Fiat Chrysler And PSA To Merge -- January 4, 2021

Updates

January 7, 2021: a reminder. Back in 2012, it was GM courting PSA. 

January 5, 2021: tonight we learn that Fiat Chrysler sales were 8 percent in 4Q20 y/y and full year sales dropping 17%. Only two models recorded year-over-year gains: Jeep Gladiator and Alfa Romeo Stelvio.  

Original Post

Only because I'm bored I'm posting this note.

Fiat Chrysler and PSA announced a merger worth $52 billion, Reuters report per a reader. NYT headline: merger needed to "save" the two companies. AP report here.

New name: Stellantis. Will become fourth largest automaker. 

My reply to reader who sent me this with me knowing almost nothing about any of this:

Pretty funny. Chrysler can't find a good fit. First Daimler Benz and Chrysler merged; a disaster.

Then, Fiat and Chrysler to which I never paid any attention.

Now, PSA.

Fiat Chrysler with a market cap of around $40 billion (?).

Peugeot, Citroën, Opel: the French must like them.

Good for them. Sounds like one of them was in trouble, probably PSA.

I don't invest in automobile manufacturers, so no dog in this fight. 

Purpose of merger according to the press release:

• the newly-formed firm is expected to play a key role in the auto industry's jump into the new era of electrification.

This is what I see: it's going to cost a huge amount of money to go electric and very few can do it. 

PSA could see the writing on the wall; EU was going all in with EVs and PSA has no options. LOL. 

Look at Ford: investing $11 billion through 2022 to electrify its Ford Mustang Mach-E. $11 billion. Think about that: $11 billion through two years to bring one EV to market. I could be wrong on that ... but probably not too far off.

Tesla? Last time I looked, trending toward a market cap of $750 billion. 

This will be fascinating to watch. Which reminds me: do I need more popcorn? 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

Again, I have no dog in this fight. I posted it because I was bored.

However, it spoke volumes about the money it will cost automobile manufacturers just to stay in the game. On top of that, "someone" is going to have to pay for:

• the electric grid infrastructure;
• the national charging network;
• just the cost for the interstate system will be mind-boggling; 
• then we have the "red" highways
• then the "blue" highways
  
• the lost federal and state gasoline tax which pays for highways (new and maintaining)
• the displacement of the entire ICE servicing economy
  

If this -- the whole EV thing -- doesn't work out, it's not going to be a pretty picture for the country.