FCA and PSA formally agree to merger:Merger Wednesday

[sjon]

I do not think there is a big future for any foreign car manufacturer in China.
Politics and culture are against you.
"We need to be self-sufficient" is the slogan.
Just came back from Shanghai and it is all over the place.

We can still sell them some robots, but not for long.
Following is an interesting video:

 

[AlexB]

@AlexB

Be sure that this will not get John's blessings.

I do not think there is a big future for any foreign car manufacturer in China.
Politics and culture are against you.
"We need to be self-sufficient" is the slogan.
Just came back from Shanghai and it is all over the place.

We can still sell them some robots, but not for long.
Following is an interesting video:

So Carlos is blowing Sellantis's cash & time on a "ship that have sailed" know as China vehicle market?
No chance for Peugeot brand in China?

 

[Bili]

So Carlos is blowing Sellantis's cash & time on a "ship that have sailed" know as China vehicle market?
No chance for Peugeot brand in China?

In China only high end i.e. premium or luxury brands can succeed.

Just look at GM's sales trend there. Cadillac is their best chance.

In the long rung all "generalist" brand will struggle. Last time I've checked Ford and Chevy are also struggling there. Even Buick which was sort of semi-premium is struggling.

German brands thrive for the time being. But for how long?

 

[redriderbob]

thats fine. They can bring the soon to updated K8 here. It would sell great here

 

[sjon]

So Carlos is blowing Sellantis's cash & time on a "ship that have sailed" know as China vehicle market?
No chance for Peugeot brand in China?

Carlos Tavares is playing European politics:
"Our new company will create a lot of European employment and sell to 1,4 billion Chinese.
Now give us your approval."

In 9 months time: "The Chinese market is asking for a different approach, we will close down some aspects."

He is a sharp cookie and has a lot of information at his finger tips and, I am sure, will be an excellent CEO.

Some well balanced information here.

 

[Bili]

thats fine. They can bring the soon to updated K8 here. It would sell great here

You think?

Old car doesn't get any newer. Besides we are talking about a car which is the most similar to a Ford Edge.

 

[Bili]

Carlos Tavares is playing European politics:
"Our new company will create a lot of European employment and sell to 1,4 billion Chinese.
Now give us your approval."

In 9 months time: "The Chinese market is asking for a different approach, we will close down some aspects."

He is a sharp cookie and has a lot of information at his finger tips and, I am sure, will be an excellent CEO.

Some well balanced information here.

Not sure about it. Actually I don't like Carlos's approach. Sergio was much better in that respect.

 

[TripleT]

Here is the deal... Chinese are clever and they love foreign products. Authentic American products.... the issue with some of the Jeeps and not taking away from the local assembly, they are Jeepish Jeeps. And frankly there are plenty of Jeepish Locally manufactured cars. The vehicles that they will really like are the ones that Americans really like the Grand Cherokee, the Wrangler.... I am betting the Wagoneer will also draw attention. Not high volume but high margin...... now I understand down market they had to go local to avoid tariffs but in the end it will be only moderately successful trading on the reputations of high end models.

 

[MJAB]

Why should FCA, and than Stellantis, end joint venture with GAC? There is no logic in that since GAC not only is manufacturing vehicles, but also engines and transmission for Jeep local models, but also use in its lineup.
To remember that GAC has also joint ventures with Toyota, Honda and Mitsubishi.
July memorandum between GAC and FCA.
GAC Group, FCA sign MoU to improve joint venture’s operations
Without hybrids and/or BEV vehicles in China You go nowhere in this period.

PSA changed its China CEO three times in 2 years and have had a decline in sales since top 2014 (were about 800k that year).
They bet on cars instead of SUVs.

 

[TripleT]

China is ahead of the EU on conversion to SUV over cars so yeah....

And why would you abandon GAC? Lot of work went into getting where they are.

 

[Bili]

China is ahead of the EU on conversion to SUV over cars so yeah....

Actually not if we take a look at Chinese made foreign brand sales. China has the slowest switch to SUVs from all 3 big car markets.

 

[TripleT]

Not talking foreign brand sales I am talking day to day drivers. They do love the Premium Cars and extended length. But when your boots are on the ground it like every new vehicle that is a daily driver is CUV and the conversion was quick. Like one year still cars, then boom CUVS. What you will notice now is that the Premiums are rapidly converting. The love the even X series BMW... which a find useless and ugly.

 

[AlexB]

China is ahead of the EU on conversion to SUV over cars so yeah....

And why would you abandon GAC? Lot of work went into getting where they are.

Why should FCA, and than Stellantis, end joint venture with GAC? There is no logic in that since GAC not only is manufacturing vehicles, but also engines and transmission for Jeep local models, but also use in its lineup.
To remember that GAC has also joint ventures with Toyota, Honda and Mitsubishi.
July memorandum between GAC and FCA.
GAC Group, FCA sign MoU to improve joint venture’s operations
Without hybrids and/or BEV vehicles in China You go nowhere in this period.

PSA changed its China CEO three times in 2 years and have had a decline in sales since top 2014 (were about 800k that year).
They bet on cars instead of SUVs.

Easy: Dongfeng is a Stellantis Shareholder and GAC is not.

1:....... Dongfeng made several concessions to win U.S. approval (became a Non-Voting Stockholder, gave up rights under Netherlands Corporate Governance laws to appoint Board Directors, and agreed to sell some stock )

2: If you believe (like PSA Management statements) both FCA and PSA have booth been unsuccessful in China to date

3: If main concern is over capacity of Stellantis in China, and think there's too much capacity in China for the company

4: If you plan to cease local Jeep models, in favor of U.S. made Gladiator, Wrangler, and Grand Cherokee family

 

[TripleT]

Well for darn sure you don't cancel production of lower end Jeeps, because now that China has signed a South East Asia Free Trade agreement that covers nearly everyone but India and includes Oceana. It give great access to that entire market.

While Dongfeng might be better partner from ownership perspective it should not be under estimated the difficulty it creating that manufacturing environment that one wants

Again you wouldn't cease but look at knock downs and other methods to drop incoming tariff burden to higher margin vehicles would help, but I would contend by shifting focus to high end vehicles you would see a coattail effect on the lower end models superior to market focused on those models specifically. Elevating Jeep in the minds of the Chinese consumer and therefore increasing the value in the minds of the local models.

 

[redriderbob]

Carlos Tavares is playing European politics:
"Our new company will create a lot of European employment and sell to 1,4 billion Chinese.
Now give us your approval."

In 9 months time: "The Chinese market is asking for a different approach, we will close down some aspects."

He is a sharp cookie and has a lot of information at his finger tips and, I am sure, will be an excellent CEO.

Some well balanced information here.

Won't sell that much when they push the Peugeot brand in China

 

[AlexB]

Back in August, I displayed the importance of who won the United States general election in terms of what path the United States will undertake in the terms of regulations given the the golf between the two sides , and the ramifications on FCA/Stellantis.(1) Death of ICE in U.S. by 2031... Coming November 2020...prescription: a Stellantis-GM Merger | Mopar Insiders Forum

Well, (most likely) on December 14, Joe Biden will officially become the U.S. President-Elect and Senator (California) Harris will become Vice President-elect when the Electoral College meets. Whenever the U.S. Federal Government changes hands between political parties there are new pet projects/goals (often created by the run up to the election) that the new Administration tries directionally to implement into policy of the U.S. Federal Government. At the same time, the new Administration also tries to undo the policies of the previous party that hold the U.S. Federal Government.

One of those major items that both falls into both pet projects/goals and undoing policy of the previous party that hold U.S. Federal Government is the Environment. A ''certain Donald'' has been pursuing a strategy of either slowing rate/postponing/cancelling environmental regulations across varies industries. For Joe Biden's political party, the environment and the urgency of imposing strict & evolving standards to combat the concept of Climate Change is a core rallying issue of advocacy. Biden is also believer that the United States has ''cherish relationship'' with Europe post World War II, and partnering with the European Union is a part of Global leadership.

Essentially, Europe will ban new production Internal Combustion Engine (ICE )vehicles by 2030, and have adopted Environmental actions to combat the concept of Climate Change.
Aggressive Environmental standards & initiatives around Climate Change is strongly backed U.S. millennials & Gen Z. The support among U.S. millennials & Gen Z(shout out to @Ryan) for environmental actions is overwhelming united beyond geographical areas, class, political affiliation and other categories. To U.S. millennials & Gen Z having policies to combat the concept of Climate Change is the matter of ''The Right Way'', and ''The Wrong Way'' (key part why ''certain Donald'' loss Blame game erupts over Trump’s decline in youth vote).

In September, California Governor Gavin Newsom issued an Executive Order banning sales of New light-duty ICE Vehicles come 2035,while banning ICE Heavy Duty vehicles in 2045(California to ban sale of new gas-powered vehicles by 2035). For context, FIAT Chrysler, Toyota, GM and a ''certain Donald'' were suing California over fuel standards that predate the ICE Executive Order. The end goal of the litigation by FCA/Toyota/GM/U.S. Federal Government under ''certain Donald'' was pretty clearly a fight inside the U.S. Supreme Court hoping to archive a strong favorable ruling. While the litigation between California (and some other states) vs FCA/Toyota/GM/U.S. Federal Government predates the Executive Order by California, what FCA & others have done is create an massive opening for ICE Ban to become Federal regulation.

The Biden Administration will no interest in continuing down FCA/''certain Donald's'' path fighting Democrat friendly states (especially when they agree with the States agenda), making
settling the litigation between California, and the other so-called ZEV states (States with Zero-Emission Vehicle targets) inevitable & quick. The Biden Administration will agree to take up California policy, and make it into Federal rules nationwide including new ICE ban in the 2031-2035 timeframe. The big thing is that the Biden Administration does not Needs Congressional approval (U.S. Senate and U.S. House Of Representatives) to pull off a Ban of New ICE production & sales . The settlement with California, rule changes , reentering the Paris Climate Agreement with strict terms and Executive Orders will form a scheme that amount to legislation banning new ICE production & sales that is too complex to be undone if Biden Administration is a one term Administration.

Brian Deese the incoming Director of the U.S. National Economic Council helped crafted the technical language of Chrysler & GM Bankruptcies in 2009 as part of the Auto Task Force, and given that legal skill he will make an ICE Ban scheme legally rock solid. Brian Deese has gone from saving Mopar to killing the HEMI(Biden Considers Ferguson, Deese to Lead His Economic Council | Financial Post)(Biden names top economic adviser Deese to fight climate change, jobs crisis | Reuters). The writing is clearly on the wall that before the end of 2021,the U.S. will join the fleet of nations around the world banning new ICE production in the first half of the 2030's(UK Will Ban All ICE Vehicle Sales In 2030, But There's More (insideevs.com) (Japan may ban sales of new ICE vehicles in mid-2030s ... (autonews.com)). Impact on the industry in North America will be significant, including step up investment spending, more cost-cutting, and grand overhaul of operations.

Categories will die ( pretty much) for good (the U.S. B-C-D Classes in traditional sedans and alike formats), new categories will be created in financing/purchasing (10-12-14 year vehicle loans, ''Flex'' Vehicle loans, Loans where down payment is replace by 5 balloon payment over s years, and hybrid all-in-one finance products that act like rent-finance-lease on one financial products), and maybe even new forms (like in-between midsize and 1500, pressing the limits of what a pickup bed is) will all be tired out to offset the cost of electric technology equipment/use less of the electric technology equipment on new vehicles.

Now barring a surprise at the U.S. Supreme Court(judges don't like ''smacking down'' other judges work) with ''certain Donald'' defeat, plans & approaches to the fuel economy fight being over & banning of ICE has begin to take shape. Ford has championed these changes (emissions, ICE phase out) after cutting a deal with California back in 2019(Five automakers finalize deal with California to clean up car emissions | CalMatters) ,and at the very same telling other OEM players that the time is to basically get along & push for different subsides(Ford Urges Other Automakers To Follow California Clean Air Rules (bloomberg.com) on multiple layers of the industry(Research, Industrial, and Demand ).Ford also has started a relationship with VW which can be a powerful tool in the conversion to EV's, and can have a wide-range of optionality with various outcomes.

FCA on the other hand, had a ''evolution'' approach that was sound in North America, capex light but will no longer hold up under Biden Administration. GM has made significant investments in EV's for North America, and have gone as far as to exit the lawsuit against California over emission standards that FCA and ''certain Donald'' participates in (once it became clear that a ''certain Donald'' was going to lose the Electoral College: GM hits reverse on Trump effort to bar California ... (reuters.com)). However despite all PR ''Thunder'', GM (to this very date) has never successfully commercialize an EV in significant quantities despite multiple attempts , and therefore lack scale needed.
That brings up to a solution: Stellantis does another deal, particularly GM:

The head of Peugeot maker PSA Group PEUP.PA expects more consolidation in the auto industry as carmakers invest vast sums to make electric vehicles, he said on Monday, while predicting some wouldn't make it through the coming decade.

“Only the most agile with a Darwinian spirit will survive,” Carlos Tavares said at the Reuters Automotive Summit teleconference,

PSA boss sees more auto deals, and some failures, in electric shift | Reuters

According to the FCA-PSA Merger prospectus, one of the key items of Stellantis will be mergers. With such massive upheaval coming in North America market, the only deal that create scale to pull off conversation is Stellantis-GM with all new Pickup underpinnings replacing the heritage of Mopar & GM ICE Trucks. The savings (that a GM deal provides) long stated by FCA (John & Sergio)combine with strong European unit, and GM's in-House financing unit (control of financing is highly important to getting buyers to move into EV products in the North American market which likely will have $15,000-$25,000 higher price due to the tech needed) creates the world's most powerful Automaker.
(And completes Sergio's legacy & vision by removing Mary Barra).

 

[AlexB]

PSA and FCA each operate with a very similar three-dimensional matrix: brand, function, region. What can we expect from Stellantis?
''A three-dimensional matrix is the basic organization of any global carmaker nowadays. It's all about interacting in a cross-functional way. In the first axis, we show the vision for each brand -- as well as consider each brand's strong history -- then build their future and destination with a clear positioning. Then, we have the functions, where we need to have very precise expertise regarding the best practices, the most efficient processes, the best techniques to be a benchmark in the worldwide industry -- in engineering, in sales and marketing, in manufacturing and supply chain, in any other function that you could imagine. Last but not least, we have the regional axis, which is the place where operationally you create the value. You create that by using the brand portfolio to cover the market and profit pools, and maximize the value that you create, both on product and on service, making sure that you make your customers happy while using the brand portfolio in a thoughtful way. Stellantis will have a 14-car-brand portfolio plus two mobility service brands and aftersales. So, we have a lot of things to do, a lot of things to imagine. That makes it very, very exciting.''

Volkswagen accounts for roughly a quarter of sales in Europe with just three volume brands. Stellantis, which year to date is at a combined 21 percent share, will have Citroen, Fiat, Opel/Vauxhall and Peugeot. Will you have too many brands in the volume sector?
''Stellantis will be very strong in Europe -- not exactly the size of the Volkswagen Group, but quite close. I have a huge amount of respect for Volkswagen because they are doing a fantastic job. They are taking many bold decisions and moving forward very strongly on electrification, which makes them a fantastic rival for us and a very good reference against whom we can compete. We understand that they will be ahead of us in Europe, but we will not be very far behind, and we will try to compete in the most efficient way, with a different approach to our business model, but also with a double-digit brand portfolio, as they have.''

Conversely, the one-time implementation cost for achieving the synergies has risen from 2.8 billion to 4 billion euros. Is this related to write-offs in revised FCA and PSA business plans ahead of the merger?

''Well, if that happens, you will see it in the financials of both companies, and of course, of Stellantis at one point. If something has to be done in that area, the CFOs will make it clear and transparent in the financials of the different entities. But, of course, the implementation costs are real. The magnitudes are something that we will be eager to optimize at any point in time, which is in the mindset of the people both on the FCA side and the PSA side. I think efficiency and effectiveness are something that I can feel on the two sides of the Stellantis family. I can feel that there is this great business sense that has been the result of the leadership from Mike Manley and, prior to Mike, from [the late former FCA CEO] Sergio Marchionne, and I think it has also been the DNA of PSA over the last few years. I feel the fact that people understand the economic impact of what they do, what they decide, what they spend, and I feel that there is eagerness to optimize the way we are spending our money and to make sure that we get more out of each buck for everything we do, and that is good. ''

As CEO of Stellantis, where will you spend most of your time?
After closing, the fair answer is hopefully not in a plane. But of course there would be some travel -- mostly to Turin, Amsterdam, Paris, Detroit, Sao Paulo, Russelsheim. All of this is part of a global company. Of course we would have significant digital interaction, that is for sure, but human interaction would also have a significant role to play. This is about management, about expressing some kind of direction and convincing people that what we are doing makes sense, inspiring people to go in one direction or the other direction, and that means human interaction. We have learned through two successive lockdowns in Europe that we can run a car company in a crisis mode using digital tools. As long as a sense of team spirit is created by having human interactions -- you can have dinner, you could have a drink, you can have arguments or discussions -- then digital communications tools are appropriate, and that is going to reduce the burden of travel, jet lag and time differences.

With the very strong and highly profitable presence you will have with Stellantis in North America because of FCA, is there still a need to bring the Peugeot brand there?
''First, as long as we are competitors, which means up to the closing, my answer will be, yes, of course our plan is to bring Peugeot to North America. This being said, our [PSA] North American team in Atlanta that is preparing for the comeback of Peugeot in the U.S. market is bringing us many ideas in terms of logistics, in terms of maintenance, in terms of the distribution model, in terms of marketing communication, as we have no legacy. Whatever we decide in the Stellantis world, all of those ideas will improve the way we go to market and the way we run the business. I was working in the United States for a while [as head of Nissan North America], and I know how competitive the market is, and I am very humbled vis-à-vis the level of competitiveness it takes to grow a profitable presence there. This is exactly what FCA has been doing, so my hat is off to the FCA team for that''.

The U.S. has been FCA's profit driver, focusing on pickup trucks and the Jeep brand. Is there room for this part of the organization to benefit from the success that you have brought to your businesses in Europe?
''The first answer to your statement, which is very true, is simple: If it's not broken, don't try to fix it. But we know that in our industry when you have the sense that everything is going well, it's exactly the moment where you need to challenge yourself and look for additional efficiencies and achieve a better performance. And the fact that we are bringing the two companies together may also be an opportunity to be challenged on the things that we could even do better, and this is true for the Americas as much as for Europe. PSA has been very successful in Europe, but that does not mean that we are doing everything very well. I think Mike [Manley] would say the same for North America''

Tavares: Keeping PSA, FCA merger on track an 'incredible' achievement (autonews.com).
Notice how Tarvares jumps to Turin (Amsterdam won't be have significant operations) when the question of where he will spend most of his time while avoiding significant traveling............he basically saying he relocating to Italy.

To me no surprise on Peugeot not coming to North America while the ideas they had for the brand in North America can go to others brands that are sold in North America( he basically hinted that the merger rules in Europe keeps him from actually saying it out-loud). Carlos'' If it's not broken, don't try to fix it'' will crush those silly dreams & out of touch thinking on that ''Other website''.

 

[pumadog]

Hmm, I don't read what you read here. His answer is about traveling to Turin, not spending time there. About Peugeot in America: might still happen, I don't see a No.

 

[Deckard Cain]

I don't think introducing the french brands to the US is a good move. It's a waste of resources when there's so many under-utilized brands in the US.

 

[AlexB]

Hmm, I don't read what you read here. His answer is about traveling to Turin, not spending time there. About Peugeot in America: might still happen, I don't see a No.

''As along as we are competitors, which means up to the closing, my answer will be ''Yes'' ................
To me that means no,.....and he would have said if the Merger was closed.