The combined business would become the third largest global OEM, with 8.7m vehicle sales © Olaf Pignataro/Fiat
The combined business would become the third largest global OEM, with 8.7m vehicle sales © Olaf Pignataro/Fiat

Fiat Renault merger could generate €5bn in synergies

28 May 2019

Fiat Chrysler Automobiles (FCA) has said its proposed merger with Renault could save €5bn per year by consolidating purchasing and development costs.

In its proposal, FCA said the merger with Renault would create a “world leader in the rapidly changing automotive industry with a strong position in transforming technologies, including electrification and autonomous driving”.

It said the proposal followed discussions between the carmakers to identify products and geographies where they could collaborate.

It said: “These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development.

“The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry like connectivity, electrification and autonomous driving.”

The carmaker said it would aim to save €5bn per year through “the convergence of platforms, the consolidation of powertrain and electrification investment and the benefits of scale”.

It said: “Approximately 90% of synergies would come from purchasing savings, R&D efficiencies, and manufacturing and tooling efficiencies.”

As implementation costs would be expected to reach around €3-4bn, FCA said the estimated synergies would be net cash flow neutral in its first year, and positive by year two onwards, with €5bn in savings achieved by year six.

The merger would not result in any plant closures as the benefits of the transaction would be achieved through “investment in common global vehicle platforms, architectures, powertrains and technologies”, it added.

The combined business would become the third largest global original equipment manufacturer, with 8.7m vehicle sales, and would be 50% owned by Fiat and 50% by Renault stockholders.

The combination of FCA and Renault sales would make it the fourth largest carmaker in North America, the second largest in the Europe, Middle East and Africa, and the largest in Latin America.

Renault said: “After careful review of the terms of FCA’s friendly proposal, the Board of Directors decided to study with interest the opportunity of such a business combination.”

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