The talks are at an advanced stage, the sources said. The Financial Times earlier reported that Fiat Chrysler Automobiles NV (FCA) and Renault were discussing a deal to forge “extensive ties” to tackle structural challenges facing the global auto industry.
Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and investment-thirsty technologies for connected and autonomous vehicles.
FCA and Renault have a combined market capitalisation approaching 33 billion euros (US$37bil) and total global sales of 8.7 million vehicles. Besides bringing greater scale, a tieup could help patch flaws on both sides.
FCA has a highly profitable North American RAM trucks business and Jeep brand but has been losing money in Europe, where it may also struggle to keep pace with looming carbon dioxide emissions curbs.
Renault, by contrast, is an electric-car pioneer with relatively fuel-efficient engine technologies and a strong presence in emerging markets, but no US business.
Any tie-up would likely face political and workforce hurdles, particularly in Italy. Most of FCA’s European plants are running below 50% capacity.
It was unclear whether the FCA-Renault deal talks would conclude successfully, the sources said. The plan under consideration could involve some transfer of equity, one source said. “This isn’t just another partnership – it’s more than that.”
Both carmakers have also been exploring tie-ups with other partners. While FCA has recently revived discussions with PSA Group – which have been recurrent over the years – Renault is seeking a merger with Nissan, its partner in a troubled 20-year-old alliance. A tie-up between FCA and Renault would not preclude a consolidation of the alliance with Nissan, one of the sources said.