PARIS — Forging a successful merger of Renault Group and Fiat Chrysler Automobiles was always going to be challenging, but the added presence of the French government — Renault's largest shareholder — may have made it impossible.
That is the prevailing sentiment in Turin, at least, where FCA Chairman John Elkann pulled his company's merger offer in the early morning hours Thursday, June 6, citing "political conditions in France" that made going forward impossible.
Elkann's move stunned the French government, which after a six-hour meeting that wrapped up at midnight Wednesday, had sought an extension to win more support from Nissan. In FCA's view, the government moved the goal posts at the last second, suggesting that it would not be a trustworthy partner.
With 15 percent of Renault's shares, and enjoying double voting rights, the French government exercises an outsize influence on operational and strategic decisions. That has been a barrier to a closer tie-up with alliance partner Nissan, and it appears to have sunk the FCA merger, too.
The government sees its role as a shareholder to protect French jobs and its investment. It emphasized repeatedly that any FCA deal had to happen "within the framework of the existing alliance" with Nissan. The issue is particularly sensitive in the wake of the arrest of former Chairman Carlos Ghosn in November, which revealed deep cracks in the 20-year alliance.
On top of that, President Emmanuel Macron of France has been facing a backlash to his pro-business agenda, which critics say favors the wealthy over the working class. A deal that could be seen as ceding control of Renault to Elkann — who would have been chairman of the proposed company — could imperil French jobs, according to that view.
For FCA, and even for Renault and its chairman, Jean-Dominique Senard, that meant only that Nissan would not block the merger talks from going ahead. But the French government insisted — in a demand made Wednesday — that Nissan's representatives on Renault's board vote "yes."
"It was out of the question to put the alliance in danger for a merger," a French government spokesman said Thursday. "There was a risk with Nissan's abstention that Nissan would later vote against it."
Nissan, stinging from being kept in the dark by FCA and Renault until the last minute, could have blocked access to shared technologies essential to generating the billions in synergies that Elkann touted in making the offer to Renault.
The government's intervention has also cast doubt on how much authority Senard, who was brought in from Michelin to stabilize Renault and the alliance, really has. French newspapers were reporting that the 66-year-old was weighing his effectiveness after talks with FCA dissolved, although the Macron administration and the French Finance Ministry affirmed their support Thursday.
FCA's proposal had faced increased criticism in France. An activist fund, CIAM, had written to the Renault board in opposition, calling the deal "opportunistic" and saying the offer strongly favored FCA from an industrial and financial point of view. The powerful CGT union had also railed against it.
But until Wednesday night, the three main parties to the deal — Renault, FCA and the French government — had expressed strong support, and there was little to suggest the Renault board would not approve it, even if support wasn't unanimous.
As it was, the board never took a vote, issuing a news release just after midnight saying it wanted more time. Less than 90 minutes later, the deal was dead.