The Renault factory in Maubeuge, northern France
The Renault factory in Maubeuge, northern France. Shares in French automaker Renault plunged by more than seven per cent when trading opened yesterday in Paris after Italian- American carmaker Fiat Chrysler withdrew a merger proposal. Image Credit: AFP

Milan, Paris (Bloomberg): Fiat Chrysler Automobiles NV abruptly withdrew its offer to combine with Renault SA after the French carmaker’s board - on the brink of approving the deal - postponed a decision for a second time.

Fiat’s move, upending a deal that would create the world’s third-largest automaker, came after Renault directors ended an hours-long meeting without taking a crucial vote. The French state, its biggest shareholder and the most important voice on the board, had requested deliberations be put off to a later date.

Renault said it would continue to review the proposal “with interest”. In its own statement, Fiat Chrysler took direct aim at the French government, owner of a 15 per cent stake in the French carmaker, for scuppering a deal.

“It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” Fiat said, adding that it remains convinced that the plan was compelling and carefully balanced.

A wasted effort that lasted weeks

The Italian-American maker of Jeep SUVs and Ram pickups had spent weeks navigating talks with Renault, its longstanding partner Nissan Motor Co. and the French state, which had ratcheted up demands over jobs, governance and factories. It had also pushed for a board seat and a payout to shareholders since the deal was announced on May 27.

In the end, the French sought more time to persuade Nissan to back the merger, the finance ministry said in a statement.

“There’s nothing positive in the withdrawal of Fiat’s offer for Renault,” said Takeshi Miyao, an analyst at Carnorama.

The decision to walk away marks a significant retreat for Fiat chairman and scion of the founding Agnelli family John Elkann. After discussions with Renault’s cross-town rival Groupe PSA, he had opted for the riskier path, proceeding with an offer for Renault despite the complications of the significant government shareholding and the company’s strained relationship with Nissan.

Fiat Chrysler has been seeking a third partner since former CEO Sergio Marchionne and Elkann created the company in 2014 with Fiat’s full acquisition of the Detroit automaker. Even so, the late deal-maestro warned in a joint interview with Elkann that it is also crucial to end talks without the right conditions.

The breakdown of late-night talks just as a deal appeared to be in hand also leaves Renault Chairman Jean-Dominique Senard in a difficult position, having sought and failed to use his diplomatic skills to bring all the parties into agreement. In addition to the demands from the French state, French labor unions were worried about jobs and Nissan felt betrayed by a partner with which it was already trying to smooth rocky relations.

Not much support from Nissan
Nissan had withheld its support for the Fiat deal, raising questions about cost savings, technology sharing and other matters, despite Renault Chairman Jean-Dominique Senard’s desire to win at least conditional backing from the Japanese manufacturer. Nissan, which wasn’t formally part of the Fiat deal, nevertheless has an important role as Renault’s 20-year alliance partner, sharing technology to develop new models, purchasing components at scale and producing models from each brand in the same factories.