France will seek protection of local jobs and other guarantees in exchange for supporting a merger between carmakers Renault and Fiat Chrysler. Photo: (AP Photo/Paul Sancya)

INTERNATIONAL - France will seek protection of local jobs and other guarantees in exchange for supporting a merger between carmakers Renault and Fiat Chrysler, its finance minister said on Tuesday, underscoring the challenges facing the plan.

Separately, Renault Chairman Jean-Dominique Senard arrived in Japan to discuss the proposed tie-up with the French company’s existing partner Nissan - another potential obstacle to the $35 billion-plus merger of equals.

Renault ands Italian-American rival Fiat Chrysler Automobiles (FCA) are in talks to tackle the costs of far-reaching technological and regulatory changes by creating the world’s third-biggest automaker.

Shares in both companies jumped on Monday on news of a deal that would create an industry No.3 behind Japan’s Toyota and Germany’s Volkswagen and target 5 billion euros ($5.6 billion) a year in savings.

Renault shares were up 1.3 percent by 1030 GMT, extending gains from Monday when the stock had closed up 12 percent. Fiat shares were flat in Milan but the U.S. listed stock was indicated 8 percent higher after a public holiday on Monday.

Analysts caution the companies face a challenge to win over powerful stakeholders ranging from the French and Italian governments, to trade unions and Nissan.

French finance minister Bruno Le Maire told RTL radio on Tuesday the plan was a good opportunity for both Renault and the European car industry, which has been struggling for years with over-capacity and subdued demand.

But he added the French government would seek four guarantees in exchange for backing a deal that would see its 15 percent stake in Renault reduced to 7.5 percent of the combined entity.

CONDITIONS

“The first: industrial jobs and industrial sites. I told the Renault chairman very clearly that it was the first of the guarantees I wanted from him in the opening of these negotiations. A guarantee on the preservation of industrial jobs and sites in France,” said Le Maire.

The minister also said France wanted to be well represented on the board of the new company, for it to be a leader in developing electric batteries, and for the deal to take place “within the framework of the alliance between Renault and Nissan.”

A source familiar with the matter told Reuters on Monday that Renault and FCA had given commitments about maintaining industrial jobs and sites, leaving room for white-collar and engineering layoffs as well as some plant downsizing.

Also on Monday, Italian Deputy Prime Minister Matteo Salvini said Rome might need to take a stake in the combined company, balancing France’s shareholding.

Le Maire said he had spoken to the Japanese personally about the proposed tie up. Asked how they had responded, he replied: “I look at the reaction of Nissan president Mr Saikawa, and it’s a reaction that is open.”

Analysts have said Nissan, which is 43 percent-owned by Renault and has a 15 percent non-voting stake in the French firm, might be reluctant to back an FCA-Renault tie-up that would probably use its technology less than the current Renault-Nissan alliance.

However, Nissan CEO Hiroto Saikawa told Japanese TV on Tuesday that “strengthening the alliance and constructive discussions are forward looking, and we are open to constructive discussions.”

The Renault-Nissan alliance has been under strain since the arrest and ouster of its former chairman Carlos Ghosn late last year on charges of financial misconduct, with Nissan recently rebuffing a merger proposal from its partner.

Reuters