By Nick Kostov in Paris and Ben Dummett in London 

The French government is seeking concessions from Fiat Chrysler Automobiles NV in return for supporting the Italian-American car maker's proposed merger with Renault SA. The demands range from putting the combined company's head office in France to guaranteeing Paris a seat on the board, according to people familiar with the matter.

No concessions have been made and any merger also depends on Renault's board accepting Fiat Chrysler's plan for a merger of equals. Reuters first reported the French government's demand for concessions late on Sunday.

The French government's active involvement in the talks shows the political sensitivity of mergers involving big French companies at a time when France's pro-business President Emmanuel Macron is under pressure from antiestablishment opponents of the far-right and far-left.

Fiat Chrysler last week proposed a merger to Renault to create the world's third-largest auto maker by production, with a market value of about $40 billion. Renault directors are set to meet Tuesday afternoon near Paris to formulate their response to the proposal. The French state owns 15% of Renault and has two seats on its board. Nissan Motor Co. also owns 15% of Renault, but doesn't have any voting rights.

French Finance Minister Bruno Le Maire spoke several times with Fiat Chrysler Chairman John Elkann by phone on Friday, according to a ministry spokesman. Mr. Le Maire's chief of staff met with Mr. Elkann in Paris on Saturday, while on Sunday Mr. Le Maire met with Renault Chairman Jean-Dominique Senard.

France's government sees merits in the deal, including the creation of a European auto-sector powerhouse with a strong presence in the U.S., people familiar with the matter said. But the government is seeking strong guarantees that French jobs and plants would be preserved, these people said.

French officials aren't expecting all of their demands to be met, but see the deal as easier to sell politically in France if at least some of them are agreed.

Fiat Chrysler said last week the merger would achieve EUR5 billion in annual cost savings for the two companies. It said the savings didn't rely on job cuts and that no factories would be shut.

Italy's government is also expected to seek guarantees on jobs and factories before any deal is reached. Unlike France, the Italian state isn't a shareholder in either company.

The various sides have reached a consensus that Fiat Chrysler and Renault shareholders would each own 50% in the merged company, the people familiar with the negotiations said, as proposed by Fiat Chrysler last week. But a number of topics are still being discussed, including guarantees regarding jobs, management positions and board seats, these people said.

The French government has also asked that the merged company preserve Renault's alliance with Nissan and Mitsubishi Motors Corp.

Nissan's CEO Hiroto Saikawa said Monday that the proposed merger would -- if realized -- "significantly alter the structure of our partner Renault."

"This would require a fundamental review of the existing relationship between Nissan and Renault," Mr. Saikawa said. "Nissan will analyze and consider its existing contractual relationships and how we should operate business in the future."

One sensitive issue being negotiated is where the merged company's management would be based.

Fiat Chrysler's proposal calls for the combined company to be legally domiciled in the Netherlands. That leaves the location of the operational headquarters open. France's government is pushing for the latter to be in France, but Fiat Chrysler is reluctant to make Paris more important than Turin and Detroit, its current main bases for operations, people familiar with the matter said.

The French government is also pressing for a guaranteed seat on the board, and for the new group's chief executive, Mr. Senard, to have an agreed term of at least four years. Fiat Chrysler's proposal includes making Mr. Senard CEO of the joint company while Mr. Elkann would become nonexecutive chairman, but it doesn't fix the length their terms.

-- Eric Sylvers in Milan contributed to this article

Write to Nick Kostov at Nick.Kostov@wsj.com and Ben Dummett at ben.dummett@wsj.com

 

(END) Dow Jones Newswires

June 03, 2019 09:17 ET (13:17 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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