Fiat Chrysler on Monday confirmed it was holding merger talks with French carmaker Renault, saying it had made a "transformative" proposal to combine the two companies.

The proposed deal, which would create the third-largest automotive group, comes as carmakers the world over face pressure to consolidate in the face of challenges posed by electrification, tougher regulations on emissions and the drive to make connected and autonomous vehicles.

In a statement, the Italian auto manufacturer said the merged company would be 50% owned by FCA shareholders and 50% by Renault shareholders. The group would be listed in Paris, New York and Milan, it said.

The "broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream," the statement said, adding that the deal would save the two carmakers €5 billion ($5.6 billion) a year.

Renault, whose current main partnership is with Japan's Nissan, welcomed the proposal. Following a meeting, the company said its board will study it "with interest" and give its response "in due course." The French government supported the potential merger, a spokeswoman said. 

Wide range of brands

The Fiat Chrysler portfolio incorporates Fiat, Alfa Romeo, Jeep, Maserati, Lancia and others. Ferrari was spun off from the group in 2016.

Meanwhile, the Franco-Japanese Renault-Nissan-Mitsubishi alliance includes a total of 10 brands, with Infiniti, Davia and Lada notable members of the group. 

Fiat Chrysler said the merger would not lead to any production sites closing down.

 tj/msh (Reuters, AFP)

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