PSA Group and Fiat Chrysler Automobiles NV will combine to create the world’s fourth-biggest carmaker, as the manufacturers prepare to shoulder the costly investments in new technologies transforming the industry such as automation and electrification.
In the biggest auto tie-up since Daimler’s ill-fated purchase of Chrysler in 1998, the French and Italo-American carmakers will each own half of the enlarged business with combined annual sales of 8.7 million vehicles.
The all-stock transaction brings together two carmaking dynasties — the billionaire Agnelli clan of Italy and the Peugeots of France — and will forge a regional powerhouse to rival Germany’s Volkswagen AG with a market value of about US$47 billion, surpassing Ford Motor Co.
Executives promised not to close any plants in the merger even though the new company aims to extract 3.7 billion euros in annual synergies related to platform and purchasing efficiencies. FCA currently operates two assembly plants in Ontario where it manufactures nearly one quarter of all vehicles made in Canada.
“In the merger there will be no affect on production in Ontario,” FCA chief executive Mike Manley said on a call with reporters Wednesday.
Earlier this year, FCA announced plans to eliminate a third shift and 1,500 jobs at its Windsor, Ont., plant where 6,000 employees build the Chrysler Pacifica, Chrysler Pacifica Hybrid, Chrysler Voyager and Dodge Grand Caravan.
It has since extended the shift until the end of the first quarter in 2020, and will continue to review the feasibility of maintaining the shift, a spokesperson said in an email. It’s too early to comment on whether that extra capacity — if it opens up — could be used to build PSA vehicles in North America, the spokesperson said.
No cuts have been proposed at FCA’s Brampton, Ont., plant where 3,400 workers build the Chrysler 300, Dodge Charger and Dodge Challenger.
While the combined company said its manufacturing footprint will remain stable for now, the executives touted the synergies from sharing technologies and platforms across brands.
The new company will be run by PSA Chief Executive Officer Carlos Tavares, with Fiat Chairman John Elkann holding the same role.
The transaction will take as long as 15 months to complete, pending approvals by shareholders of both companies and by regulators, the carmakers estimated.
Like executives across the industry, Tavares and Elkann are responding to growing pressure to pool resources for product development, manufacturing and purchasing in the face of trade wars and an expensive shift toward electric and self-driving technology.
“The challenges of our industry are really, really significant,” Tavares, 61, said on the call with reporters. “The green deal, autonomous vehicles, connectivity and all those topics need significant resources, strengths, skills and expertise.”
“The technological revolution we are embracing requires a more innovative response than anything we have done before,” Elkann, 43, said in a letter to staff.
In an era when size is becoming ever more important, the deal will turn the two mid-sized carmakers into a global heavyweight, with a stable of popular brands and annual vehicle sales surpassing General Motors Co. The combination will give Peugeot-maker PSA a long-sought presence in North America and should help Fiat gain ground in developing low-emission technology, where it’s lagged rivals.
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, said the deal reflects where the auto industry is going and where it needs to go given how expensive it is to develop new technologies.
“That is so capital intensive and there’s only so much money to go around,” Nantais said. “They have to look for partners, they have to look for synergies in order to basically be prepared for the future.”
As for future manufacturing decisions, Nantais expects the companies to choose markets where it can produce more profitably. While Canada has a skilled labour force, infrastructure and the benefit of the new Nafta deal, it also has higher costs for inputs such as electricity, Nantais said.
“We’re still one of the highest cost jurisdictions to produce,” he said.
When it comes to where to locate production and management, Tavares indicted the company will stick to where the brands have roots and manage through regional headquarters.
“The brands carry the passion, the brands carry the history, the brands carry the emotions. This is why we considered that the brands will stay in their countries of origin,” he said. “Italian brands will stay in Italy, French brands will stay in France, American brands will stay in the U.S., and German brands will stay in Germany.”
Yet the new company will face many challenges. It will still be heavily reliant on Europe’s sluggish and saturated auto market, and poorly positioned in China, the world’s largest country for car sales.
The challenges will be manifold, from improving Fiat’s struggling European operations to meeting tough rules on emissions that kick in next year in the region as well as an unprecedented policy known as the green deal demanding an even tougher clampdown on carbon. Tavares, known as a hard-nosed cost-cutter, will also have to navigate the political crosscurrents in France, Italy and the U.S., where the automakers have deep national roots.
He has tackled tough jobs before, leading the French carmaker back from the brink after taking over in 2014, and reviving the loss-making Opel brand after acquiring it from GM two years ago.
“We believe further synergies above the modest 3.7 billion euros announced will be required to justify the combination going forward, which Tavares’ track record makes likely,” Bloomberg Intelligence analyst Michael Dean said in a note.
The deal with Fiat Chrysler marks a reversal of fortune for the 61-year-old executive, who was forced into a bystander role earlier this year when Elkann approached Renault SA, PSA’s French rival. That merger fell apart in early June after Renault’s Japanese partner, Nissan Motor Co., declined to back it.
China’s Dongfeng Motor Corp., which owns 12 per cent of PSA, will see its stake in the combined company decline to 4.5 per cent as a result of the deal and the sale of a portion of its holding to the French carmaker.
Dongfeng’s stake in PSA has attracted attention because of the possibility it could interfere with U.S. regulatory approval. U.S. economic adviser Larry Kudlow said last month the Trump administration would review the proposed merger because the deal would give the Chinese carmaker a stake in the combined company.
Tavares, on the call, said the companies don’t expect any significant issues from the antitrust regulators.
Fiat CEO Manley dismissed concerns over legal and tax issues that arose in recent weeks. GM in November accused Fiat Chrysler of bribing a union in the U.S. for more favourable terms. Manley, speaking with reporters, called the allegation meritless.
Separately, Italian tax authorities have claimed that Fiat owes the government a hefty sum after underestimating Chrysler’s value following its purchase several years ago. Manley reiterated that the case would have no material impact, and said both issues were reviewed during due diligence with PSA.
Manley, 55, who took over at Fiat last year after the sudden death of industry legend Sergio Marchionne, “will be there alongside” Tavares at the combined group, Elkann said in a letter to employees. He didn’t specify what Manley’s role would be.
Before the closing, Fiat will distribute to its shareholders a special dividend of 5.5 billion euros while PSA will distribute its 46 per cent stake in car-parts maker Faurecia SE to its own investors.
The spinoff or sale of Fiat’s robotics arm Comau slated for the benefit of the Italian company’s shareholders has been modified since October. Now, the planned separation will occur after the closing, and shareholders of the combined company will benefit.
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The Canadian Press
Ani Di Franco, “Revolutionary Love” (Righteous Babe Records) Pioneering folkie activist Ani Di Franco is a standout instrumentalist whose guitar could kill fascists. Alas, on “Revolutionary Love,” her six-string doesn’t play a major role — or many notes. Not that Di Franco has gone mellow. With characteristic passion on her first studio album since 2017, she makes the personal universal, and the political personal. Her title cut is a seven-minute pledge to propel social movements with love and forgiveness, the message underscored by a slow-burn soul groove. Elsewhere Di Franco quotes Michelle Obama, skewers an ex-president and calls for resilience in the wake of depressing news headlines. Such topics are mixed with couplets about personal pain and bliss, sometimes within the same song. The best of “Revolutionary Love” is very good. Di Franco’s acoustic guitar is most prominent on “Metropolis,” and it’s beautiful — a love ballad with shimmering reeds that evoke her description of “fog lifting off the bay.” The equally compelling “Chloroform” laments domestic dysfunction as a string quartet creates dissonance of its own. Elsewhere Di Franco blends elements of folk, jazz and R&B, and makes music suitable for a rally. She’s at her most politically vociferous on “Do or Die,” singing about “Yankee Doodle Dandy” to a Latin beat. Di Francophiles will find it positively patriotic. Steven Wine, The Associated Press
Merck ends development of two potential COVID-19 vaccines – The Globe and Mail
Drugmaker Merck & Co said on Monday it would stop development of its two COVID-19 vaccines and focus pandemic research on treatments, with initial data on an experimental oral antiviral expected by the end of March.
Merck was late to join the race to develop a vaccine to protect against the coronavirus, which has so far killed more than 2 million people and continues to surge in many parts of the world including the United States.
The company will record a pre-tax discontinuation charge in the fourth quarter for vaccine candidate V591, which it acquired with the purchase of Austrian vaccine maker Themis Bioscience, and V590, developed with nonprofit research organization IAVI, Merck said in a statement.
In early trials, both vaccines generated immune responses that were inferior to those seen in people who had recovered from COVID-19 as well as those reported for other COVID-19 vaccines, the company said.
The announcement is a setback to the fight against the pandemic and comes a month after Sanofi and GlaxoSmithKline delayed launch of their shot to late 2021, underscoring the challenges of developing vaccines at record speed.
Tens of millions of doses of vaccines from rivals Pfizer Inc and German partner BioNTech as well as from Moderna Inc have so far been administered globally.
Johnson & Johnson, AstraZeneca Plc and others are also racing to develop safe and effective vaccines to protect against the virus.
Merck said it would focus COVID-19 research and manufacturing efforts on two investigational medicines: MK-7110 and MK-4482, which it now calls molnupiravir.
Molnupiravir, which is being developed in collaboration with Ridgeback Bio, is an oral antiviral being studied in both hospital and outpatient settings.
Merck said a Phase 2/3 trial of the drug was set to finish in May, but initial efficacy results were due in the first quarter and would be made public if clinically meaningful.
Merck said results from a Phase 3 study of MK-7110, an immune modulator being studied as a treatment for patients hospitalized with severe COVID-19, were expected in the first quarter.
Shares of Merck fell 1 per cent to $80.12 in trading before the bell.
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Canadian provinces push back vaccination plans as Pfizer deliveries grind to a halt – MSN Canada
Some provinces were forced to push back vaccination for health-care workers and vulnerable seniors on Monday as deliveries from a major manufacturer ground to a temporary halt.
Canada is not due to receive any Pfizer-BioNTech vaccines this week as the company revamps its operations, and deliveries are expected to be slow for the next few weeks.
Ontario announced Monday that it was pausing COVID-19 vaccinations of long-term care staff and essential caregivers so that it can focus on giving the shots to all nursing home residents.
Premier Doug Ford said the delay has taught the province that it can’t take vaccine shipments for granted.
“I want to be clear: we’re using every single vaccine we can to protect our most vulnerable,” Ford told a news conference. “But delivery delays are forcing us to be careful and cautious as we plan, to ensure we’re able to offer second doses.”
The news came as more cases of the more contagious U.K. variant of COVID-19 were detected across Ontario, including in at least one long-term care home.
Some provinces have used up nearly all their vaccine supply and have been forced to push back their vaccination schedules.
Saskatchewan announced Sunday that it had exhausted all the doses it received. However, even after technically running out, the province still managed to vaccinate another 304 people as it continued to draw extra doses from the vials it received. It had administered 102 per cent of its allotted doses by Monday, and it expected the remaining excess doses to be gone this week.
Quebec has used up more than 90 per cent of its supply. It confirmed that the delivery delay would force it to postpone its vaccination rollout in private seniors’ residences, which had been scheduled to start Monday.
“Let’s be realistic: our vaccination momentum will be reduced as of this week,” Marjaurie Cote-Boileau, press secretary to Health Minister Christian Dube, said in a text message.
“Given the important reduction of Pfizer doses we’ll receive in the next two weeks, we have had to review our vaccination calendar.”
Quebec finished giving first doses to long-term care residents last week and has vaccinated some 9,000 seniors in private homes by using leftover doses. The province gave less than 2,000 shots Sunday, compared to an average of more than 9,600 a day over the previous week.
Video: COVID-19 outbreak declared at Surrey homeless shelter (Global News)
In British Columbia, the provincial health officer said the government is extending the interval between the two doses of the COVID-19 vaccine. Dr. Bonnie Henry said further delays in the production and delivery of the Pfizer-BioNTech vaccine over the next two weeks caused the time period between the shots to be extended from 35 days to 42.
She said about about 60 per cent of more than 119,000 doses of COVID-19 vaccine administered in the province so far have gone to protecting residents of long-term care homes.
The Manitoba government also said it may soon have to put off some second-dose vaccine appointments as a result of the disruptions to the supply of the Pfizer vaccine.
Prime Minister Justin Trudeau has stressed that the delay is only temporary and that Canada is expected to receive 4 million doses of the Pfizer vaccine by the end of March.
As Parliament resumed Monday, Trudeau faced a barrage of questions from MPs of all parties as they blasted the Liberal government for what they described as a botched approach to rolling out vaccines.
Both Trudeau and Procurement Minister Anita Anand repeated the government’s promise that by the end of September, all Canadians wishing to be vaccinated will have received their shots.
Trudeau added that the country is still receiving shipments of the Moderna vaccine.
Earlier Monday, Deputy Prime Minister Chrystia Freeland said there is “tremendous pressure” on the global supply chain for vaccines that the government has tried to mitigate.
“We are working on this every single day, because we know how important vaccines are to Canadians, to first and foremost the lives of Canadians and also to our economy,” she told a news conference in Ottawa by video.
Despite the vaccine delay, some provinces continued to report encouraging drops in the number of new cases and hospitalizations. Ontario reported fewer than 2,000 cases, as well as fewer people in hospital. It was a similar story in Quebec, where hospitalizations dropped for a sixth straight day.
Newfoundland and Labrador also reported no new cases of COVID-19 for a third straight day.
Alberta reported only 362 new cases of COVID-19 on Monday, compared with daily numbers peaking as high as 1,800 in mid-December. But the big concern for health officials was a case of the U.K. variant that could not be directly traced to international travel.
Alberta Health Minister Tyler Shandro said that while it is one case, the variant could quickly overwhelm hospitals if not checked.
“There’s no question that this kind of exponential growth would push our health-care system to the brink,” Shandro told a news conference. “It would significantly impact the health care and the services available to all Albertans.”
This report by The Canadian Press was first published Jan. 25, 2021.
— With files from Shawn Jeffords, Jordan Press, Dean Bennett and Stephanie Levitz.
Morgan Lowrie, The Canadian Press
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