Merger to survive ?
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Thread: Merger to survive ?

  1. #1
    1000+ Posts gerry freed's Avatar
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    Default Merger to survive ?

    An analyst at Fitch, the rating agency, has expounded the theory that PSA and FCA(Fiat Chrysler) could be saved by a merger.
    He must be new on the job, pushing the story to encourage a risk reduction for the investors or perhaps unaware of the history.

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    Quote Originally Posted by gerry freed View Post
    An analyst at Fitch, the rating agency, has expounded the theory that PSA and FCA(Fiat Chrysler) could be saved by a merger.
    He must be new on the job, pushing the story to encourage a risk reduction for the investors or perhaps unaware of the history.
    Have you got the link? Do Moody's and S&P share the same sentiment?

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    1000+ Posts gerry freed's Avatar
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    http://www.boursorama.com/actualites...des-manoeuvres
    Which sentiment? It is a generally shared view in the industry that PSA, FCA and Opel have insufficient volumes to survive with a product positioning that depends on the mass markets. It is a ten year view and both companies are being supported by the financial markets with a view that they have time to find solutions. The CEO of FCA said the 6 million cars per annum was the minimum survival level and Alvares at PSA is running a strategy called "getting back in the race" to restore profitability and as he says, keeping all options open until that happens.
    One warning sign is that the positive feedback loop that pushes ahead winners is affecting PSA. The more volume you have, the greater economies of scale, more discretionary cash flow and hence more to invest in R&D, new models and market expansion. PSA in its statements about hybrid development is making clear its constraints on R&D finance and product innovation for the longer term and can't for example match Toyota's fuel cell car programme.
    What surprised me about the Fitch review was that it suggested this merger at this time. It was a serious discussion that leaked before the DongFeng rescue of PSA was chosen. It may still be going on, where it should be - behind closed doors and they got wind of it or it is a controlled leak or written by someone unaware of the history or ..........

    Another news item this week is that Opel are to assemble Chevrolets for the US market - one way of absorbing the excess manufacturing capacity in Europe without creating too much political stress.
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    Veni Vidi Posti 68 404's Avatar
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    If it's the European Chevys (read Daewoo stuff) good luck to them.

    Gerry, how is Renault handling their Russian arm (Renault/Dacia/Lada) with European sanctions?

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    1000+ Posts gerry freed's Avatar
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    It seems to be operations as usual at Renault. It is an interesting power play. The factory is a hostage that the Russians can't touch. If they do try to take over the investment their people won't get the cars or jobs and its effect on future investments in Russia would be catastrophic. The sanctions in place by the Europeans are essentially aimed at the fortunes of the managers of Russia. The reverse sanctions are of commodities like food items which do not directly affect Russian employment. They are not helping Putin's domestic reputation because he has limited the consumer choice in the supermarkets.
    Fitch have down graded Russian debt to just above junk. All said, the investment is for the long term as Russia car buyers are not so easy to find in the present economic squeeze.

    Correction. I was wrong - the cars built at Opel for the US market will be branded Buick

    GM are to build in Poland the Opel Cascada, branded Buick Cascada for the US market.
    Opel will build in RŻsselheim a replacement for the Zafira and something similar for Buick.
    The Opel Insignia and Mokka already share platforms with the Buick Regal and Encore.

    This is a different supply stream to the Daewoo.

    GM have backed away from selling the small Chevrolet range/Daewoo in Europe and the brand is no longer in France.
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    Should get a life 2353's Avatar
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    Ratings agencies don't look at the emotion or logic when making an argument. It is purely driven by 'the numbers'
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    Quote Originally Posted by 2353 View Post
    Ratings agencies don't look at the emotion or logic when making an argument. It is purely driven by 'the numbers'
    The views are proffered by actuaries, people who found accounting too exciting.
    Brendan.
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    1000+ Posts gerry freed's Avatar
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    Quote Originally Posted by 2353 View Post
    Ratings agencies don't look at the emotion or logic when making an argument. It is purely driven by 'the numbers'
    They are there to serve investors, lenders and creditors whose prime interest is the 'numbers'. They operate with the logic of rational analysis of the present and predictions of the future which must by their nature have some measure of subjectivity.
    VW have an investment of 140 billion euros of equity and debt. You don't attract that kind of money through emotion based decisions.
    The continuous consolidation of the automotive industry is accepted by the industry and its financiers alike. The speculation is about who will acquire whom and when. Already half the world's car production is controlled by four corporations.
    To recap the history:-
    In the early 1970's Michelin, trying to separate CitroŽn started to merge it with Fiat. The relationship didn't work and they went their separate ways leading to Peugeot's absorbtion of CitroŽn.
    Two years ago with PSA's dependance on Europe, it ran out of money and the Peugeot family was divided as to whether to back away from the industry or provide more money. The new government, in a very immature way, intervened to try to save jobs and force the shareholder's hands. The Minister concerned after several similar failed interventions is now out of politics and government while he attends business school.
    Peugeot had put in place a relationship with GM to solve the over capacity of both groups in Europe and to gain economies of scale through common logistics and platform sharing. The management of GM changed after it was reconstituted and they backed away from European issues to sort out the US. Discussions took place with Fiat and got nowhere. Finally a deal was brokered in which the Peugeot family stood back and control passed to a triumverate of shareholders who took control and facilitated the refinancing of PSA. That control rest in equal proportions with the Peugeot family, the French government and Dong Feng, their Chinese partner who in turn are controlled by the Chinese Government.
    The management changed and Tavares took on the challenge to turn the company profitable. The question is in the air of what next and this report again flies the kite of a merger with FCA.
    No emotion - just hard business, which it has to be when you have billions at stake and the issues of differential wages structures to juggle.
    Last edited by gerry freed; 18th January 2015 at 03:29 AM.
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