Fiat Chrysler Automobiles and French carmaker Renault are discussing a possible alliance to boost the competitiveness of both companies in Europe and other parts of the world, a person familiar with the matter said on Saturday.
The talks are still in their early stages and could still collapse, but they are in the midst of significant technological and regulatory changes that are putting pressure on automakers and spurring some to unite. Ford Motor and Volkswagen have recently agreed to work together in pickup trucks and commercial vehicles, and are in talks about pooling their efforts to develop self-driving cars.
In Europe, the two companies face more stringent environmental regulations, forcing automakers to invest billions in electric vehicles and other new technologies that reduce tailpipe emissions. Both also have problems getting a foothold in China, the world's largest auto market, and have been slower in developing autonomous vehicles than some competitors.
An alliance with Fiat Chrysler could allow Renault access to the US market, where there is currently none. It was not clear how Nissan, the almost 20-year-old partner of Renault, would fit into a collaboration with Fiat Chrysler.
Renault needs Nissan, the dominant performer in the alliance, to continue to make a financial contribution to Renault as a performance of the French automaker slipping in Europe. Carlos Ghosn, the former CEO of Renault and Nissan, had sought to link the two companies more closely by implementing the idea of merging or creating a joint holding in the face of growing competition in the marketplace. But inter-company relations have frayed since November when Mr Ghosn was arrested in Japan and charged with financial misconduct.
News of the talks between Fiat Chrysler and Renault was first reported by the Financial Times.
Until recently, Fiat Chrysler had been openly looking for fusion partners. In 2015, his former CEO, Sergio Marchionne, publicly suggested joining forces with General Motors, but was turned down. Fiat Chrysler also explored the opportunity to connect with Chinese automakers. But since then, rising sales of pickups and jeeps have strengthened the coffers. And in January, Mr. Marchionne's successor Mike Manley said he was confident that Fiat Chrysler would no longer need a merger or alliance, though he stopped excluding one.
Vehicle sales have slowed in recent months, with Fiat Chrysler's net profit down 47 percent to € 508 million in the first quarter.
Although car companies spend a lot of money on new technologies, it is not known when or how their investments will pay off, especially due to a global slowdown in car sales and concerns over trade warfare.
Compared to its competitors GM and Ford, Fiat Chrysler was slower in the development of electric and self-propelled vehicles and may need partners to share the costs of research and development. Currently, the company is working with PSA Groupe, Renault's French rival, in small vans in Europe.
Large auto alliances are complex and difficult to manage. The merger of the German Daimler with Chrysler in the 1990s was a costly bust. The Renault alliance with Nissan was considered one of the more successful examples of cooperation until the arrest of Ghosn revealed the deep tensions in the relationship.
Renault's recent leadership change has not fully alleviated the tensions – a problem that, according to analysts, poses a risk to the Alliance's performance.
This month, Renault's new chairman, Jean-Dominique Senard, proposed merging the French automaker into a holding company with Nissan as a headwind on the company's main markets.
The proposal, which was submitted to Nissan behind closed doors but became known to the Japanese media, was flatly rejected by Nissan CEO Hiroto Saikawa, who has long been against the idea. He has sought to restructure the alliance of forces, where Renault holds a 43 percent stake in Nissan, while Nissan owns a 15 percent stake in Renault, which has no voting rights – a move that Renault has rejected. 19659002] But the pressure for catching up has increased as Nissan's performance wore off. Nissan reported a 45 percent drop in operating income this month over the past fiscal year, warning of a decline of nearly 30 percent this year. Renault representatives expressed their deep concern about Nissan's performance and see a merger as a significant step in strengthening the Alliance.