Italian-American carmaker Fiat Chrysler on Thursday withdrew its blockbuster proposal to merge with Renault, blaming political objections in Paris and sparking a war of words with French officials.
Fiat Chrysler (FCA) had stunned the markets last week by proposing a “merger of equals” with the French group that would create an auto giant spanning the globe.
The plan was welcomed by analysts as one of the few deals in the auto sector that might prove a success, given the companies’ complementary range of vehicles and regional markets.
The French government, which controls 15 percent of Renault, gave it a conditional green light but also warned against “haste”.
In a statement issued after a board meeting Wednesday evening, FCA said it “remains firmly convinced of the compelling, transformational rationale” of its proposal, which it said was “carefully balanced to deliver substantial benefits to all parties”.
“However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” it added.
Renault, whose longstanding alliance with Japan’s Nissan is in trouble, expressed its “disappointment”.
The deal would have created a group worth more than 30 billion euros (£26.5 billion) across the two companies’ namesake brands as well as Alfa Romeo, Jeep, Maserati, Dacia and Lada.
French Finance Minister Bruno Le Maire had set conditions for the FCA tieup, including no plant closures and that the Renault-Nissan alliance be preserved.
The Renault source said Le Maire had asked for another board meeting next Tuesday after he returns from a trip to Japan where he was to discuss the proposal with his Japanese counterpart.
A source close to FCA blamed the “sudden and incomprehensible” objections of Le Maire’s ministry for causing the collapse of the deal.
“New demands imposed by the French government have led to this damaging situation for all parties,” the source told AFP.
Italian Deputy Prime Minister Luigi Di Maio said: “When politics tries to intervene in economic procedures, they don’t always behave correctly, I don’t want to say any more.”
But Le Maire stressed that of his conditions for the FCA alliance, only the explicit approval of Nissan remained to be secured, while aides denied that the ministry had played politics with the deal.
French Budget Minister Gerald Darmanin said the government was right to demand guarantees of FCA.
“And to seek (more) time for a wedding is normal,” he told Franceinfo radio, while keeping the door open for the deal to be revived.