Renault & Nissan to merge and create a new auto manufacturing entity

Nissan Renault deal would end the current alliance between the companies and marry them as one corporation

According to insiders familiar with the subject, the apparent deal is looking at ending the current alliance between the companies - which added Mitsubishi into the framework in October 2016 - and combine them into a single corporation.

Shares in French automaker Renault shifted up several gears yesterday, reaching the highest level in a decade, following a report that it was in talks with its alliance partner Nissan about a merger. Carlos Ghosn, the chairman of both companies, is driving the negotiations and would run the combined entity. Nissan shareholders would also receive shares in the new company in exchange for their holdings. Nissan shares had shed 0.5 percent to 1,094.50 yen in a market up 0.6 percent overall.

As per Janet Lewis, an analyst, "Size matters in the auto industry", "The concern has always primarily been the French government, and somewhat Japan, because both France and Japan like to keep their national champions". A Renault-Nissan spokesperson told the BBC: "We do not comment on rumours and speculation".

Shares in Renault were up 6.4% in afternoon trading.

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The alliance between the companies, which has included sharing engines and building smaller vehicles on a common architecture, has delivered cost savings but the fragmented ownership has held them back from reaping the full benefits of a merger.

A possibility would be basing the new business in the Netherlands or London, where cross Atlantic automaker Fiat Chrysler has the company's corporate charter, but has its headquarters in both the USA and Italy.

The alliance forecasts unit sales of 14 million units by 2022, compared with 10.6 million past year.

Ghosn reiterated last month that Japan wouldn't agree to a tighter structure if France remains a shareholder.

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