Competition has been intensifying in the global automobile industry over the development of next-generation technologies. This merger deal represents a realignment symbolic of these moves.
Fiat Chrysler Automobiles NV (FCA), a major carmaker in Europe and the United States, has proposed management integration on equal terms with Renault SA of France. A de facto merger is assumed in the proposed deal.
If the deal materializes, it will create the world's largest alliance of carmakers, also including Nissan Motor Co. and Mitsubishi Motors Corp., both of Japan, with a combined annual production of more than 15 million vehicles.
Renault and FCA lag behind in the development of autonomous driving technology and electric vehicles. The two carmakers likely judged that an expansion of scale would be necessary to cover the huge costs required for research and development of these technologies.
FCA estimates the integration will bring about an annual financial effect of 5 billion euros (about 610 billion yen) mainly due to the common use of parts. The Renault-FCA deal may serve as an opportunity to once more accelerate regrouping and realignment on a global scale.
Needless to say, expansion of the management base alone would not enhance their competitive edge.
Renault and FCA have suffered stagnant sales of their main brand cars even in their hometown European market. They are far behind Volkswagen AG of Germany also in Asia, which is a growing market. It is imperative for Renault and FCA to reconstruct their sales strategies, in addition to producing attractive cars.
The French government, which is the largest shareholder of Renault, will continue investment in the planned merger company. The Italian government may acquire shares of the new merged firm as a countermeasure.
Nissan's engagement vital
A view has emerged that the founding family of Fiat, which holds a slightly less than 30 percent stake in FCA, will increase its influence. The composition of the shareholders in the planned new company will likely become one of the focal points.
To be noted is the merger's effect on Nissan, which is more than 40 percent owned by Renault. As things stand now, it is impossible to anticipate how the tripartite alliance of Nissan, Mitsubishi and Renault will be affected.
Management integration with Nissan, which has been studied by Renault, is expected to be shelved for the time being. But Renault will gain a greater voice because the planned new company, if created, will be larger than Nissan. In any case, Renault is expected to enhance pressure for integration.
It is desirable for Nissan to engage itself in the merger deal between Renault and FCA as much as possible so that its desires are reflected in the deal.
FCA and Nissan are competitors in North America, which is the main market for their vehicles. There are believed to be many points to be adjusted.
To make its presence felt within the alliance, Nissan must expedite the recovery of its earning power. Nissan has the lead in the development of electric vehicles. It must implement a tenacious strategy that takes advantage of its technological clout.
More than 5 million people work in the domestic automobile industry. As a company sustaining such employment, Nissan must strive to maintain high-level manufacturing and development technologies as well as production centers.
(From The Yomiuri Shimbun, May 31, 2019)
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