Fiat and Renault give some reassurance to french officials and Nissan

Fiat and Renault give some reassurance to french officials and Nissan

As Renault board members prepared to meet on Tuesday to consider a merger with Fiat Chrysler, the French government was scrambling to ensure that it would have influence over a proposed tie-up that could significantly change the balance of power in the global auto industry.

And another interested party to the potential deal – Nissan, Renault’s main partner in a 20-year-old car alliance – said Monday that a merger would “require a fundamental review of the existing relationship” to ensure that its interests were protected.

The cautious approach by two influential stakeholders means that the board of Renault, one of the crown jewels of French industry, won’t strike a deal Tuesday but rather decide to begin formal negotiations. A merger with Fiat Chrysler would create a behemoth that would displace General Motors as the third-largest car company in the world, behind Volkswagen and Toyota.

French Finance Ministry officials met with the chief executives of both companies in Paris in recent days in a bid to ensure the role of government, currently Renault’s largest shareholder, in a combined company, according to a person with knowledge of the meetings, who requested anonymity because of the confidential nature of the discussions.

The French finance minister, Bruno Le Maire, wants the government to have a seat on the board of any new company. He also sought assurances that Renault would remain an equal partner with Fiat Chrysler in any merger and that the merged company’s European headquarters would be in France, the person said.

Since the proposal was announced a week ago, concerns have risen on the French side that Fiat may be undervaluing Renault. The government decided to step up its involvement after Fiat Chrysler suggested that its proposal was a take-it-or-leave-it deal, alarming French officials, the person said.

Mr. Le Maire met over the weekend with Jean-Dominique Senard, Renault’s chairman, and spoke on Friday with John Elkann, the chairman of Fiat Chrysler, in last-minute political deal-making before the board meeting. Mr. Elkann was open to the proposals and agreed to discuss conditions surrounding a possible deal, the person said.

French officials sought assurances that there would be no factory closings in France, as well as a guarantee that Mr. Senard would be chief executive of the new company for at least four years, according to the person with knowledge of the meetings.

Under the proposal offered by Fiat Chrysler last week, the French government’s 15% stake in Renault would be reduced to 7.5% in a combined company.

But the French government is insisting that it keep a seat on the new 11-person company board – something that is not in the current blueprint for the merger, according to two people with knowledge of the conversations.

Fiat Chrysler doesn’t consider the requests to be deal breakers, although the company already views its current offer as generous considering that Fiat would be contributing more than Renault in terms of profitability, car volumes and market capitalization, a person with knowledge of Mr. Elkann’s negotiating position said.

Fiat Chrysler’s proposal to reduce the French government’s stake is considered necessary to send a signal to investors that any merged company would not be politically influenced, this person said.

The French government signaled several times last week that it would back Fiat’s plan as long as jobs and industrial sites in France weren’t compromised.

But Renault’s labor union warned that the present proposal could give Fiat the power to favor operations in Italy over France, because the French government would no longer have a representative on the new board. At least 22.000 jobs have been shed at Renault in France since 2005, the union, known as the C.G.T., added.

Last week, the board of the Renault-Nissan Alliance, which also includes Mitsubishi, met and considered Fiat Chrysler’s proposal.

In a statement on Monday, Nissan’s chief executive, Hiroto Saikawa, said the potential addition of Fiat Chrysler “as a new member of the alliance could expand the playing field for collaboration and create new opportunities for further synergies.