By Giulio Piovaccari and Laurence Frost
MILAN/PARIS, May 26 (Reuters) - Fiat Chrysler FCHA.MI and Renault RENA.PA are set to confirm tie-up talks on Monday, with the board of the French carmaker called to an early morning meeting to discuss the situation.
It comes after news broke over the weekend that two of the world's leading car companies are in talks on a comprehensive global combination that could address some of the main weaknesses of both.
The plan under discussion would involve some transfer of equity, according to a source close to the discussions. The Wall Street Journal reported Sunday that the two companies are considering a merger of equals, among other tie-up options.
Renault Chairman Jean-Dominique Senard presented an FCA-Renault merger plan to French Finance Minister Bruno Le Maire on Friday, Les Echos reported on its website. The French government has a 15% stake in Renault.
The deal being discussed would include guarantees covering corporate governance and employment in France and Italy, the French daily said.
Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and expensive new technologies being developed for connected and autonomous vehicles.
Earlier this year FCA Chairman John Elkann - a member of Italy's Agnelli dynasty that controls the company - stressed the family's commitment to the automotive industry. But he also added that they were prepared to take "bold and creative decisions" to help build a solid and attractive future for the company.
A source said earlier an announcement from Italo-American FCA could provide some concrete although initial details but added the situation was still "fluid".
A separate source with direct knowledge of the situation confirmed that the Renault board will meet on Monday morning at 0800 local time (0600 GMT) to discuss the issue.
FCA has a highly profitable North American RAM trucks business and Jeep brand but has been losing money in Europe, where it may also struggle to keep pace with looming carbon dioxide emissions curbs.
Renault, by contrast, is an electric-car pioneer with relatively fuel-efficient engine technologies and a strong presence in emerging markets, but no U.S. business.
Any tie-up would likely face political and workforce hurdles, particularly in Italy. However, most of FCA's European plants are running below 50% capacity.
A deal between FCA and Renault would not preclude a consolidation of Renault's alliance with Japanese carmaker Nissan Motor Co Ltd 7201.T, a source told Reuters on Saturday.
The Renault-Nissan partnership, underpinned by cross shareholdings, has been strained by the scandal surrounding former Chairman Carlos Ghosn, who was ousted after his arrest last year.
Speculation about the future of Fiat Chrysler, often seen as a potential M&A target, intensified after the sudden death of long-serving former CEO Sergio Marchionne almost one year ago.
In October last year, just after three months he was picked to replace Marchionne, new CEO Mike Manley agreed to sell FCA's car parts unit Magneti Marelli to Japan's Calsonic Kasnsei, owned by U.S. private equity firm KKR & Co Inc KKR.N.
The sale was completed early this month for 5.8 billion euros.
According to reports earlier this year, the manufacturer had also restarted talks with France's PSA Group PEUP.PA - which have been a recurrent theme over the years.
Fiat Chrysler and Renault together would have a combined market capitalisation of more than 32 billion euros ($36 billion) and total global sales of 8.7 million vehicles.
Fiat Chrysler has a valuation of just under 18 billion euros and Renault around 14.4 billion
An alliance that included Nissan would vault the ensemble to the rank of global No.1 carmaker with 13.8 million annual sales. It would also maintain a foothold in China, where both FCA and Renault are marginal players.
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(Reporting by Laurence Frost, Gilles Guillaume and Inti Landauro in Paris, Pamela Barbaglia in London and Giulio Piovaccari in Milan Editing by Keith Weir and Lisa Shumaker)
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