Fiat Chrysler Automobiles NV and Renault SA are in talks for a possible merger of equals as the carmakers explore a wide-ranging alliance with Nissan Motor Co. Ltd. and Mitsubishi Motors Corp., The Wall Street Journal reported May 26, citing people familiar with the matter.
The report comes shortly after the Journal reported that Fiat Chrysler was considering joining Renault's automotive alliance with Nissan and Mitsubishi.
The newspaper said Fiat Chrysler and Renault are in advanced merger talks, including the possibility of a merger of equals, which would create a carmaker with a combined value of about $37 billion and annual vehicle output of almost 9 million passenger cars and light trucks.
According to the report, the two carmakers expect the combination of their businesses to help them cope with weakening sales and high costs related to developing electric and self-driving vehicles.
The talks reportedly include collaborations in fields such as electric vehicle technology, manufacturing platforms and in-car connectivity. Sources told the Journal that an announcement could be made as early as May 27.
The companies could commence a share swap as part of an initial agreement that could progress into a merger at a later date, the report said.
Renault Chairman Jean-Dominique Senard reportedly met with French Finance Minister Bruno Le Maire May 24 to present the merger plan since the French state owns 15% of Renault. One of the sources told the Journal that France is not opposed to a merger.
Meanwhile, a French official told the news outlet that Paris has notified the Japanese government about a potential deal after learning that Renault's board was expected to review it in the coming days. The official reportedly said that the French state will assess the final proposal "with an open mind."
If a deal proceeds, the Journal said the combined entity would rank as the third-largest automaker by production, next to Volkswagen AG and Toyota Motor Corp. If not, Fiat Chrysler could still join the three-way alliance between Renault, Nissan and Mitsubishi, the sources reportedly said.
Fiat Chrysler and Renault did not immediately respond to S&P Global Market Intelligence's requests for comment.
Renault, Nissan and Mitsubishi are all embroiled in Carlos Ghosn's ongoing litigation in Japan. Ghosn served as chairman of Renault and Nissan at the time of his arrest in November 2018 over charges of financial misconduct.
In April, Renault was reported to have proposed a 50/50 holding company with Nissan after it was reported that the Japanese company planned to reject the French carmaker's previous merger proposal.