• by Thom Forbes  @tforbes, June 6, 2019

Fiat Chrysler Automobiles withdrew its $40 billion proposal to merge with Renault after midnight in Paris this morning, reportedly because of the French government’s indecision about the “transformative” deal-in-the-making.

The French government “said it had asked for five more days to review a deal and to obtain support from Nissan, a longtime Japanese alliance partner," but FCA "pulled out of the deal instead, citing political conditions in France,” the AP’s Angela Charlton, Lori Hinnant and Colleen Barry write for Yahoo News.

“Following more than six hours of discussion on Wednesday evening at Renault’s headquarters in Paris, the French carmaker said it ‘was unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later council,’” David Keohane, Leo Lewis, James Fontanella-Khan and Arash Massoudi report for the Financial Times. 

“A person close to Renault said FCA’s decision to pull the proposal was understandable given the reluctance of the French government to engage in meaningful talks. The French state ‘pulled the elastic until it broke,’ the person said,” they continue.

“‘We still needed to obtain Nissan’s explicit support,’ France’s Finance Ministry said Thursday morning. … The ministry said it believed Renault, in its partnership with Nissan, had the scale to compete without pursuing the merger with Fiat Chrysler,” Nick Kostov and Stacy Meichtry write  for the Wall Street Journal. “Renault, within the alliance, has all the assets to meet the challenges facing the automotive sector,” the ministry added.

“The French state has been intrusive in the extreme,” a person close to Fiat Chrysler tells Kostov and Meichtry. “They have sought the final word on every issue and this has created a situation of uncertainty that finally became intolerable.”

France owns 15% of Renault.

It “previously indicated that it would support a merger if the companies protect French jobs and auto plants. The deal would have created the world's third largest carmaker behind Volkswagen and Toyota. General Motors would have fallen to fourth in the global ranking,” write  Rob McLean and Rishi Iyengar for CNN Business.

“The merger talks took a turn after General Electric announced Thursday that it planned to cut 1,000 jobs in France -- a legacy of its 2015 merger with the French energy company Alstom. The move was politically sensitive for president Emmanuel Macron at a time when other foreign companies, including Whirlpool and Ford, are cutting thousands of jobs in France,” Liz Alderman and Andrew Ross Sorkin observe for the New York Times.

“At that point, the government’s team in the talks, headed by Finance Minister Bruno Le Maire, added new demands, including a pledge to make any job cuts in the United States and Italy before doing so in France, one person involved said,” they add.

“The situation for Renault in Japan has been complicated by the charges brought against former CEO Carlos Ghosn, who is awaiting trial in Tokyo. Le Maire said on French TV on Wednesday that Renault could also bring Ghosn to court in France over €11 million of expenses,” points out DW.com.  

“Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate. Older, and often heavily indebted carmakers, also face rising competition from new entrants in the motoring sector including Tesla, as well as cash-rich companies developing driverless technology such as Amazon and Google-owned Waymo,” the BBC reminds us.

“The Fiat Chrysler tie-up with Renault would have allowed the companies to share development costs on key technology such as electric vehicles and self-driving cars and to create an important player in the automotive industry,” it concludes.

“It is not clear what the two companies will do next to tackle the costs of far-reaching technological and regulatory changes. Fiat Chrysler had held inconclusive talks with France’s PSA Group, which also has the French government as a shareholder,” writes  Reuters’ Laurence Frost. “Fiat Chrysler said it ‘will continue to deliver on its commitments through the implementation of its independent strategy.’”

Meanwhile, “Renault shares are tanking,” Theron Mohamed reports for Markets Insider, dropping 8% on Thursday morning after Fiat Chrysler pulled its offer. “The demise of the deal sent shares in Fiat Chrysler down 2% in pre-market trading, while Nissan stock slid 2%,” Mohamed adds.