U.S. Auto Manufacturing Grinds to a Halt

The U.S. “Big Three” will now idle their manufacturing facilities in the United States, Canada, and Mexico at least until the end of the month due to COVID-19.

General Motors, Ford, and Fiat Chrysler Automobiles issued statements separately regarding their decision to idle production—marking a costly and dramatic step to battle the pandemic that automakers had hoped to avoid.

Before the complete shutdown, the three automakers initially wanted to just slow down its manufacturing opting to put enhanced safety measures in place. That all changed though when a Ford worker at its Michigan assembly plant tested positive, while the Illinois plant that makes the Explorer suspended operations after its supplier closed after a worker there got the virus.

For FCA, two COVID-19 cases were detected among its workers, and this prompted them to close down their manufacturing through the end of March. And while General Motors hasn’t said if any of its workers contracted the virus, they are doing the same to “keep their plant environments safe” and because “it’s the right thing to do now.” A person did test positive, but at the GM Technical Center.

While not part of the U.S. Big Three, American Honda will also halt production at its five assembly plants and three powertrain plants in North America as will Hyundai at its assembly plant in Alabama and Nissan in Tennessee.

Fiat Chrysler and Peugeot are Merging

Fiat Chrysler Automobiles and Peugeot have agreed to merge. The new entity, which will be 50/50 split among the two automakers will create the fourth largest global automotive OEM by volume and third largest by revenue.

With its combined financial strength and skills, the merged entity will be particularly well placed to provide innovative, clean, and sustainable mobility solutions, both in a rapidly urbanizing environment and in rural areas around the world. The gains in efficiency derived from larger volumes, as well as the benefits of uniting the two companies’ strengths and core competencies, will ensure the combined business can offer all its customers best-in-class products, technologies and services, and respond with increased agility to the shift taking place in this highly demanding sector.

The combined entity will have a balanced and profitable global presence with a highly complementary and iconic brand portfolio covering all key vehicle segments from luxury, premium, and mainstream passenger cars through to SUVs and trucks & light commercial vehicles. This will be underpinned by FCA’s strength in North America and Latin America and Groupe PSA’s solid position in Europe. The new Group will have much greater geographic balance with 46 percent of revenues derived from Europe and 43 percent from North America, based on aggregated 2018 figures of each company. The combination will bring the opportunity for the new company to reshape the strategy in other regions.

The efficiencies that will be gained from optimizing investments in vehicle platforms, engine families and new technologies while leveraging increased scale will enable the business to enhance its purchasing performance and create additional value for stakeholders. More than two-thirds of run rate volumes will be concentrated on 2 platforms, with approximately 3 million cars per year on each of the small platform and the compact/mid-size platform.

Completion of the proposed combination is expected to take place in 12-15 months.

Fiat Chrysler Confirms Merger Talks with Peugeot Citroen

After Nissan blocked a potential merger with Renault, Fiat Chrysler Automobiles or FCA seems to have found a potential new partner: PSA. After reports on a potential business combination emerged, FCA has confirmed that talks are underway with the parent company of Peugeot, Citroen, and Opel.

The merger, worth USD 50 billion could potentially transform the global automotive industry given that it will form the fourth largest auto manufacturing group. The merger could also help leverage technical expertise from both groups to help them with challenges such as electrification. Moreover, the merger could help save around 4 billion euros.

While FCA has yet to comment on the details of the proposed merger, Reuters cites sources that the merger will entail a 50/50 share swap, creating a new company formally based in the Netherlands. In terms of board structure, the combined company will have 11—six from Peugeot’s side, and five from Fiat Chrysler’s.