GlobalData : COVID-19 adds to M&A rationale in autos

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.'