The FCA (Fiat Chrysler Automobiles)<\/strong><\/strong><\/p>\n\n\n\n In recent years, sales of FCA products in the major markets of the US,\nChina and Europe have been falling (mainly Europe and China) and present\nproblems in relation to competition. In some of these large markets its sales\nhave almost disappeared (China).<\/p>\n\n\n\n These findings forced the administration of FCA to invest massively in the\nBrazilian market to achieve an increase in its sales and of course its profits\nby balancing the large sales decrease in other major markets on the planet.<\/p>\n\n\n\n Due to the historic presence of Fiat in Brazil with its first factory\nopening there in 1976, the Brazilian market is one of the few markets in the\nworld outside the European market where the name Fiat has gained great\npopularity.<\/p>\n\n\n\n The FCA has almost disappeared from China’s huge market and the US market\nis dropping its sales compared to its competitors, where consumers choose SUVs\nand trucks. For this reason, FCA bets on the Brazilian market and generally in\nall emerging markets of the world to survive.<\/p>\n\n\n\n On the other hand, FCA’s sales in Europe are not attributed the expected and its factories in Europe are under operated. The FCA has a strong presence in the U.S. market and especially in the SUV (Sport Utility Vehicle) market. <\/p>\n\n\n\n How to influence the course of this type of investment<\/strong><\/strong><\/p>\n\n\n\n The fact that $ US is appreciated in relation to the remaining currencies\nand since the trade war mainly between the US and China will continue, the\nconditions are created for a significant reduction in consumption in countries\nsuch as Brazil, China, India, Russia and other emerging markets.<\/p>\n\n\n\n This is because countries like Brazil have public and private debt in US\ndollars and any appreciation of $ US, increases and the service size of the\ncountry’s public debt. As a result, it is drastically reducing the amount of\ndisposable income available to citizens. In such\ncases, citizens try to cover basic living needs first and then turn to other\ntypes of needs such as cars which are considered the most consumer commodity.<\/p>\n\n\n\n This is the main reason why other automakers who have made\nmulti-billion-dollar investments continue to receive negative returns from\ntheir investments and to worry when their investments in Brazil and in other\nemerging markets will at some point yield the expected.<\/p>\n\n\n\n Renault and its partners <\/strong><\/strong><\/p>\n\n\n\n Both Renault and FCA on their own built about 8.7 million passenger cars\n(2018). Both companies themselves are located, as regards the constructed\nnumber of vehicles at the same annual levels as the Hyundai Motor Group and\nGeneral Motors. But all these companies are at a lower level in terms of the annual number of manufactured\nvehicles compared to the large groups in the industry, namely Volkswagen and\nToyota.<\/p>\n\n\n\n But Renault alone together with its partners, Nissan, Mitsubishi, and\nAvtoVaz are approaching the numbers of their annual manufactured vehicles of\nthe two major groups in the automobile industry. <\/p>\n\n\n\n Renault is stronger in terms of market shares in the European market,\nespecially in electric cars.<\/p>\n\n\n\n The needs that lead to a merger between Renault and FCA<\/strong><\/strong><\/p>\n\n\n\n The timeless and historically fierce competition in the most developing, in\nterms of innovation, industry of the world (automobile) has forced all groups\nof automakers to continually seek solutions to remain competitive.<\/p>\n\n\n\n The electrification, the introduction of stricter gas emissions regulations\nby all countries, the continued development of costly research to develop new\ntechnologies for both internet-connected vehicles and\nautonomous vehicles, the application of artificial intelligence technologies in\nvehicles, the most effective internet connectivity, are constantly demanding\nhuge amounts of costs from the automobile industries.<\/p>\n\n\n\n Other main reasons for mergers between groups of car manufacturers are, of\ncourse, economies of scale (as in any type of merger between companies) to save\ncosts.<\/p>\n\n\n\n Furthermore, and given that the French government has a 15% stake in\nRenault and wants the creation of gigantic companies in Europe and which will successfully respond to global\ncompetition in their business sector, it is another reason why companies like\nRenault push to enter into such a\nmerger agreement.<\/p>\n\n\n\n The advantages of a merger of the type between Renault\nand FCA<\/strong><\/p>\n\n\n\n Complete market coverage is achieved for each type of vehicle, from\nluxurious to mass-produced vehicles.<\/p>\n\n\n\n Such a merger should create savings of huge capital size (economies of scale)\nwhich can then be redirected to R&D (Research &Development). For this\nmerger and what has been seen in the light of publicity, it is estimated that\nfunds will be saved in the order of \u20ac5 billion.<\/p>\n\n\n\n The combined market value of Renault & FCA was \u20ac32.6 billion (24\/5\/2019).<\/p>\n\n\n\n Renault together with its partners Nissan, Mitsubishi and AvtoVAZ produce\nabout 10 million vehicles annually. With the addition of FCA, all together will\nproduce 15 million vehicles annually with almost most market brands being under\nthe umbrella of the same group.<\/p>\n\n\n\n Renault gains access through FCA to the share of profits held\nby FCA in the world’s strongest market. In the US market.\nThe FCA, due to its inability to costly R&D, through this merger it will be\nable to acquire advanced technology, access to rights in electrical\npowertrains. This sector would have cost FCA, under other circumstances of\nenormous size for the development of the corresponding R&D. <\/p>\n\n\n\n Renault does not have access to the US market except through the profits of\nNissan. Through FCA, Renault acquires this much-needed access.<\/p>\n\n\n\n They gain a common corporate culture (European) as to how competition will\nbe tackled.<\/p>\n\n\n\n The disadvantages of merging between Renault and FCA<\/strong><\/strong><\/p>\n\n\n\n Renault so far has no access\nto the\nUS market, except\nthrough the sales\nshare of\nNissan. <\/p>\n\n\n\n Nissan in the event of a merger between Renault & FCA may in future\nhave to spend more capital on the new Renault & FCA Group for the Renault\nplatforms and engines. That is why Nissan is correctly reacting negatively to\nthis merger.<\/p>\n\n\n\n In this type of merger and for the above reasons Nissan may be forced to\nleave as a Renault partner, seeking another\npartner or developing its own engines. In any case, Nissan with FCA and\nMitsubishi will react highly competitively to the US market, with only Renault won.<\/p>\n\n\n\n Economiess of scale achieved by mergers between companies to save\nresources must include closures of factories and in general production chains\nand, in any case, a drastic reduction in jobs.<\/p>\n\n\n\n The reduction of number of jobs does not only take place because of the\nmerger but also from the implementation of the 4th industrial revolution which\nin industries such as automakers is one of the first to be implemented in\npractice.<\/p>\n\n\n\n This means that this merger between FCA & Renault will face obstacles from:<\/p>\n\n\n\n 1.<\/strong> Politicians <\/em>\u2013 Every job lost means political costs for them. This drastically restricts the movements of the company’s management.<\/p>\n\n\n\n 2.<\/strong> Workers ‘ unions<\/em> \u2013 particularly in Europe (Italy, France) where trade unions are very strong.<\/p>\n\n\n\n 3.<\/strong> Existing partners<\/em> \u2013 e.g. Nissan.<\/p>\n\n\n\n 4.<\/strong> Governments <\/em>\u2013 Governments holding a share in the merging companies e.g. the French government owns 15% of Renault and the Italian government is also asking for a share in the new group.<\/p>\n\n\n\n What is the best solution for FCA, Renault and its\npartners?<\/strong><\/p>\n\n\n\n The process of an unbridled expansion made by all the companies regardless\nthe business sector, should be avoided in general and any qualifying extensions\nshould be made in moderation and absolute long-term planning.<\/p>\n\n\n\n In cases of global economic recession and generally significant reduction\nof global demand, the first companies that will be hardest hit are those that\nmanufacture the most consumer products (e.g. cars) given that they face\nsimultaneously a large exhibition on borrowing. If this situation that the company will experience is combined with a fierce competition, these\nbusinesses increase the likelihood of collapsing\/bankrupt leaving behind\n‘debris”.<\/p>\n\n\n\n It is preferable for a company to limit its costs, even with factory\nclosures and drastic reductions in productive jobs (productive in relation to\ntheir matched profitability), in order to save capital and dispose of them for\nR&D that will give it a technological lead, even if it means smaller size\nas a company. In this case, the goal posed is to make it more effective and attractive, in terms of its profitability, the company.<\/p>\n\n\n\n The involvement of governments in companies (due to ownership of shares)\n“cement” the movements of companies’ management because all kinds of\ncuts, e.g. factories, jobs, etc., when these are necessary from the prevailing\nconditions, they should be done without delay.<\/p>\n\n\n\n Renault and its existing partners are not so complementary in the event of\na merger with FCA. The FCA should focus on markets that have a comparative\nadvantage and drastically increase its available resources for R&D, even if\nit means brave internal cuts in expenditure. In this case it will be more\nprotected in the non-desirable macroeconomic situations globally.<\/p>\n\n\n\n Thanos Chonthrogiannis<\/strong><\/p>\n\n\n\n The law of intellectual property is prohibited in any way\nunlawful use\/appropriation of this article, with heavy civil and criminal\npenalties for the infringer.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The recent information that saw the spotlight on the merger between two major European groups of the global automobile industry, namely between the FCA…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[620,946],"tags":[699,697,700,698,703,696,701,702,704],"class_list":["post-730","post","type-post","status-publish","format-standard","hentry","category-business","category-companies","tag-car-industry","tag-fca","tag-how-the-expansion-of-an-automaker-may-fail","tag-renault","tag-the-cons-of-merging-between-renault-and-fca","tag-the-merger-between-fca-and-renault","tag-the-needs-which-make-renault-and-fca-to-merge","tag-the-prons-of-a-merger-renault-and-fca","tag-what-is-best-for-fca-and-renault"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/730","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=730"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/730\/revisions"}],"predecessor-version":[{"id":732,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/730\/revisions\/732"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=730"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=730"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=730"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2019\/05\/Logo_Fiat_Chrysler_Automobiles.png\"){kind=logo}
Author: Robilant Associati Studio, licensed public domain
Source: fiatspa.com https:\/\/commons.wikimedia.org\/wiki\/File:Logo_Fiat_Chrysler_Automobiles.png
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