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Fiat Chrysler lost Renault. It must quickly find another fusion partner



The logic behind the merger, however, remains valid, as the French carmaker explained in a statement about the failure of the deal.
"We see the opportunity as up-to-date, with convincing industrial logic and great financial benefits, and what would lead to a European-based global automotive company," said Renault ( RNLSY ) .

Fiat Chrysler has no time to mourn what could have been.

Marchionne, who led the Italian American automaker until his death last year, believed that carmakers would have to scale up to save costs and not waste valuable money.
The combination of Fiat Chrysler and Renault would have created the world's third largest automaker, which relegated General Motors ( GM ) to fourth place. Fiat alone takes Chrysler eighth place.
Marchionne wrote in a 201
5 presentation – "Confessions of a Capital Junkie" – that car companies spend far too much money on copying activities. It would be better, he thought, to band together.
  Sergio Marchionne pleaded for consolidation in a presentation titled

Even the former Renault Chief Carlos Ghosn understood the necessity of economies of scale. He partnered with Nissan [194559003] ( NSANF ) before adding Mitsubishi Motors to establish the world's largest alliance for cars.

The rest of the industry has since come behind the tricky pipes of consolidation that have come into action due to the high cost of developing the electric and autonomous vehicles of the future. A collapse in the world car market this year has increased the pressure to save money. Germany BMW [194559003] BMWYY ) and Daimler ( DDAIF ) have formed a joint venture to develop Ride and charge services were established, and BMW has just agreed to work with Jaguar Land Rover on a new generation of electric motors. Ford [ F ) and Volkswagen [194559003] [ VLKAF ) are jointly developing some new vehicles The trend towards cooperation has increased accelerated in recent months, as the automakers of uptrends such as Tesla ( TSLA ) and technology companies such as Uber ( UBER ) .

Fiat Chrysler said a merger with Renault would have saved more than $ 5 billion a year – cash that can barely afford to stay on the table. First quarter operating income decreased 29% to EUR 1.1 billion (USD 1.2 billion). This underscores the dependency on truck sales in North America.

"Both believe that they really need economies of scale to generate investment profits," said David Bailey, a professor at Birmingham Business School, of Fiat Chrysler and Renault.

  BMW and Jaguar Land Rovers do not need China's rare earth for their new electric motors.

Fiat Chrysler is considered a latecomer in the development of electric vehicles and must quickly come up with a Plan B. to let. One possibility is to conclude an agreement with Peugeot, whose shares rose on Thursday due to speculation. This could be the next option to get a proposal.

Like Renault, however, Peugeot [194559003] ( PUGOY ) also counts the French state among its largest shareholders via a sovereign wealth fund . If French policy fails a deal, it could do so again.

Bailey suggested that Fiat Chrysler might find his answer in Asia instead of Europe.

The Jeep brand is highly profitable and a sought-after capital. Alfa Romeo, another brand in the Fiat Chrysler stable, has unused luxury potential.
China is already the world's largest car market. Aggressive efforts by the government to promote the development of electric cars make it an important argument for future technologies. [19659004] Although Marchionne advocated industry consolidation, he insisted that Fiat Chrysler survive on its own if needed. The consequences of a mistake in this question, however, could be serious.

"If companies do not quickly adjust to this reorientation of the industry, they run the risk of being wiped out," Bailey warned. "That means we have much more to do in terms of collaboration and consolidation."


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