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Fiat Chrysler, Peugeot announce merger as world's No. 4 carmaker

MILAN  — Fiat Chrysler and France's PSA Peugeot said Thursday they have agreed to merge to create the world's fourth-largest automaker with enough scale to confront big shifts in the industry, including a race to develop electric cars and driverless technologies. Italian-American Fiat Chrysler brings with it a strong footprint in North America, where it makes at least two-thirds of its profits, while Peugeot is the No. 2 automaker in Europe. Both lag in China, however, despite the participation of Peugeot's Chinese shareholder, Dongfeng, and are playing catching up in developing electric vehicles. Fiat Chrysler shares were trading up 9% at 14 euros in Milan, while PSA Peugeot shares were down 3.2% to 22.84 euros. The 50-50 merger is expected to offer savings of 3.7 billion euros ($4 billion), which the automakers expect to achieve without any factory closures — a concern of unions in both France and Italy where the carmakers have more overlap. Fiat Chrysler's strongest brands are Jeep SUVs and Ram trucks and it is focusing on relaunching its premium and luxury brands, Alfa Romeo and Maserati, with a focus on hybrid engines. It still makes smaller cars under the Fiat marquee, mostly for the European and Latin American markets. PSA Peugeot makes mostly small, city-friendly cars, family sedans and SUVs under the nameplates of Peugeot, Citroen and Germany-based Opel, which it bought in 2017. That is where the companies can expect to have the most overlap. The new company would be worth $50 billion, with revenue of 170 billion euros ($189 billion). It would produce 8.7 million cars a year — still behind Toyota, Volkswagen and the Renault-Nissan alliance, which make over 10 million each. Once a merger is finalized, PSA Peugeot CEO Carlos Tavares will be chief executive of the new company, with Fiat Chrysler Chairman John Elkann becoming chairman. Fiat Chrysler CEO Mike Manley will have a senior executive role. "This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity," Tavares said in a statement. Manley called it "an industry-changing combination," and noted the long history of cooperation with Peugeot in industrial vehicles in Europe. The 11-member board will be made up of five members from each company plus Tavares, who is locked in as CEO for five years.

November U.S. new car sales mixed as automakers deepen discounts

DETROIT — Major automakers posted mixed U.S. November new vehicle sales on Friday and predicted a competitive December as they rushed to sell vehicles and boost their numbers before 2017 ends. Automakers are trying to sell down 2017 model-year vehicles, offering high discounts to consumers as the year-end nears. In 2016, the industry reported record annual sales of 17.55 million units. According to consultancies J.D. Power and LMC, discounts have been above 10 percent of the average transaction price for 16 of the past 17 months, a level experts say is unhealthy and unsustainable. The November sales results come as the National Automobile Dealers Association said on Friday it expects new vehicle sales to decline to 16.7 million units in 2018, after dropping to 17.1 million for the full year in 2017. If that forecast comes true, the race to move new vehicles off dealers' lots will only intensify next year. Brandon Mason, a director at PwC's automotive practice, said a worrying trend for the industry was a rising number of subprime loans. He said subprime levels are at just over 20 percent of originations, against more than 30 percent prior to the Great Recession, but recent increases remain a concern. "That's a bit of a red flag," Mason said. "It's something to keep an eye on as we move into 2018." November results by automaker: General Motors: Sales fell 2.9 percent, with sales to consumers flat against the same month in 2016. Much of the decrease was driven by lower fleet sales. GM said strong SUV and crossover sales pushed its average transaction price for the month above $37,000 for the first time. The level of unsold cars, which has been a concern for analysts and the industry, rose slightly to 83 days' supply, from 80 days at the end of October. "More vehicles are sold in December than any other month, and we are very well positioned because we have momentum in so many segments, but especially in crossovers," said Kurt McNeil, U.S. vice president of sales operations. Fiat Chrysler Automobiles: Fleet sales are low-margin, and FCA in particular has targeted a significant reduction in this type of sale in 2017. It posted a 4 percent overall decrease in sales for November, but fleet sales were down 25 percent while sales to consumers were up 2 percent on the year. Ford: The No. 2 U.S. automaker reported a 6.7 percent increase for the month, with fleet sales up nearly 26 percent and retail sales 1.3 percent higher than in November 2016.

FCA seeks partner to keep building Dodge Dart, Chrysler 200

Mere weeks after FCA announced it was shutting down production of the Dodge Dart and Chrysler 200, new hope emerges to give the sedans a stay of execution. Speaking at the Geneva Motor Show last week, Sergio Marchionne said that the company was looking for a partner "who is better at it than we are and who has got capacity available" in order to continue building the models on its behalf. "There are discussions going on now," said Marchionne, according to Motor Trend. "I think we will find a solution. We continue to talk. It's both a technical solution and an economic one. We need to find a solution that works economically." Contracting vehicles to be manufactured offsite is more common practice among European automakers than it is with American ones. Chrysler's former patron Mercedes, for example, has the G-Class built for it by Magna Steyr in Austria, the A-Class by Valmet in Finland, and the R-Class by AM General in Indiana (even though it's no longer sold in the US). This arrangement would, on the surface at least, appear more similar to the deal that Toyota struck with Mazda to build the Scion iA, drawing on the contractor's expertise and capacity to build the small sedan on the client company's behalf. Only rather than basing a new model on one of the partner's existing ones, this deal would ostensibly continue building FCA models on FCA platforms using FCA components. We'll have to wait to find out with whom FCA strikes up the manufacturing deal, but we wouldn't be surprised to see Marchionne turn to a partner he already knows. The company is, after all, at the center of an intricate web of joint ventures and manufacturing contracts. The Fiat 124 Spider, for example, is built by Mazda. The Fiat Sedici that preceded the 500X was built by Suzuki. Models like the Dodge Stealth and Eagle Talon were built in Illinois at the Diamond-Star Motors joint venture before Mitsubishi took it over altogether. And Dodge continued selling the Mercedes-made Sprinter long after DaimlerChrysler split. The Ram ProMaster, though built by FCA in Mexico for the North American market, stems from a partnership in France with PSA Peugeot Citroen. And the ProMaster City is built in a joint-venture plant in Turkey, from which it's also sold by GM as an Opel in Europe and a Vauxhall in the UK. With all those deals coming and going, after all, what would one more add to the complexity?