Business Essentials for Professionals


Mergers & Acquisitions In Global Auto Industry In 2019

Mergers & Acquisitions In Global Auto Industry In 2019
The pressure that was felt by the global auto industry because of slowing demand, increased need for extensive investments for new generation vehicles and stricter auto emission norms saw a wave of consolidation in the industry in the past year. There were many big-ticket merger and acquisitions aimed at meeting the challenges facing the industry.
The largest merger of 2019 was the FCA-PSA merger with the creation of the fourth-largest OEM by volume and third-largest by revenue in the world. The combined annual sale of the two companies on each side of Atlantic amounts to about 8.7 million units and the combined revenues of almost $190 billion. The combined operating profit of the merged entity was more than $12.2 billion with an operating profit margin of 6.6 per cent.
A diversified business is to be created from the merger with the new entity expected to have one of the highest profit margins in their core markets of Europe, North America and Latin America. It is expected to deliver cost savings form synergies of about 3.7 billion euro annually. The two companies have pledged not to close down any of the existing factories and retain all employees. The combined entity will possess a wide range of brands such as Peugeot, Citroen, DS, Open and Vauxhall of PSA and Fiat, Chrysler, Dodge, Alfa Romeo, Maserati etc from FCA. 
In September this year, Japanese automaker Toyota and Subaru Corporation also expanded their strategic partnership by Toyota increasing its stake in Subaru to 20 per cent from 16.8 per cent.  The companies announced that their focus will be on making investments to jointly develop technologies for the connected, autonomous, shared and electric (CASE) vehicles.
A 50-50 joint venture with Chinese company Geely was announced in March this year by the German auto giant Daimler – the parent company of Volvo. The major aim of the partnership is to develop and deliver China specific e-mobility services jointly. 
On the other hand, Indian auto giant Mahindra formed a -Ford formed $275 million joint venture with the United States based auto giant Ford which was announced in October this year. The two companies plan to work on the development, marketing and distribution of the Ford vehicles in India. Optimization of resource sourcing, product development, using relevant technologies and the creation of a global network are among the aims of the joint venture.
Further in Japan, Toyota bought a small but significant stake of 4.94 per cent in Suzuki and vice versa in August this year. The aim of the stake taking by both the companies is to better utilize their resources and create greater synergies between the companies. While the amount invested by Toyota in the deal was about $907 million, the money invested in Toyota's shares by Suzuki was worth $453 million. The two companies had joined hands for the collaboration in February 2017. The two companies announced of making joint efforts for electric and hybrid vehicles, sharing cars, and the development of self-driving technology.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc