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Fiat Chrysler-Renault deal means globalism crashing with populism



On Monday, Fiat Chrysler Automobiles and Renault announced a plan to merge. The combined entity would become the world’s third largest automaker, surpassing General Motors and falling in behind Volkswagen and Toyota.

By Tuesday, governments in Italy and France had already raised the alarm about jobs.

If you were looking for a textbook example of pre-Trump globalism versus the brand of populism that’s now sweeping the planet, you couldn’t do better than this FCA-Renault deal.

FCA was created by the late Sergio Marchionne, a Canadian-Italian accountant who rescued Fiat before saving a bankrupt Chrysler when the US government was providing billions in funding to support the ailing automaker. The new company had hubs in Detroit and Milan, was headquartered in London, and was financially domiciled the Netherlands.

Read more: Fiat Chrysler’s business is already complicated — a merger with Renault would make it even more challenging

Renault, meanwhile, is part of an alliance that includes Nissan and Mitsubishi. The tie-up was engineered by Carlos Ghosn, who was arrested last year in charges of financial malfeasance and is currently awaiting trail in Japan. But back when he was the biggest celebrity CEO in the car business, Ghosn — a French-Lebanese-Brazilian executive — was the definitive example of the globetrotting mega-manager, imperious yet brilliant.

Cosmopolitan opportunists vs. a populist surge

France’s Yellow Vests have halted the government’s residual globalism.
Getty Images

Both men were cosmopolitan opportunists who played politics as much as they did business. Marchionne seemed to function in a perpetual state of caffeinated improvisation, while Ghosn operated like the ruler of a country, perpetually shadowed by a retinue of advisors and enablers.

They were creatures of post-Cold War globalism, the Davos-driven economic and political philosophy that sought to transcend borders and propel freewheeling market capitalism to new heights. They lived large, Marchionne with his Ferraris and Ghosn with his multiple residences. They were frequent fliers on private jets.

But their grand creations were also hustles, to a degree. FCA was laden with debt, and outside the US pickup-and-SUV market, saddled with underperforming Italian brands such as Fiat and Alfa Romeo. Marchionne knew that, when the inevitable sales downturn arrived after years of recovery following the financial crisis, FCA was going to be severely challenged. He also delayed on electric-vehicle and self-driving adventures because he knew FCA couldn’t afford it.

Ghosn, meanwhile, was forever dealing with Japanese resentment that the alliance it has joined was hopelessly lopsided, with Renault contributing a small fraction of sales and profits while Nissan did the heavy lifting. It was probably his undoing, as he tried to outmaneuver his Japanese charges, who suddenly stopped tolerating, it appears, his many perks.

Streamlining costs vs. keeping jobs

Late FCA CEO Sergio Marchionne.
Thomson Reuters

With these machers out of the picture, Fiat scion John Elkann and Renault Chairman Jean-Dominique Senard have carried on with a logical merger, one that could exclude the entire Japanese side of the Renault-Nissan-Mitsubishi alliance. It’s useful to think of it as a Fiat-Renault deal, with the Detroit aspect of FCA bringing a cash-cow dowry to the marriage in the form of the RAM and Jeep brands.

The whole point of such an undertaking would be to streamline the costs of both automakers and set them up to compete in the future; not for nothing did Marchionne lament the intense, capital-consuming nature of the auto industry and its tendency to endorse redundant technology.

Obviously, that means fewer jobs and less factories. Except that governments in France and Italy are currently trapped in a wave of jobs-preserving populist movements, and the situation appears to be worsening for the globalist side of the argument. Paris and Rome are both down with the deal — so long as there are jobs guarantees.

This merger could be the first big fight in this new worldwide business situation. The rationale behind the merger is straight from the pre-financial-crisis playbook. But also embedded in it is the failure of the Renault-Nissan alliance to hold itself together. The whiff of Marchionne’s own desperation to merge FCA with somebody — he unsuccessfully courted GM at one point — also lingers.

While the deal would be big, it also feels sort of exhausted, with FCA and Renault each unprepared to face down the labor backlash. It pretty clear that the only way this thing works is for French and Italian workers to be eliminated. Elkann and Senard probably think they’re prepared for that battle. But given the swiftness of populism ascent, and their ties to the vanquished realm of borderless business, they have no idea what’s in store.

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