and producing cars in each other's factories.

Nissan had raised questions about cost savings, technology sharing and other matters, despite Senard's desire to win at least conditional backing from the Japanese manufacturer.

Some Renault investors had also voiced doubts. Paris-based activist investment manager CIAM, in a letter to Renault's board, said the merger with Fiat significantly undervalues Renault and that a €2.5bn dividend set to go to Fiat Chrysler shareholders should instead have been paid to the French company.

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