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Why FCA-PSA merger is no quick fix for their China problem

BEIJING — Fiat Chrysler and Peugeot owner PSA's merger is unlikely to provide a quick fix to their problems in China, as both companies have long struggled to find the right products at the right price for the world's top car market, analysts say. The companies said on Thursday they aimed to reach a binding deal in the coming weeks to create the world's fourth-biggest automaker by production volume. But scale alone will not make Italian-American Fiat Chrysler Automobiles (FCA) and France's PSA Group more competitive in a market where they have been slow to adapt to trends and win over consumers, leading their sales to lag far behind foreign rivals such as Volkswagen and General Motors. PSA does not have enough competitive SUV models, and neither company has enough electric and plug-in hybrid vehicles, or enough cars packed with hi-tech features for Chinese tastes, analysts say. In a market where 28 million cars were bought in 2018, FCA sold just 155,215, while PSA sold 257,723, according to consultancy LMC Automotive. At the end of September, FCA had a market share of 0.5% in China's passenger car market, while PSA's was 0.6%. Analysts say they have been squeezed by Japanese and local brands, which have product line-ups better suited to Chinese tastes at cheaper prices. "Both companies are very home-market centred and have failed to adapt to shifts in Chinese market preferences," said Bill Russo, head of Shanghai-based consultancy Automobility Ltd and a former senior Asia-based Chrysler executive. "Neither company has recognized and delivered on the trends of shared, connected and electric vehicles,” Russo said. That makes them ill-prepared to deal with further shifts in the Chinese market, which saw annual sales contract for the first time since the 1990s last year and is expected to see another drop this year. "China's overall market is experiencing a transmission and adjustment period," said Alan Kang, a Shanghai-based senior analyst at LMC Automotive. "It is very hard for these two companies, which do not have enough competitive up-to-date products, to quickly recover with the merger." FCA has a partnership in China with Guangzhou Automobile Group, which said on Thursday it backed the merger. PSA has been trying to reboot its operations in China.

Fiat Chrysler will pay $70M to settle safety disclosure suit

FCA US will pay a $70 million civil penalty to the National Highway Traffic Safety Administration for failing to submit Early Warning Report data going back to 2003. The automaker will also provide any missing data since that time, and an auditor will monitor future compliance. NHTSA says the failures to report this information "stem from problems in FCA's electronic system for monitoring and reporting safety data, including improper coding and failure to account for changes in brand names." There are no allegations of any intentional deception by the automaker. NHTSA will wrap up the latest fine with the previous consent order against FCA US earlier this year for the automaker's handling of 23 recalls. The company will know owe the safety regulator a total of $140 million in cash, and there will be possibility of $35 million more in deferred penalties if FCA doesn't comply with the agency's requests. In a statement about the fine to Autoblog, FCA US said the automaker "accepts these penalties and is revising its processes to ensure regulatory compliance." The company strongly believes that it didn't miss any safety problems over the time with this problem. Early Warning Reports include information on deaths, injuries, crashes, and other potential safety concerns, and NHTSA often uses the data in investigations for possible recalls. In September, the safety agency first announced the automaker failed to submit these documents. At the time, the regulator's administrator Mark Rosekind promised to "take appropriate action after gathering additional information on the scope and causes of this failure." FCA US also released a statement then about the lapse and said the company notified NHTSA immediately after discovering the problem. FCA US is not the first company to run afoul of NHTSA's reporting requirement. The agency fined Triumph Motorcycles and Honda this year for similar lapses. It also punished Ferrari in 2014. U.S. DOT Fines Fiat Chrysler $70 million for Failure to Provide Early Warning Report Data to NHTSA WASHINGTON – The U.S. Department of Transportation's National Highway Traffic Safety Administration has imposed a $70 million civil penalty on Fiat Chrysler Automobiles (FCA) for the auto manufacturer's failure to report legally required safety data. The penalty follows FCA's admission in September that it had failed, over several years, to provide Early Warning Report data to NHTSA as required by the TREAD Act of 2000.

FCA US under-reported death and injury claims to NHTSA

The National Highway Traffic Safety Administration says FCA US significantly under-reported death and injury claims due to flaws in its early warning system. The government first discovered a potential problem with the automaker's reporting in late July, and FCA US has been investigating the issue since. NHTSA claims that the problem appears linked to the way the company gathers and reports safety information. The agency is still investigating how serious the flaws are and their causes. "This represents a significant failure to meet a manufacturer's safety responsibilities," NHTSA Administrator Mark Rosekind.Rosekind said in a statement. FCA US admits that it "identified deficiencies" in the reporting, but in a statement the company said that it notified NHTSA of the issue immediately. The company promised that it is taking this problem "extremely seriously" and pledged to remedy the situation. In late July, FCA US was hit with a potential $105-million fine by NHTSA for the way the automaker conducted some recalls. As part of that agreement, the company also consented to more rigorous oversight by safety regulators in the future and a buy-back of some affected vehicles. Other automakers have been punished for failing to submit EWR data. Honda incurred a $70 million fine in January from NHTSA for missing 1,729 incidents over 11 years. Ferrari had to pay $3.5 million in 2014 for not sending them in for three years. Statement from NHTSA Administrator, Mark Rosekind, on Fiat Chrysler Automobiles' under-reported discrepancy in FCA's Early Warning Report data September 29, 2015 "In late July, NHTSA notified Fiat Chrysler Automobiles of an apparent discrepancy in FCA's Early Warning Report data. FCA has informed NHTSA that in investigating that discrepancy, it has found significant under-reported notices and claims of deaths, injuries and other information required as part of the Early Warning Reporting system. Preliminary information suggests that this under-reporting is the result of a number of problems with FCA's systems for gathering and reporting EWR data. This represents a significant failure to meet a manufacturer's safety responsibilities. NHTSA will take appropriate action after gathering additional information on the scope and causes of this failure." – Mark Rosekind, NHTSA Administrator. Statement: TREAD Reporting September 29, 2015 , Auburn Hills, Mich.