Fiat Chrysler is planning to propose a merger with French carmaker Renault on Monday, according to two people involved in the negotiations, in a transaction that could reshape the global auto industry.
The two companies were deep in talks over the weekend about the structure of the deal and how to handle the political implications, but many details remained unclear. Renault, which is partly owned by the French government, is already in a three-way partnership with two Japanese companies, Nissan and Mitsubishi, in what is known as the Renault Nissan Alliance. And Fiat has significant operations in Italy.
A combined Renault and Fiat Chrysler would become the third-largest automaker in the world by sales, behind Volkswagen and Toyota.
A merger, if it came about, would further underscore how auto companies are linking arms to cope with sweeping technological change, including the development of electric cars and autonomous driving technology.
The two sides have already agreed to the broad outlines of a deal to share technology, intellectual property, supply chains and plants to develop and manufacture vehicles, three people with knowledge of the talks said. The people spoke on the condition of anonymity.
The deal would reduce the French government's stake and influence in Renault, one of the country's cherished businesses, because Fiat Chrysler would dilute the government's stake. That influence has been a key point of contention between Nissan and Renault.
While Renault and Nissan had long cultivated the impression that they operated as one, Nissan has not been a party in the merger talks although it has been kept apprised. Relations between the French and Japanese companies have grown tense since Carlos Ghosn, the former head of the alliance, was arrested in Tokyo in November and later charged with financial wrongdoing.
People on both sides said the benefits of a Fiat-Renault merger would be from savings in combining purchases for supplies and in the development of new vehicles. Renault, for example, has a robust electric vehicle plan in place that would be shared with Fiat Chrysler, which is considered to be behind.
Renault and Fiat have been negotiating for several weeks over a "possible rapprochement" to collaborate on electric cars, autonomous and connected vehicles, and "new uses of the automobile," said a French government official with knowledge of the situation. Renault directors are expected to consider the plan during a board meeting Monday in Paris.