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(CNN Business) —  

Fiat Chrysler has withdrawn its proposal to merge with French automaker Renault — a deal that would have reshaped the global auto industry and helped the carmakers compete in the race for electric and self-driving vehicles.

The company said Wednesday that it “has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”

Earlier in the day, Renault indicated the French government requested its board of directors postpone the vote on the merger. France, which owns 15% of Renault, previously indicated that it would support a merger if the companies protect French jobs and auto plants.

France, which owns 15% of Renault and is the company’s largest shareholder, had previously indicated that it would support a merger if the companies protected French jobs and auto plants.

Renault said in a statement on Thursday that it was disappointed not to be able to pursue the merger, which it said had “great financial merit” and “compelling industrial logic.”

Shares in Renault plunged nearly 7% in Paris after the proposal was withdrawn. Fiat Chrysler stock opened lower in Milan, but later recovered its losses.

The deal would have created the third largest carmaker behind Volkswagen and Toyota. General Motors would have fallen to fourth place in the global ranking. The proposal is the latest example of established automakers seeking partnerships to share the costs of developing new technologies including electric vehicles and autonomous driving systems.

The proposal was the latest example of established automakers seeking partnerships to share the costs of developing new technologies including electric vehicles and autonomous driving systems.

Fiat Chrysler (FCAU) owns brands including Jeep, Dodge, Alfa Romeo and Maserati. Among its top markets is North America, where Renault does not have a significant presence.

When it first made the merger proposal last month, Fiat Chrysler said a combination would produce annual cost savings of more than €5 billion ($5.6 billion). The company said no plants would be closed as a result of a merger.

Renault is already part of a major global alliance with Japanese automakers Nissan and Mitsubishi. Renault and Nissan both own major stakes in one another. But that alliance was put under extreme pressure when Renault’s Chairman and CEO Carlos Ghosn was arrested in Japan last year, accused of improprieties in his pay package from Nissan.

That alliance was put under pressure when Carlos Ghosn, the architect of the partnership and the former chairman of Nissan and Renault, was arrested last year in Japan and accused of financial wrongdoing.

Nissan declined to comment late Wednesday on Fiat Chrysler’s withdrawal.

Nissan, Renault and Mitsubishi Motors together employ more than 470,000 people in nearly 200 countries. They sold more than 10.6 million cars worldwide in 2018. All three alliance partners renewed their commitment to one another at a meeting in Amsterdam last December, but tensions linger among the partners.

All three alliance members renewed their commitment to one another last year after Ghosn was arrested, but tensions linger among the partners.

Fiat Chrysler was formed as a merger of two struggling automakers. Fiat bought a controlling stake in Chrysler following the US government bailout of the company in 2009. They were formally merged in 2014.

Fiat Chrysler is a distant fourth in US sales and eighth globally. The company has also trailed its competitors in adopting electric vehicle and self-driving technology.

Sergio Marchionne, its former CEO who passed away a year ago, had spoken openly of the need to merge Fiat Chrysler with a larger automaker to give it the scale and resources to compete. He had even sought a merger with General Motors, only to be rebuffed. He had been far more blunt than other auto executives about the threat to the industry that new entrants such as Google (GOOG) posed to old-line automakers.

He had even sought a merger with General Motors, only to be rebuffed. He had been far more blunt than other auto executives about the threat to the industry that new entrants such as Google (GOOGL) posed to automakers.

- Chris Isidore and Sherisse Pham contributed to this report