Many factors such as the epidemic cannot affect the merger plan of the two major automobile groups PSA (Peugeot Citroen Group) and FCA (Fiat Chrysler Automobiles). The merger transaction will be completed in the first quarter of 2021 at the latest.
This was confirmed by both PSA and FCA.
PSA Group CEO Tang Weishi said at the annual shareholder meeting on June 25 that the epidemic stage is not a time to re-examine the transaction with FCA Automobile Group, and warned all parties not to attempt to undermine PSA Group and FCA Automobile Group. FCA Automobile Group's merger plan. It also emphasized that it is very confident that the merger with FCA Automobile Group will produce the expected synergies, and the merger transaction is expected to be completed in the first quarter of 2021 at the latest.
On June 26, FCA Group Chairman John Elkann said that the merger of FCA and PSA to form the fourth largest automaker in the world is the best way for the two companies to survive the epidemic crisis. way.
FCA CEO Mike Manley also said that the company clearly knows that "the epidemic will continue for the foreseeable future", but with its brand portfolio and solid business plan, FCA can buffer the impact of the epidemic.
Manley also said that the EU’s antitrust investigation into the merger transaction will not affect the advancement of the merger.
In May this year, PSA Group and FCA Group have jointly confirmed that the two parties' project to "achieve a comprehensive merger of the two companies' businesses at a 50:50 share ratio" is progressing smoothly, involving the anti-monopoly of the project Declaration and other related work with regulatory agencies are also progressing in an orderly manner.
Difficulties but not giving up
In October last year, PSA Group and FCA Group announced that they would conduct a comprehensive merger with a 50:50 shareholding to expand scale and cope with high costs. Investment in new technologies and slowing market demand.
However, the epidemic that began at the beginning of the year broke out around the world, which has led to the closure of a large number of car companies' factories in the United States and Europe, resulting in a decline in sales and a sharp decline in the revenue of car companies. That raises questions about the financial terms of a merger between PSA and Fiat Chrysler, according to sources involved in the deal.
Among them, FCA has been the most severely affected. Currently, FCA has closed 10 factories in Europe. Factories in the United States, Canada, and Mexico have also been closed. PSA has closed its European factories around March 19. 15 factories.
In addition, according to the 2019 financial reports released by the two companies, in February the two companies released their 2019 financial reports. FCA's full-year revenue was US$119 billion, a year-on-year decrease of 2%; operating profit was US$7.3 billion. , down 1% year-on-year; net profit was US$3 billion, down 19% year-on-year.
PSA’s annual revenue was 74.7 billion euros, a year-on-year increase of 1%; operating profit was 6.3 billion euros, a year-on-year increase of 11.2%; net profit was 3.2 billion euros, a year-on-year increase of 13%.
Relevant people have said that PSA and FCA are no longer as confident as they were a month ago in terms of sales revenue, market share, and product planning. If the two parties continue to move forward with the combined business, the valuations, revenue forecasts, and sales of both companies in 2020 and beyond must be re-evaluated.
However, PSA has obviously not given up hope for cooperation. In response to the impact of the new coronavirus epidemic, PSA did not accept any government-guaranteed loans, which it believes may complicate its merger with FCA.
The significance of the merger
Relevant parties have predicted that after the merger, the new company's total sales volume is expected to reach 8.7 million vehicles, becoming the fourth largest automobile enterprise group in the world, only Second to Volkswagen, Toyota and the Renault-Nissan-Mitsubishi Alliance. The new company's turnover will reach 170 billion euros and operating profit will exceed 11 billion euros.
Both parties believe that a mere merger, without considering any factory closures, can save 3.7 billion euros in annual costs.
The two parties plan to, in the initial stage of the new company, first rely on FCA's advantages in North America and Latin America and PSA's advantages in Europe, give full play to each other's synergy, and achieve the highest level of success in their respective markets. profit margin.
The merger will enable the new company to have brand advantages in the fields of ultra-luxury cars, luxury cars, mainstream passenger cars, SUVs, pickup trucks and light commercial vehicles, and can further develop these advantages.
In addition, the new company after the merger will continue to make efforts in electrified powertrains, automated driving and digital interconnection to embrace the future era of sustainable mobility. After integration, the two parties will be able to achieve 80% synergies, and the total cost of the restructuring work will be approximately 2.8 billion euros.
If PSA and FCA’s decision to announce a merger to create the world’s fourth largest automaker is a wise move, then at a time when the auto industry is in trouble due to the COVID-19 epidemic, the merger between the two parties is The meaning is even more significant.
The reason is that increased economies of scale will help reduce unit costs and better amortize huge investments in future technologies to ensure profits for the combined entity in the coming years. As the COVID-19 pandemic continues to spread, this synergy is becoming an essential tool to help companies survive the crisis. This epidemic, many experts say, will be more severe, if not longer, than the financial crisis of 2008-2009. As the global auto industry enters a period of sluggish sales and transformation, it is still very meaningful for PSA and FCA to "join together for warmth".
In the Chinese market, the performance of both PSA Group and FCA Automobile Group was "disappointing." In 2019, PSA Group's sales in China and Southeast Asia fell 55% year-on-year to 117,000 vehicles, accounting for only 3.34% of PSA Group's global sales. PSA Group suffered losses and write-downs totaling 700 million euros (approximately RMB 5.355 billion) in China in 2019.
In 2019, FCA Group’s new car shipments in Asia were only 149,000 units, a year-on-year decrease of 29%. Among them, the joint venture GAC FCA sold 74,000 units throughout the year, down 41% year-on-year. Therefore, FCA Group suffered a loss of US$39.6 million (approximately RMB 274 million) in Asia in 2019.
Cui Dongshu, secretary-general of the China Passenger Car Association, once said, "The reason for the poor performance of the two car manufacturers lies in their management and competitiveness. I do not see the potential for their integration in China's business. The two will not have much synergy in terms of procurement and product lines. "
This article is from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.