France Pushes Fiat Chrysler for Concessions to Support Renault Deal--Update
03 Juni 2019 - 09:32PM
Dow Jones News
By Nick Kostov in Paris and Ben Dummett in London
Fiat Chrysler Automobiles NV and Renault SA have agreed to base
the European headquarters of their combined operations in France, a
measure aimed at winning French government support for a proposed
merger between the car makers, according to people familiar with
the matter.
The French government and Fiat Chrysler are still discussing a
range of other concessions, including whether to guarantee Paris a
seat on the board of the merged company, the people said.
Meanwhile, Renault's board is poised to formally consider the
Italian-American auto maker's offer. The French state, which owns
15% of Renault, and has two seats on the French auto maker's
board.
Fiat Chrysler would resist any demands from Paris that might
weaken the rationale for a merger, according to a person familiar
with the company's thinking. Reuters first reported the French
government's demand late Sunday.
A person familiar with discussions about the merger said Fiat
Chrysler's operational headquarters in Turin would retain their
importance within the merged organization. Fiat Chrysler Chairman
John Elkann, who is expected to be the new company's chairman, has
his residence in Turin -- long seen as a guarantee for the
company's Italian business.
The French government's active involvement in the deal making
shows the political sensitivity of mergers involving big French
companies at a time when President Emmanuel Macron is under
pressure from antiestablishment opponents on both the right and the
left. For the proposed auto merger, one sensitive issue is the
location of management.
Fiat Chrysler's proposal called for the combined company to be
legally domiciled in the Netherlands, leaving the location of the
operational headquarters open. People familiar with the
negotiations said an agreement is now in place to base the merged
company's European operational headquarters in
Boulogne-Billancourt, Renault's historic home on the outskirts of
Paris.
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.
French Finance Minister Bruno Le Maire spoke several times with
Mr. Elkann by phone on Friday, according to a ministry spokesman.
On Saturday, Mr. Le Maire's chief of staff met with Mr. Elkann, and
on Sunday the finance minister met with Renault Chairman
Jean-Dominique Senard.
France's government sees merits in the deal, including the
creation of a European auto-making powerhouse with a strong
presence in the U.S., people familiar with the matter said. But
Paris wants strong guarantees that French jobs and plants would be
preserved, these people said.
French officials see the proposed merger as being easier to sell
politically in France if at least some of their demands are
accepted.
Fiat Chrysler said last week the merger would achieve EUR5
billion ($5.58 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.
The Italian 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 Motor Co. and Mitsubishi
Motors Corp. Nissan owns 15% of Renault, but doesn't have any
voting rights.
Nissan CEO Hiroto Saikawa said Monday that the proposed merger
if realized would "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."
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 15:17 ET (19:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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