PSA criticises proposed FCA-Renault merger

31 May 2019

The proposed merger between Fiat Chrysler Automobiles (FCA) and Renault has drawn criticism from French carmaker PSA Group.

′FCA is taking advantage of Renault’s financial distress’

PSA has highlighted that the value of Renault was lowered due to its close ties to Nissan during Carlos Ghosn’s alleged financial misdemeanours.

CEO Carlos Tavares pointed out in a memo sent to PSA’s top executives on Monday, that the merger looked to be more of a takeover and capitalised on Renault’s recent misfortunes.

′Renault’s current valuation largely explains Fiat’s interest in a merger,’ the memo said, and called the merger a ′virtual takeover of Renault by Fiat.’

Tavares added ′The transaction proposed by Fiat Chrysler therefore seems particularly opportunistic, largely to its benefit. For Renault, this may be an asset in discussions with Nissan, but it could also weaken the alliance or even lead to an unwinding.’

Whereas FCA has described the merger as a ′friendly’ one, the view from the competition paints a much more opportunistic picture, where FCA is taking advantage of Renault’s financial distress.

Place and time

The proposed merger, announced earlier this week, would see both companies acquiring a 50% stake in what would become the world’s third largest automaker, and the second largest in Europe.

With carmakers looking to collaborate in multiple areas, the Italian business believes that broader collaboration through a merger would substantially improve capital efficiency and the speed of product development.

Nissan would almost certainly lose out should the merger take place but due to financial struggles and PR missteps, the company is unlikely to be able to impact the merger talks.

′The relationship between Renault and its Japanese partners is not as constructive as probably anybody wishes,’ a source familiar with the FCA-Renault talks told Reuters.