FCAU Fiat Chrysler Automobiles NV

By Nick Kostov and Stacy Meichtry 

PARIS -- Fiat Chrysler Automobiles NV has withdrawn its proposal to merge with Renault SA after the French auto maker's alliance partner, Nissan Motor Co., refused to back the deal, according to people familiar with the matter.

Nissan's two representatives on Renault's board were withholding support late Wednesday as other board members prepared to vote in favor of the $40 billion merger, the people said. The planned abstentions raised doubts about Nissan's commitment to preserving the alliance if the merger were to proceed, the people said.

The French government said Wednesday it wouldn't approve Fiat Chrysler's merger proposal without Nissan's guarantee that Renault's decadeslong alliance with Nissan would survive. The state asked to delay a vote on the merger, prompting Fiat Chysler to withdraw its merger proposal, the people said.

Fiat Chrysler's merger proposal aimed to build scale to cope with slowing sales and the rising cost of developing electric vehicles and self-driving cars. The combined company, if realized, would produce almost nine million passenger cars and light trucks a year, placing it just behind Volkswagen AG and Toyota Motor Co.

The negotiations represented a test of the European auto industry's ability to overcome national economic rivalries and establish a European champion, akin to Airbus SE in aviation. Fiat Chrysler sent Renault directors a merger proposal on May 26 that called for the combined business to be 50%-owned by its shareholders and 50% by Renault shareholders.

French and Italian officials signaled cautious support for the deal when the proposal was made public last week. The French state, which is Renault's largest shareholder and has two seats on its board, had pushed Fiat Chrysler for concessions in recent days.

Complicating the consummation of the deal was the two-decade partnership between Renault and Nissan in which they share technology and vehicle parts. Renault owns 43.4% of Nissan, while Nissan owns 15% of Renault. The Japanese company hasn't been involved in the talks, people familiar with the discussions have said.

Nissan CEO Hiroto Saikawa on Monday said that the proposed merger if realized would significantly alter the structure of Renault.

"This would require a fundamental review of the existing relationship between Nissan and Renault," Mr. Saikawa said.

Write to Nick Kostov at Nick.Kostov@wsj.com and Stacy Meichtry at stacy.meichtry@wsj.com

(END) Dow Jones Newswires

June 05, 2019 18:55 ET (22:55 GMT)

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