Fiat Automobiles suddenly withdrew its proposal to merge with Renault, after the board of directors of the French automaker delayed the settlement for the second time.
Italian car-maker Fiat said in a statement on Thursday that It has become clear that the political situation in France is not fit for such merging.
The French state, which is Renault's biggest board and shareholder with 15 percent, delivered a surprise request to postpone discussions.
Fiat's sudden decision came after Renault's long-running board meeting ended yesterday.
Throughout the statement, Fiat has praised the Renault's Group as well as Nissan and Mitsubishi Alliance partners for their constructive participation in all perspectives of Fiat's merger plan.
Japan's Nissan, which was not part of the Fiat deal, holds an influential status in Renault's decisions. The two automakers have been partners for nearly 20 years.
The partnership helps equip vehicles with sophisticated technology, including supplies of ultra-compact cars and new models.
The merger deal would have formed the third largest automaker in the world with a combined market capitalization of $ 39 billion.
Fiat shares rose 0.1 percent By the end of today's session, to close at €11.71, while Renault dropped 6.4 percent at € 52.60.