As Renault was
considering Fiat Chrysler’s proposal to merge, industry executives and analysts
believed “that car makers must link up to share the cost of a transition from
internal combustion engines to avoid being run over by fast-moving tech
industry challengers like Tesla or Uber.”[1] To be sure, (b)y purchasing
parts together, combining their manufacturing operations and sharing the cost
of research and development,” the merger could “eventually save 5 billion euros
per year,” according to Fiat.[2] The R & D would include funds spent on
developing new models as well as on high tech oriented to the future. Although
significant efficiency could be achieved due to under-used factories and all
the money going into product development, the basic problem was one of
insufficient scale (i.e., revenue) to support (i.e., finance) the very costly
research and development needed on electric and/or self-diving cars. In its
statement, Fiat Chrysler pointed to “the need to take bold decisions to capture
at scale the opportunities created by the transformation of the auto industry
in areas like connectivity, electrification, and autonomous driving.”[3] The
insufficient scale was particularly troubling given the declining E.U. auto
market at a time when Tesla, Google and Uber were making progress on electric
and self-driving cars. Fiat Chrysler could really use the expertise at Renault
and Nissan on electric cars. However, I'm not sure a merger was the optimal route forward.
The full essay is at "Fiat-Chrysler's Merger Proposal."
The full essay is at "Fiat-Chrysler's Merger Proposal."
[1] Jack Ewing et al, “Renault Considering Fiat’s Offer to Merge Into a New Auto
Giant,” The New York Times, May 27, 2019
[2] Ibid.
[3] Ibid.