Fiat Chrysler Automobiles NV and Renault SA are in talks for a wide-ranging tie-up that could include joining large portions of their businesses, according to people familiar with the matter, a move that could reshape the European auto industry.
While many details and the financial contours of any transaction couldn’t be learned, it could be substantial: Fiat Chrysler, which trades in New York and Milan, has a market value of $20 billion. Paris-listed Renault is worth about $17 billion.
The carmakers are reportedly seeking to join forces to tackle structural challenges facing the global auto industry. It is too early to say whether the negotiations would result in a formal union, but they were focused on co-operation between the two companies, the source said.
An agreement might ultimately lead Fiat Chrysler to join the Renault-Nissan-Mitsubishi Alliance in the future, according to sources, some of whom warned that this outcome would mean taking a complicated path that would involve winning over Japan’s Nissan Motor Co Ltd.
Renault and Fiat Chrysler declined to comment and a spokesman for Nissan did not reply to a request for comment.
Renault Chief Executive Jean-Dominique Senard said on Saturday that Renault, Nissan and Mitsubishi may discuss a merger later in the future.
It was reported in March that Renault intends to restart merger talks with Nissan within 12 months, after which it will set its sights on a bid to buy Fiat Chrysler.
The plans signaled a return to the strategies supported by former Nissan boss Carlos Ghosn who held talks about merging Renault with Fiat Chrysler two to three years ago. The report added that the French government had opposed the move.
Until recently, Fiat Chrysler had been openly seeking merger partners. In 2015, its then-chief Executive, Sergio Marchionne, publicly proposed combining with General Motors but was rebuffed. Fiat Chrysler also explored the possibility of linking up with Chinese automakers. But since then, rising sales of pickup trucks and Jeeps have bolstered its coffers. And in January, Mr. Marchionne’s successor, Mike Manley, said he was confident Fiat Chrysler no longer needed a merger or alliance, although he stopped short of ruling one out.
In recent months, vehicle sales have slowed, and Fiat Chrysler’s net profit fell 47 percent in the first quarter to 508 million euros.
Although auto companies are spending heavily on new technologies, it is unknown when or how their investments will pay off, especially with a global slowdown in car sales and concerns over trade wars cloud the horizon.
Compared with its rivals G.M. and Ford, Fiat Chrysler has been slower to develop electric and self-driving vehicles, and may now need partners to share the costs of research and development. It currently cooperates with PSA Groupe, Renault’s French rival, in small delivery vans in Europe.
Large-scale auto alliances are complex and difficult to manage. The merger of the German Daimler with Chrysler in the 1990s was a costly failure. Renault’s alliance with Nissan was regarded as one of the more successful examples of cooperation until Mr. Ghosn’s arrest exposed the deep tensions in the relationship.
A recent leadership change at Renault hasn’t fully alleviated the tensions — a problem that analysts say poses a risk to the performance of the alliance.
Renault’s new chairman, Jean-Dominique Senard, this month proposed merging the French carmaker with Nissan under a holding-company framework, citing fierce industry competition for electric vehicles and emerging technologies, as well as headwinds in the companies’ main markets.
The proposal, which was floated to Nissan behind closed doors, but leaked to the Japanese media, was roundly rebuffed by Nissan’s chief executive, Hiroto Saikawa, who has long opposed the idea. He has sought to reshape the alliance’s balance of power, in which Renault owns a 43 percent stake in Nissan, while Nissan holds a 15 percent share in Renault that does not carry voting rights — a move that Renault, in turn, has opposed.
But pressure for a tie-up has intensified as Nissan’s performance flags. Nissan this month reported a 45 percent slump in operating profit in the last fiscal year, and warned of a near 30 percent drop this year. Renault officials have said they are highly concerned about Nissan’s performance, and see a merger as an essential step toward strengthening the alliance.