FCA says French politics caused merger pullout

Fiat Chrysler says it has withdrawn offer to merge with France's Renault

Italian-American carmaker Fiat Chrysler on June 6 withdrew its blockbuster proposal to merge with Renault, blaming political objections in Paris and sparking a war of words with French officials.

Within hours of a potential deal, the board of Fiat Chrysler Automobiles (NYSE: FCAU) yanked its proposed merger with Groupe Renault (OTC: RNLSY) in what would have created a $35 billion automobile powerhouse.

"FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties", the automaker writes in its news release.

In a statement, Fiat Chrysler said the compensation committee of its board still needs to determine whether Bigland met company and personal performance conditions. FCA proposed the merger with Renault on May 27.

The headquarters of the French auto manufacturer Renault in Boulogne Billancourt, near Paris, on January 24, 2019.

Renault expressed its "disappointment" at the turnabout.

Renault said it would continue to review the proposal "with interest".

A merger would create the world's third-biggest automaker, worth nearly $40 billion and producing some 8.7 million vehicles a year.

News of the plan's failure mainly hurt Renault's shares, which tumbled 7 per cent to 52.45 euros, in early trading. In Milan, FCA shares also slid at the open but then recovered to show a small gain.

Despite the verbal sparring that erupted after FCA's announcement, industry experts did not rule out talks being resumed.

France's finance minister says Renault and Fiat Chrysler shouldn't rush into a merger.

FCA's Board of Directors made the decision at its meeting Wednesday night. According to people familiar with the matter, Nissan representatives were doubtful about the Japanese automaker's commitment to the alliance should the merger take place. If Nissan had gone along, it would have created the world's biggest auto company.

Bigland claims he just cooperated with the SEC investigation by testifying about FCA's sales reporting, from the time he took the position to the period prior to being appointed the company's US sales chief. Fiat, on the other hand, saw the French state as the culprit, saying the government repeatedly attempted to change conditions for its support and leaving Elkann with the impression that the state was clamoring for full control of the combined entity - a demand that was unacceptable to Fiat.

FCA's decision to end the talks could also further fray relations between Renault and Nissan, already strained by the arrest and ouster of alliance chairman Carlos Ghosn, who is now facing trial in Japan on financial misconduct charges he denies.

In their statement, FCA said they withdrew their proposal due to the French government. Unwilling to be seen as the disrupting factor, the government said it hadn't closed any doors, and that all it had asked for was another five days to win over Nissan. Italian Deputy Prime Minister Luigi Di Maio said: "When politics tries to intervene in economic procedures, they don't always behave correctly, I don't want to say any more".

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