Ball in Renault's court after Fiat Chrysler proposes merger

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Fiat also held initial talks with Peugeot owner PSA Group as it evaluates potential partners, the people said.

"We now have the French, the Italians, the Japanese and the Americans needing to find consensus on the board of a Dutch company, where the French state stands to lose its special status", Ellinghorst said. The world's two biggest automakers, Volkswagen and Toyota Motor, each topped 10 million vehicles a year ago.

It would rank third in the global auto industry behind Japan's Toyota and Germany's Volkswagen. Renault spokesman Frederic Texier said the French carmaker had no comment. A tie-up between Daimler and Chrysler in the 1990s was billed as a merger of equals, but it collapsed nine years later amid cultural differences and recriminations. Before the deal is closed, to maintain equality across different markets, FCA shareholders would get Euro 2.5 billion as a dividend and distribution of Comau's shares to FCA or an incremental Euro 250 million dividend.

Fiat has conditioned the merger talks on Renault agreeing not to pursue a transaction with Nissan in the short term, the people said. She said the companies have been discussing a merger for weeks but the French government was only informed last week.

Industry shifts toward electric models, along with stricter emissions standards and the development of new technologies for autonomous vehicles, have put increasing pressure on carmakers to consolidate.

The combined business would be 50% owned by Fiat shareholders and 50% by Renault stockholders.

Renault, by contrast, was an early mover in electric cars, with relatively fuel-efficient engine technologies and a strong presence in emerging markets, but no USA business.

"Nissan is still an important block in their puzzle, given it has good coverage of China, where neither Renault nor FCA are strong", said one auto sector analyst who asked to remain anonymous.

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FCA said joining forces would make the automakers a global leader in electric vehicle technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis.

It could also have profound repercussions for Renault's 20-year-old alliance with Nissan, already weakened by the crisis surrounding the arrest and ouster of former chairman Carlos Ghosn late last year.

Renault Chairman Jean-Dominique Senard presented an FCA-Renault merger plan to French Finance Minister Bruno Le Maire on Friday, Les Echos reported on its website.

FCA-Renault, like nearly every possible automotive pairing, had been studied intermittently for years by dealmakers.

Prior to his November arrest in Japan, Ghosn had revived discussions about a deal to bring FCA into a reinforced Renault-Nissan alliance, sources have told Reuters.

Fiat Chrysler Automobiles on Monday submitted a shock proposal to French automaker Renault for a 50/50 merger.

While talks between FCA and Renault have been widely reported on in recent days, Bloomberg shares that Renault's board is scheduled to meet tomorrow, indicating that a partnership deal announcement could follow soon after.

Anticipating such sensitivities, FCA stressed "new opportunities for employees of both companies" under the merger.

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