Proposed merger between Fiat and Renault could shake up global auto industry

French automaker Renault said it would “study with interest” a proposal from Italian-American rival Fiat-Chrysler that would merge the companies in a deal that could help reshape the global auto industry.

French automaker Renault said it would “study with interest” a proposal from Italian-American rival Fiat-Chrysler that would merge the companies in a deal that could help reshape the global auto industry.

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Fiat-Chrysler on Monday pitched the “merger of equals,” which would create the world’s third largest carmaker, a company that would have a significant presence in every major world market and in every market segment from electric and hybrid vehicles to compact cars and from trucks to luxury cars.

It would also give the combined company the economics of scale to compete in the race for the technologies for self-driving cars.

Fiat predicted the combined company would save more than 5 billion euros (5.6 billion U.S. dollars) per year through the merger.

All told, shareholders in each of the two companies would end up owning exactly half of the combined company, which Fiat said would produce around 8.7 million vehicles per year. Only Germany’s Volkswagen and Toyota from Japan would be bigger.

The next step will be for Renault to decide whether to recommend the proposal to its shareholders. If they do that, it will be up to shareholders from both companies to vote the deal up or down.

According to Marco Leonardi, an economist with the Department for the Study of Labor and Welfare with the State University of Milan, the deal will face some obstacles. For example, Fiat said it would not be necessary to close any production plants for either company, but it did not address the possibility of job losses.

“There’s also the question of who will be in charge,” Leonardi told Xinhua. “Fiat says it will be a 50-50 merger and that the board will include independent directors. But someone will have to be the head of the company. Will that person come from Fiat-Chrysler or from Renault?”

Roberto Alfonsi, an automobile sector analyst with ABS Securities, said there is also the problem of the role of the French state in Renault. The company was privatized starting in 1996, but the French state retains a 15-percent stake. That means the French government would own 7.5 percent of the combined company. The Italian government has never owned a stake in Fiat.

“Fiat shareholders could say they won’t approve the deal unless the Italian state takes a similar stake in Fiat, or unless the French government sells its shares,” Alfonsi said in an interview.

Leonardi said that despite the obstacles, the deal makes good sense. “Geographically, the companies complement each other, especially with Fiat lacking a strong presence in Asia,” Leonardi said.

Leonardi pointed out that Sergio Marchionne, the famed Italian-Canadian businessman who shepherded Fiat’s 2014 merger with Chrysler and who headed the new company until his death last year, said that the global marketplace will ultimately support six major carmakers. As a standalone company, Fiat is the world’s eighth largest automobile maker, one rank ahead of Renault.

“This merger, or another one on the same scale, is probably necessary for the long-term survival of both companies,” Leonardi said.

Alfonsi said the merger could spark a streak of other mergers between second-tier car makers.

It is not clear how the merger would impact Renault’s alliance with Japanese carmakers Nissan and Mitsubishi. Media reports said Renault last year proposed a merger with its Japanese partners but was turned down.

EU leaders discuss process to elect new EC president, Spitzenkandidat in doubt

The European Union (EU) member states leaders didn’t discuss names of the candidates but only the process to choose new president of the European Commission (EC), European Council President Donald Tusk said in Brussels.

During a press conference following the leaders informal dinner, Tusk told reporters that the discussion confirmed the agreement reached by the leaders in February last year, that “the European Council will exercise its role when electing the Commission president, meaning — in accordance with the Treaties –that there can be no automaticity.”

“At the same time, no-one can be excluded: being a lead candidate is not a disqualification, on the contrary, it may increase their chances. The Treaty is clear: the European Council should propose, and the European Parliament should elect,” he said during the press conference.

“Therefore, the future President of the Commission must have the support of both a qualified majority in the European Council and a majority of the Members of the European Parliament,” he noted.

The landscape of European politics is changing as far-right and nationalist politicians made strong gains in the European Parliament elections although parties committed to strengthening the Union retained over two-thirds of the seats.

This year’s elections saw a record-high turnout as nearly 51 percent of the 426 million eligible voters in the 28-member bloc voted from May 23 to 26.

“We are very happy about the turnout, which was the highest in 25 years. This proves that the EU is a strong, pan-European democracy, which citizens care about. Whoever will lead the European institutions, they will have a genuine mandate from the people,” said Tusk.

Meanwhile, Angela Merkel, German Chancellor, told reporters that tonight’s discussion was “harmonious.” She said leaders agreed they would try to settle on a nominee for the Commission president by the time of their next summit, in late June.

She said Tusk had been tasked with consulting among leaders and “very closely” with the European Parliament.

Before the leaders started the informal dinner, the current EC President Jean-Claude Juncker publicly showed his support to a president-choosing process –Spitzenkandidat.

“Last time round the Spitzenkandidat I became European Commission President. Should happen this time too,” he said on his twitter account.

This long German word essentially means “lead candidate,” and refers to a system in which the European political groups put forward one candidate to lead their list of candidates. This makes the Spitzenkandidat something of the “face” of a political group’s campaign.

The Spitzenkandidat is also meant to represent a European political group’s choice for the next President of the EC, to take the place of Juncker when he steps down this autumn. In theory, the European political group who wins enough seats in the European Parliament to form a governing coalition would have their Spitzenkandidat become the next EC President, provided that he or she is approved by the European Council.

Juncker was the first European Commission president to be elected in this way, as the Spitzenkandidat for the European People’s Party political group in 2014. He may also be the last, however, since not all EU leaders are agreed that the system should continue.

French President Emmanuel Macron is one of the recent leaders to suggest he would not support the approach, saying at a news conference in Sibiu, Romania, on May 9, that he didn’t “feel bound at all by the principle of Spitzenkandidat.” Macron was joined by Luxembourg’s prime minister Xavier Bettel in showing some doubt about the system. China Daily/Xinhua

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