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Fiat Chrysler share price down 1% after withdrawing Renault merger offer

Italian-American Fiat Chrysler ends its bid to buy French Renault after the two carmakers couldn't reach an agreement.

Fiat Chrysler share price dropped after the corporation ended its bid to merge with Renault. The surprise announcement from Fiat Chrysler comes just days after the automaker submitted an offer to partner with Renault.

Why did Fiat Chrysler withdraw its merger offer to Renault?

Italian-American Fiat Chrysler blamed Renault’s native French government for the deal collapse. The French government owns 15% of Renault and pushed for Fiat Chrysler to guarantee a dividend to Renault shareholders, including the government. According to sources close to Renault, the French government also wanted to delay the merger until Nissan, a member of the Renault-Mitsubishi-Nissan Alliance, approved the deal.

Fiat Chrysler confirmed the withdrawal of the merger offer in a statement and said that the French government jeopardised the potential partnership.

‘It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,’ said Fiat Chrysler.

Renault also released a statement expressing regret about the failed merger offer from Fiat Chrysler.

‘Groupe Renault expresses its disappointment not to have the opportunity to continue to pursue the proposal of FCA [Fiat Chrysler]’, said Renault.

What’s next for Renault?

The merger was supposed to combine Fiat Chrysler’s strong sales with Renault’s cutting-edge technology to create popular fuel-efficient cars. The deal would have also created the world’s third-largest automaker. The collapse of the potential merger likely hurts Renault more than Fiat Chrysler as it recovers after the arrest of former Alliance chief, Carlos Ghosn, for fraud.

While the merger talks seem to be over, Nissan chief executive officer (CEO), Hiroto Saikawa, said he is open to a union of the carmakers in the future.

‘I welcomed the broadening of the [Renault-Mitsubishi-Nissan] Alliance’s opportunities, and I still feel that way,’ said Saikawa.

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