AutoBeta(AutoBeta.net)05/06 Report--

After Dongfeng Group formally approved the merger of Peugeot PSA Group and FCA Group, the merger of PSA Group and FCA Group was promoted. FCA issued a statement on May 6th that Fiat Chrysler (FCA) and Peugeot Citroen (PSA) will still merge in early 2021.

The merger was first announced in October 2019 that the PSA and FCA groups will fully merge with a 50:50 stake to expand and cope with costly investment in new technologies and slowing market demand. Under the merger agreement signed in December 2019, the two sides will complete the merger within 12-15 months. After the formal merger, it is expected to create the world's fourth largest automaker in terms of sales and third in revenue.

The outbreak of the COVID-19 epidemic stood in the way of the merger. Affected by the epidemic, most of the factories of the two groups in Europe and North America have been shut down, and cash flow and performance expectations have been greatly hit. The data assumptions made by FCA and PSA at the beginning of the negotiations, including the valuation, revenue and sales of the two groups after 2020, all need to be reassessed, while the epidemic continues to spread, which will take a lot of time.

In addition, in order to circumvent regulatory scrutiny, PSA Group needs to reduce Dongfeng Motor's shareholding in order to merge with FCA Group, but the shares of PSA Group have fallen by 50% due to the epidemic. If Dongfeng Group refuses to reduce its holdings, the merger will end in failure. Fortunately, at the end of last month, Dongfeng Group agreed to reduce its stake, approved the merger plan of PSA Group and FCA Group, and approved the PSA share repurchase agreement.

In the first quarter of 2020, both PSA and FCA were not doing well. On April 21, PSA Group released its financial results for the first quarter of 2020, showing that PSA Group achieved operating income of 15.179 billion euros in the first three months, down 15.6% from the same period last year, and global car sales fell 29.2% to 627000 vehicles. On May 6th, FCA Group reported that first-quarter net income fell 16% to 20.567 billion euros (158 billion yuan), net loss fell 43.3% to-1.694 billion euros (13 billion yuan), and global car sales fell 21% to 818000 vehicles.

From a regional perspective, the net income of FCA Asia Pacific region in the first quarter of this year was 466 million euros, down 21% from the same period last year, mainly due to the decline in shipments and parts sales of joint ventures in China; the net income of Europe, the Middle East and Africa region was 3.732 billion euros, down 26% from the same period last year; the net income of North America region was 14.541 billion euros, down 9% from the same period last year; and the net income of Latin America region was 1.322 billion euros, down 32% from the same period last year.

At present, FCA's joint venture factory and dealer network in China have successfully resumed operation. In addition, the Ataisa plant in Italy also resumed production on April 27th and has now restored about 70% of its normal production capacity. The company's North American plant will gradually resume production according to consumer demand, except for the Belvidere assembly plant in Illinois, which will resume production from June 1st. While PSA has not yet announced plans to resume work, its main sales come from the European market, which is still the hardest hit area of the epidemic.

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