Renault-Nissan, Fiat merger

would dwarf Volkswagen as

biggest automaker
Unprecedented transformation in the car industry is spurring talk of a deal that would create the
world’s biggest auto manufacturer, dwarfing Volkswagen AG and Toyota Motor Corp. The combined
workforce would reach more than half a million people -- still less than Volkswagen’s 664,500 global
staff. Volkswagen, with 12 brands, last year sold 10.8 million cars, holding on to the global sales crown
after taking the lead from Toyota in 2016.

Combining the existing Nissan-Renault-Mitsubishi alliance with Italian-American rival Fiat Chrysler
would create a global powerhouse with cost-savings potential, but also a “gargantuan” task to
remodel production networks, and to streamline development spending and model plans, said
Bankhaus Metzler analyst Juergen Pieper.

“This would be about ‘mass not class,’ but that’s what it’s about for mass-market carmakers,” Pieper
said. “This would be a logical step to gain scale.”

Merging companies with production facilities in North America, Europe and Japan from three corners
faces significant hurdles. Daimler AG a decade ago unwound a merger with Chrysler after failing to
overcome cultural differences between the German luxury-car maker and U.S. producer of mid-range
cars.

Renault SA aims to restart merger talks with alliance partner Nissan Motor Co. within 12 months, then
acquire another rival -- with Fiat Chrysler Automobiles NV a top target, the Financial Times reported.
Adding Jeep, Ram and Maserati to the French and Japanese maker’s namesake brands would create a
carmaker producing 15 million vehicles a year, by far the most in the world.

The late Sergio Marchionne used to say consolidation would be the only way to compete against the
biggest global carmakers. The company looks certain to fulfill that goal, but perhaps not in the way he
intended. The Financial Times reports that Renault wants to begin merger talks with Nissan in the next
12 months. Assuming a merger gets completed, the plan is for the combined company to then pursue
another merger, with Fiat Chrysler a prime target.

Renault, Nissan, and Mitsubishi have been busy since cutting ties with ex-alliance boss Carlos Ghosn.
They formed a new alliance board with Renault chairman Jean-Dominique Senard at the helm, Renault
has shrunk the size of its board while Nissan added more outside directors, and the two agreed to a
new governance structure to ease operational decision making. All three automakers have walked
away from Ghosn-era goals to sell 14 million cars and find 10 billion euros in savings by 2022. New
strategic plans for all three car companies are in the works.

With stability in sight, it's said Senard wants to succeed where Ghosn failed — a full-fledged merger
between Renault and Nissan with talks to begin "as soon as possible." Ghosn's pursuit of a merger last
year in attempt to make the 20-year-old alliance "irreversible" is part of what led to his downfall, with
Nissan executives including CEO Hiroto Saikawa against the push.

The new effort is presented as larger scale being the only way for the alliance to take on companies
like Volkswagen and Toyota. But the Nissan-Renault-Mitsubishi trio sold 10.76 million cars around the
world last year, second to Volkswagen with 10.83 million sales, ahead of Toyota with 10.39 million. If
Nissan hadn't suffered a 2.8 percent dip in sales, the alliance would have taken the top spot.

If a little scale is good that means more is better, right? Pulling Fiat Chrysler into the alliance would
add around 5 million annual sales, and would be another move in Ghosn's footsteps. The former
honcho is said to have "held talks with FCA" about some kind of union within the past three years. The
French government, which has a 15 percent stake in Renault and double voting rights, shut down the
initiative.

It's not clear if FCA will be an independent company by the time a potential Nissan-Renault merger
closed, though. FCA is open to a union, CEO Mike Manley having said at Geneva, "We have a strong
independent future, but if there is a partnership, a relationship or a merger which strengthens that
future, I will look at that."

Groupe PSA, the parent company of Peugeot that's still processing its purchase of Opel, has already
met with FCA Chairman John Elkann to discuss a transaction. According to the Wall Street Journal,
Elkann and the Agnelli family that controls FCA declined the latest proposal partly because of
Peugeot's desire to finance a transaction with stock, which would mean more FCA exposure to a
mature European market where FCA is already having issues. Beyond that, the FT said Elkann had met
with "several rivals." With so many interested parties, something seems bound to happen.

Home work discussion:

Q1. Search about automobile industry of the world and list top 10 firms. Also list the car brands
mentioned in above case.

Q2. What is the case where Carlos Ghosn was involved? (search internet)

Q3. How the value creation can be achieved in the above predicted merger?