FCA, Renault Face Tall Odds Delivering On Cost-Cutting Promises In Merger

www.oann.com | 5/25/2018 | Staff
marisha (Posted by) Level 3
FRANKFURT/DETROIT (Reuters) – Fiat Chrysler Automobiles NV and Renault SA promise huge savings from a mega-merger, but such combinations face tall odds because of the industry’s long product cycles and problems translating deal blueprints into real world success, industry veterans told Reuters.

BMW AG’s 1994 purchase of Rover, and Daimler AG’s 1998 merger with Chrysler Corp both made sense on paper. The companies promised to hike profits by combining vehicle platforms and engine families. Both combinations proved unworkable in reality, and were unwound.

Renault - Nissan - Motor - Co - Alliance

Renault and Nissan Motor Co, which have been in an alliance since 1999 designed to share vehicle components, have only managed to use common vehicle platforms in 35% of Nissan’s products despite an original target of 70%, according to Morgan Stanley.

FCA and Renault have raised the stakes for themselves by ruling out plant closures. That increases the pressure to achieve more than $5 billion in promised annual savings from pooling procurement and research investments.

Companies - Blanks - Merger - Plan - Fiat

The two companies have yet to fill in many of the blanks in the merger plan put forward by Fiat Chrysler. Renault’s board is expected to act soon to accept the proposal, but that would lead only to a memorandum of understanding to pursue detailed operational and financial plans. A final deal and the legal combination of the two companies could take months to complete if all goes well.

Pressure to cut automotive pollution is driving the latest round of consolidation. Automakers are looking at multibillion-dollar bills to develop electric and hybrid cars and cleaner internal combustion engines. Fiat Chrysler and Renault are betting they can design common electric vehicle systems, then sell more of them through their respective brands and dealer networks, cutting the cost per car.

Vehicles - Opportunities - Share - Costs - Outset

Developing all-new electric vehicles can bring more opportunities to share costs from the outset, industry experts said.

“With the emergence of...
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