When we first heard about The Who’s Left Merger, it was that Fiat Chrysler was pushing for it, and like all things FCA, we viewed it with as much skepticism as we would, say, our friend telling us they were getting a great deal on a Dodge Journey. But as the days roll on, things are looking increasingly serious. All that and more in The Morning Shift for May 29, 2019.
1st Gear: Renault: You Love It, Don’t You? Nissan: We Are Not Not Loving It.
Here are three pieces of news rolled into one. The first is that Renault has gone to the trouble of flying to Japan to chat with longtime alliance partner Nissan about the latter’s possible merger with Fiat Chrysler. This can only mean one thing, as Bloomberg reports: Renault is down to clown.
B’Berg’s story ran today under the headline “Renault’s message to Nissan: Fiat deal is good for all of us” and here’s a little bit:
Renault SA Chairman Jean-Dominique Senard arrived in Tokyo with a crucial mission: to sell the proposed merger between Fiat Chrysler Automobiles NV and Renault SA to longtime partner Nissan Motor Co.
While neither party has disclosed what will be discussed, there will be plenty to talk about. Under the terms of the Fiat proposal, Nissan will gain voting rights of 7.5% in the new entity, compared with no voting rights attached to its cross-held shares in Renault. A merger would also dilute the French state’s control over Renault, and indirectly over Nissan, easing a concern the Japanese company has had for years.
Senard’s goal is to ensure that they all work well together. Although Nissan and Renault have been partners for two decades, the Japanese automaker isn’t in a position to block the deal. Nissan doesn’t own a controlling stake in the French company, and a merger wouldn’t breach their operating agreement.
Bloomberg couldn’t get comment from Nissan for the story, but the Nikkei got some goss, as reported by Reuters today:
“We are not opposed,” the Nikkei quoted an unnamed Nissan source who had attended the meeting as saying. The person also said “many details need to be worked out” before the Japanese automaker solidifies its position on the issue, the Nikkei reported.
In a statement, the alliance members confirmed that they had “an open and transparent discussion” on the proposal. The deal looks designed to tackle the costs of far-reaching technological and regulatory changes, including the drive toward electric vehicles.
In any case, the two sides are meeting on Monday, as the Financial Times reports. I wish them all well in this definitely well-thought-out merger that makes sense to everyone and doesn’t seem like desperation.
2nd Gear: Of Course Wall Street Loves a FCA-Renault-Nissan Merger For Every Wrong Reason
Wall Street never met a budget it couldn’t slash, and unsurprisingly it is loving the prospect of trimming the fat on five carmakers at once, as The Detroit News reports today:
A potential merger between Fiat Chrysler Automobiles NV and Renault SA would create a massive global company, but it’s the cost cuts proposed by FCA that has investment analysts optimistic about the deal.
The proposed 50-50 merger between the Italian-American Fiat Chrysler and France’s Renault would create the third-largest automaker in terms of sales, behind Volkswagen AG and Toyota Motor Corp. It’s a move that would also save some $5.6 billion (5 billion euros) annually for the companies as they find ways to cut costs in manufacturing, purchasing and R&D.
Hold on, wait, there’s a better quote in here, from Moody’s, which just upgraded FCA to its highest level of junk status, as the Detroit News notes. Take in this fantastic line, which says in as many words as possible that this is going to be a giant mess but they’ll slash costs and we’ll make out like bandits:
“Combining Fiat Chrysler and Renault would be credit-positive in general as it makes strategic sense and could create a substantial amount of synergies,” Falk Frey, senior vice president and auto analyst at Moody’s, said in a Tuesday note. “However, we’ll also consider significant execution risks of such a large scale transaction given the complexity of the two group’s businesses’ operations, particularly in view of Renault’s existing alliance with Nissan Motor Co. Ltd and Mitsubishi Motors Corporation.”
Now, there was some nice analysis from automotive journalist and friend of Jalopnik John Voelcker, who noted that, yes, it sounds evil to salivate about “a substantial amount of synergies,” but there really is still a lot of pointless fat in the auto industry today:
Personally I would love to see the auto industry as it stands today change entirely, moving from these giant silo’d giants into tons of tiny manufacturers, all putting together different combinations of licensed engines or electric modules on widely available skateboard chassis, like we had over a hundred years ago.
3rd Gear: Infiniti Returning To Japan After Ghosn Moved It To Hong Kong
I’m going to be completely honest, I totally forgot this happened.
For some reason Carlos Ghosn moved Infiniti’s headquarters to Hong Kong back in 2012 in an effort to make it more in his image, I mean, more international. Anyway, with Ghosn gone, Infinti is packing up its pencils once more, as Bloomberg elaborates in a wire report:
Ghosn in 2012 planned to more than triple Infiniti’s annual sales to 500,000 units within five years to raise its share of the global luxury car market to 10%. The brand sold less than half of the target last year.
Hurt by slumping U.S. sales, aging vehicle models and an out-of-sync product cycle, Nissan reported its lowest annual profit in a decade for the fiscal year through March. Chief Executive Officer Hiroto Saikawa is working on reviving profits, pledging to lift Nissan out of a “rock bottom” in two years. Infiniti currently has 180 employees based in Hong Kong, mostly in management, sales and marketing positions.
The report further noted that Infinti is planning on dumping its diesels and focusing on EVs and China, which is what you could also call the “doing what Tesla has been trying to do for years now” plan of action.
4th Gear: China Considering Subsidizing EV Charging
China has been somewhat vocal in saying it’s rolling back on subsidizing its budding electric car hegemony, but apparently someone in power didn’t get the message, as noted in a Bloomberg wire report today:
China is scaling back subsidies on EV purchases and plans to phase them out completely after 2020 amid concerns that automakers have become overly reliant on them at the expense of developing new technologies. The funding offered on purchases will be diverted to develop charging infrastructure, industry minister Miao Wei said in March.
China, which has about 960,000 charging poles for its 2.31 million electric vehicles, is working to upgrade the network. The new standards will boost the capacities of facilities about sixfold to more than 350 kilowatts, making re-charging as efficient as a filling a regular fuel tank, Liu [Kai, a director with the Information and Certification Department of the China Electric Vehicle Charging Infrastructure Promotion Alliance] said.
There’s a part of me that worries about this. I don’t love the idea that the fate of EVs may hinge upon a government program, one that could change at any time, but any little bit helps and it’s not like consumers are any less fickle, buying gas guzzlers the moment fuel prices drop.
5th Gear: In New Era Of Auto Layoffs, It’s Hard To Tell Who Looks Worse: Detroit or Washington
I love everything about this incredibly obvious analysis from The Washington Post, which seems to have just now woken up to realize Detroit has been slashing jobs while budgets have been fat, and Trump hasn’t been helping anything:
[T]here’s another pillar of Trump’s base — the auto industry, which he promised to transform into the engine of a manufacturing revival — that is stalling at an inopportune moment for the president.
Layoffs in the industry this year are at their highest since the economic crisis a decade ago[.]
The piece focuses on Trump not fulfilling his promises of helping out the auto industry, which, ha, but I think you can’t look at this without putting a great deal of blame on companies like GM for shutting down whole factories when we’re not even in a recession.
Reverse: This Was More Recent Than You’d Wish
Neutral: What Do You Call The Potential Fiat-Chrysler-Renault-Nissan-Mitsubishi Conglomerate?
Is it the Who’s Left Merger? Is it the Merger To Restore Balance, as with one new auto company entering the fray (Tesla) another must presumably be absorbed? Is It The Merger Of Equals But For Real This Time? Your thoughts are welcome.