Fiat Chrysler seeks a merger with Renault

THE RISE of the SUV shows that carmakers have persuaded many customers that bigger is better. Renault and Fiat Chrysler Automobiles (whose chairman, John Elkann, sits on the board of The Economist’s parent company) are hoping to convince investors that the same is true of carmakers. On May 27th FCA, an Italian-American firm, said it was seeking a merger with its French counterpart, itself in a close alliance with Japan’s Nissan and Mitsubishi. If a deal goes ahead, it will create an automotive colossus.

Together, the two companies sold nearly 9m cars last year and their combined revenues totalled €170bn ($190bn), with €10bn in operating profits. Only Toyota and Volkswagen (VW), each making over 10m cars a year, are bigger. Add Renault’s alliance partners, and the grand total of 15m cars would leave everyone in the dust.

The deal—still subject to approval by Renault’s shareholders—can be seen as the legacy of two fallen giants of carmaking. Sergio Marchionne, FCA’s charismatic boss who died last year, had called for consolidation of the mass market, where slender profits are partly the result of duplicated investment in similar technologies, such as engines, that do little to differentiate brands. Carlos Ghosn’s Napoleonic personality helped him build and run the Franco-...

via Business Feeds

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