- The proposed Fiat Chrysler-Renault merger pits the declining logic of globalism against surging worldwide populism.
- Immediately after the merger plan was revealed, the French and Italian governments moved to secure jobs.
- But the only way this merger works is for the combined companies to streamline costs, and that has to mean job losses.
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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-Donald 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 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 Turin, was headquartered in London, and was financially domiciled in the Netherlands.
Renault is part of an alliance that includes Nissan and Mitsubishi. The tie-up was engineered by Carlos Ghosn, who was arrested last year on charges of financial malfeasance and is 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 globe-trotting mega manager, imperious yet brilliant.
Cosmopolitan opportunists versus a populist surge
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 advisers 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, who died last year, 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 his alliance 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 versus keeping jobs
With these machers out of the picture, the Fiat scion John Elkann and Renault’s chairman, Jean-Dominique Senard, have carried on with a logical merger, one that could exclude the 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 the two 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 factories. Except that governments in France and Italy are 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 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 labour backlash. It seems 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’s ascent, and their ties to the vanquished realm of borderless business, they have no idea what’s in store.
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