Automaker mergers: Fiat Chrysler and Renault show why car manufacturers desperately need each other

It is a great reason that France's Renault is considering a merger with Fiat Chrysler that would create the world's third largest automaker and transform the global automotive industry.
Carmakers is facing a major challenge. Global sales fall just when they need to spend more to develop electric and autonomous vehicles. There is also new competition from such as Tesla ( TSLA ) and Uber ( UBER ) . ] The pressure forces established car manufacturers into schemes that allow them to increase revenue while sharing costs.

"There has been talk of long-term consolidation," said Michelle Krebs, senior analyst at Autotrader, who noted that former Fiat Chrysler CEO Sergio Marchionne was a major proponent. "It's not surprising that it is coming now."

Under Pressure

Carmakers need to focus on future transport. But the first major problem is to flag sales.

In China, annual car sales went for the first time in two decades last year among economic weakness and trade war with the United States.

Sale of cars in the US also pushes. Fiat Chrysler's US sales fell more than 3% in the first three months of 201[ads1]9 compared to the previous year.

"We're in a post-peak era where sales have hit record, so come down a little," Krebs said.

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However, the amount of money the car manufactures must mark for research and development, balloon formation, especially since competition with Silicon Valley is heated.

A number of car companies have responded to this pressure by making cuts. Ford last week announced cutting 10% of its profitable staff worldwide to save $ 600 million a year.

Still others are also moving to deepen partnerships and alliances so they can spread development spending. Germany BMW BMWYY ) and Daimler ( DDAIF ) puts $ 1 billion at a one-time rate on developing the tour and charging services. Ford and Volkswagen are building some new cars together.

A merger between Fiat Chrysler and Renault would take such a collaboration a step further. The companies had discussed ways to build on new products and technology, but Fiat Chrysler claimed that a merger would be best.

Merger Moves

Combine Fiat Chrysler FCAU ) and Renault ( RNLSY ]] may benefit both companies.

Fiat Chrysler owns brands like Jeep and Ram have a lot of growth potential abroad, especially in the Middle East and Africa where Renault is strong, Krebs said.

However, Renault does not have a significant presence in North America, where Fiat Chrysler is a major player.

In addition, Renault is considered the leader in electric vehicles, while the Fiat Chrysler has settled behind. The Italian-American company said a merger with Renault would produce annual cost savings of over $ 5 billion ($ 5.6 billion). Nissan hits “rock bottom” som Renault presser for en fusjon ” data-src-mini=”//” data-src-xsmall=”//” data-src-small=”” data-src-medium=”//” data-src-large=”//” data-src-full16x9=”//” data-src-mini1x1=”//” data-demand-load=”not-loaded” data-eq-pts=”mini: 0, xsmall: 221, small: 308, medium: 461, large: 781″ src=”data:image/gif;base64,R0lGODlhEAAJAJEAAAAAAP///////wAAACH5BAEAAAIALAAAAAAQAAkAAAIKlI+py+0Po5yUFQA7″/>

A wild card is Renault's existing relationship to Nissan ( NSANF ) ). Renault has a 43.5% stake in Nissan, while Nissan owns 15% of Renault, as part of an alliance that also includes Mitsubishi Motors.

The French car manufacturer, which sells fewer cars than Nissan, had pushed for the companies to merge, but met back.

"The greatest mystery in all this is where Nissan fits," Krebs said.

However, auto mergers do not always perform. Fiat Chrysler wanted to know: The merger with Daimler in 1998 ended less than a decade later, partly due to differences in corporate culture.

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