Fiat plans merger with Renault in latest auto industry jolt

Fiat Chrysler said to be in advanced talks to ally with French automaker Renault

Groupe Renault's board of directors will meet to discuss the proposal, which would have Renault and FCA each owning 50% of the business.

FCA would also be a more natural cultural fit, and the proposed 50-50 shareholding and management structure would, in theory, eliminate some of the pain points Renault and Nissan have endured.

A deal could help both companies address some of the shortcomings that have led their market valuations to lag major rivals, as well as the shift to electric and self-driving technologies amid tightening emissions regulations.

Now, questions are growing over the Renault-Nissan-Mitsubishi alliance, which is the biggest maker of passenger cars in the world.

Early areas for potential convergence include Renault's next electric vehicle platform being launched at its Douai site in France, the source said, adding all of Renault's board members backed the decision to study FCA's proposal with the exception of the leftist CGT union, which abstained. A representative for Yokohama-based Nissan declined to comment.

According to the Financial Times, a deal between FCA and Renault would spell the end of a potential merger between Nissan and its French alliance partner.

In making the proposal to Renault, Elkann said he's encouraged by the success of Fiat's own merger with Chrysler.

That prospect did not play out, and it may be up to FCA to provide a relatively soft landing for Renault.

"There isn't much overlap and the key thing is finding synergies between Renault and Fiat Chrysler", Endo said.

Fiat would give Renault access to the North American market, while gaining clout in Russian Federation, the French carmaker's second-biggest market with its Avtovaz unit.

Nissan isn't involved in talks between the two European auto companies and doesn't view an extensive deal between them as a positive development, people with knowledge of the matter said. Falling sales in the world's biggest markets - China, the USA and Europe - have brought fresh urgency to consolidate. The group would be listed in Paris, New York and Milan, it said.

It could also have profound repercussions for Renault's 20-year-old alliance with Nissan, already weakened by the crisis surrounding the arrest and ouster of former chairman Carlos Ghosn late last year. Judging by what FCA is saying, Nissan, as a partner for Renault, will also be involved in the new company.

Fiat Chrysler and Renault together would have a combined market capitalization of more than 32 billion euros ($36 billion) and total global sales of 8.7 million vehicles.

Following his arrest, Ghosn was bailed for a second time on April 25 and is now preparing for trial on four charges of financial misconduct ranging from concealing part of his salary, to using Nissan funds for personal expenses. A year later, Marchionne became vocal on the auto industry's need for consolidation in an analyst presentation called "Confessions of a Capital Junkie".

No plant closures would be caused as a result of the tie-up, the carmaker said. Sales dropped five percent to 24.48 billion euros.

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