21 May 2020
COVID-19 adds to M&A rationale in autos
Posted in Automotive
Following the news that Exor NV - Fiat-Chrysler's (FCA's) largest investor - has confirmed the timing for the proposed FCA-PSA merger for completion by early 2021 as initially announced;
David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:
'The COVID-19 crisis will be adding pressures for corporate restructuring in the global automotive industry - for both vehicle manufacturers and companies in the supply chain.
'The proposed FCA-PSA merger is on track to be completed in early 2021 and the sizeable synergies and efficiencies it brings - projected at €3.7bn a year before the crisis - have become even more important as the companies look at their recovery paths this year.
'Combining operations creates the opportunity to look for further efficiencies and reduce cost at a time when the industry is having to endure an exceptionally tough business environment.
'The two companies also face long-term challenges such as the CASE (Connected Advanced Shared Electrified) megatrends and developing strategies for the automotive sector's industrial transformation.
'The planned FCA-PSA merger will create the third largest global car company by revenues and fourth largest by volume, yielding the greater scale and resources to tackle CASE.
'Similarly, Tier 1 supplier BorgWarner has said that its planned acquisition of Delphi Technologies will go ahead. The deal's drivers are similar to the FCA-PSA merger in terms of CASE megatrends and the need to exploit scale and synergies.
'They will also be very aware of the changed business landscape caused by COVID-19 and the benefits that combining for greater scale and cost reduction can bring.'
GlobalData plc published this content on 21 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 May 2020 13:29:05 UTC