Fiat Chrysler withdrew its merger offer with Renault SA on Wednesday evening, after negotiations with the French government had collapsed, according to sources familiar with the discussion.
The Italian-American company originally proposed the merger as the two companies complement each other. Fiat has best-selling brands such as Jeep and Ram, while Renault has driven the production of emission-free and self-driving vehicles.
The talks between the two companies began earlier this year privately and were accelerated when Fiat filed a proposal in late May. However, negotiations were quickly halted after French government officials on Fiat's board began making escalating demands, sources told FOX Business.
The companies planned to release an update this week, as the talks progressed.
"If it's so hard to come through the agreement, how will that be in the next five years?" The risks involved were just too big, "said a source.
In a statement, Fiat referred to the dispute and said it had become "clear that the political conditions in France do not exist at present". The company declined to comment on the statement.
The French government, the principal shareholder of Renault, has reportedly expressed concern over how the merger might reconcile its long-term alliance with Nissan. Representatives of the Japanese manufacturer wanted to abstain, according to the Wall Street Journal of the merger vote.
A source with knowledge of the ongoing talks denied the idea that Nissan was a challenge to the deal. Both Renault and Fiat were convinced that the company was open to the potential opportunities of the transaction.
In a statement, Renault said it was "pleased with the constructive approach of Nissan."
Auto Powerhouse, "the company wrote.
A Renault spokesman did not respond immediately to a request from FOX Business as to whether the French government had played a role in the breakdown of the talks.
On Thursday, the French Ministry of Finance said companies "still need Nissan's express support," but noted that Renault "has all the resources to meet the challenges of the automotive sector," the Journal said.
Carlos Ghosn, chairman and CEO of Renault's alliance, Nissan and Mitsubishi, was arrested and charged with using Nissan funds for personal matters. His wife, Carole Ghosn, told CNBC that the allegations were part of a plot to avoid a merger between Nissan and Renault.
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Fiat remains open to future merger proposals, but is confident that its existing strategy will enable it to continue independently, the company said.
The automaker previously announced that it would spend $ 4.5 billion to build a new plant in Detroit and expand production elsewhere in the state. This investment should create 6,500 new jobs.