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Automobile global giant

Fiat Chrysler proposed on Monday to merge with France's Renault to create the world's third-biggest automaker and combine their investments in the race to make new electric and autonomous vehicles.

The merged company would reshape the global industry: it would make some 8.7 million vehicles a year, leapfrogging General Motors and trailing only Volkswagen and Toyota.

Shares of both companies jumped over 10% on the news of the offer, which would see each side's shareholders split ownership in the new manufacturer.

Renault welcomed the idea. The company's board met Monday at its headquarters outside Paris to discuss the proposal and said afterward that Renault will study it "with interest." In a statement, Renault said such a fusion could "improve Renault's industrial footprint and be a generator of additional value for the Alliance" with Japan's Nissan and Mitsubishi.

Fiat Chrysler's offer comes at a key moment for Renault. The French manufacturer had reportedly wanted to merge with Nissan, but those plans were derailed by the arrest of boss Carlos Ghosn on financial misconduct charges in Japan.

Now, questions are growing over the Renault-Nissan-Mitsubishi alliance , which is the biggest maker of passenger cars in the world. While Fiat Chrysler says the merger with Renault would accommodate the alliance and lead to savings for them, it is unclear how the Japanese companies might react in the longer term to being tied to a much larger partner.

A deal would save 5 billion euros ($5.6 billion) for the merged companies each year by sharing research, purchasing costs and other activities, Fiat Chrysler said in a statement. It said the deal would involve no plant closures, but didn't address potential job cuts.

The companies are largely complementary: Fiat Chrysler is stronger in the U.S. and SUV markets, while Renault is stronger in Europe and on electric vehicle developments. Together, they would be worth almost $40 billion euros.

Analysts at financial firm Jefferies said it was "hard to disagree with the logic" of the deal as there is a strong fit in the markets each company covers and the brands they offer.

"The elephant in the room is who will run the entity," analysts Philippe Houchois and Himanshu Agarwal wrote in a note to investors.



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