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Up Next: Ford-Volkswagen Tie-up?

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What a week it has been. More like a half-week, actually.

For it was within that abbreviated timeframe we officially heard that Fiat Chrysler and the PSA Groupe (Peugeot and Citroën) were talking merger. The news spilled out late Monday and by Wednesday the two automakers came to terms. Today, news of the planned merger was announced, setting in place what will become a near $50 billion entity, which currently produces 8.7 passenger vehicles annually.

Merger talk doesn’t take place in a vacuum. Indeed, soon after the FCA broke off talks with Renault to merge in June, rumors of PSA’s interest in FCA came out. All we’ve heard is what was reported this week. But talks have been going on for some time, carried under the cloak of secrecy.

We shouldn’t be surprised that the two automakers are connecting as the entire industry is ripe of consolidation. With the deal nearly certain to pass, it likely will trigger further consolidation with perhaps Ford and Volkswagen following. Yes, these two automakers seem like prime candidates for an alliance or outright merger. There are several reasons why, which we’ll explore here.

Volkswagen and Ford: The Next Tie-up?

1. The two companies forged a global alliance.

In January 2019, Ford and Volkswagen announced that the two companies were forging a global alliance, but without cross-ownership. Pickup trucks and commercial vans were the first vehicles mentioned where collaboration will take place.

2. An EV/AV alliance follows.

In July, Ford and Volkswagen announced that the two automakers would begin sharing electric vehicle (EV) and autonomous vehicle (AV) technology. VW is investing in Argo AI, which is Ford’s self-driving technology, while Ford will build at least one vehicle based on Volkswagen’s Modular Electric Toolkit (MEB) architecture for sale in Europe.

3. Ford cuts back on cars.

The Ford Motor Company still produces cars, but the U.S. market will soon offer only the Mustang, pickup trucks, and lots of utility vehicles. With a VW tie-up, Ford might find it affordable and sensible to sell small cars again in the U.S., especially as the merged entity shaves costs. In any case, if the market suddenly shifts to cars again, Ford will have the platforms in place to build what’s needed.

4. The Rivian factor.

We already know that Ford owns a slice of Rivian, the upstart electric vehicle maker. Rivian will begin producing an SUV and pickup truck by the end of 2020. Ford will have access to Rivian’s skateboard electric vehicle architecture, which is certain to produce at least one model for the Ford brand. Volkswagen wants a pickup too and might utilize Rivian besides tapping the Ford Ranger for its own purpose.

5. Big is better.

When it comes to building passenger vehicles, the bigger you are, the better. Or at least that is the thinking in this industry. Yes, “economies of scale” and “synergies” are realized through smart collaboration. But there is another factor, bragging rights, which the new company led by Volkswagen would claim as sales would top an estimated 14 million units annually, putting the new automaker well in front of the pack.

What About GM?

With FCA and PSA hooking up and Ford and Volkswagen presenting a strong argument for consolidation, what about GM? At one time we might have seen GM go it alone or acquire another automaker, but that’s not going to happen.

Fresh on the heels of a costly labor agreement with the UAW, GM is ripe for the picking. We don’t see Toyota or Hyundai/Kia interested nor is it likely Honda with its independent streak planning to do likewise. There’s a chance GM might find a place in the Renault-Nissan alliance, but we think a Chinese suitor is just as likely.

In any case, the industry is changing and most likely will see additional mergers, acquisitions, and alliances in the months ahead. FCA and PSA triggered the tsunami. Now we’ll witness how other automakers avoid getting consumed by the waves of change.

See Also — Emerging Alliances Point to Further Auto Industry Consolidation

Peugeot Prepares for its U.S. Return

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Peugeot 2008 SUV
This Peugeot 2008 SUV may someday find its way to the U.S.

French automaker Peugeot departed the U.S. market in 1991, following years of operating in relative obscurity. Indeed, the company never sold more than 20,000 vehicles annually during its time in the states, with just a fraction of that number sold in its final years.

The automaker’s parent, the PSA Groupe, has been planning its U.S. return since 2016, although it wasn’t clear whether it would market its Peugeot, DS or Citroën brands stateside. Furthermore, the company later acquired the Opel and Vauxhall brands from GM, casting a bit more uncertainty about its intentions.

Push to Pass: Bring Us a Peugeot

We now know that the Peugeot brand is PSA’s choice for leading the company back to North America. Moreover, Peugeot’s return is part of a wider Push to Pass” plan, which was outlined this week.

The global plan includes bringing Citroën to India and Opel to Russia, while enhancing DS’s international footprint. The company is seeking to increase its non-European business by 50 percent by 2021, an ambitious undertaking that won’t include U.S. and Canadian sales. Indeed, Peugeot’s North American return won’t happen before 2026, thus the company’s initial sales thrust will depend on other markets.

Don’t expect PSA to commit to building a U.S. manufacturing plant, at least not initially. The company plans to import cars from China and Europe to meet North American capacity (including Canada), according to Automotive News. PSA CEO Carlos Tavares said the North American launch will be done in a “frugal, conservative and profitable way.”

Free2Movie App
PSA’s U.S. operation already includes this Free2Move app.

There’s an App for That

PSA’s North American headquarters is based in Atlanta. Already, the company has its Free2Move app, which tracks all the shared cars, scooters, bikes, and rides in a city. The app consolidates various car- and transportation-sharing businesses to one app, making it easier for users to find what they want. At present, the app tracks Car2Go services in Portland and Seattle and adds cycling service to Washington, DC.

PSA plans to launch a whopping 116 vehicles by 2021, including concepts. The automaker wants to reduce the average age of its product range to just 3.5 years. That’s below the industry average and could give this automaker an edge in a market where consumers want the latest models.

French, But Not Renault

Peugeot’s pending return ensures a French automaker is once again represented in the U.S. market. The company’s chief rival, Renault, doesn’t have a presence either, as it exited the market a few years after selling its AMC subsidiary (including Jeep) to Chrysler in 1987. Renault’s alliance partner, Nissan, however, is well-represented in the Western Hemisphere, including in the U.S. and Canada.

DS SUV
PSA’s premium DS brand won’t be headed to North America. At least not yet.

The Peugeot 2008 SUV might be one of the first models we see from the French automaker. It is a compact model with a 2019 starting price of about $23,500. Its current competitors include the Nissan Rogue and Chevy Equinox. In the midsize utility vehicle segment is the Peugeot 5008 SUV, which costs around $35,000. Like models include the Hyundai Santa Fe XL and the Honda Pilot.

Of course, the new vehicle market may look far different than it is today, with a host of electric and autonomous vehicles dominating the segment. Peugeot also has a fleet of cars in its arsenal, including hatchbacks and sedans. The automaker also has a line of vans, ranging in size from compact to full-size. Whatever Peugeot supplies, it will give North American consumers yet another choice in a crowded sphere.

See Also — 7 Car Brands You Won’t See in the USA Anytime Soon

Photos courtesy of the PSA Groupe.

Will Renault Models Replace Fiat Chrysler Products?

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French automaker Renault may have the solution to FCA’s product needs.

If you want to buy a French-built model in the US, you probably know that Renault, Peugeot and Citroen have no presence in the market. Instead, you’ll only be able to consider the Toyota Yaris, the lone model currently built in France and exported to the US.

2015 Chrysler 200.
The current Chrysler 200 may be replaced by a competitor’s model.

Exit…Stage Right

Both Renault and Peugeot-Citroen once had a presence in the US. Indeed, Renault had controlling interest in American Motors for several years, but exited the market in 1989, two years after selling those assets to the Chrysler Corporation. In 1991, Peugeot made its own exit from the US market, ending Citroen sales too. Some twenty-five years later, few Americans under 40 can recall cars built by French manufacturers and sold in the United States.

Neither manufacturer is poised to return to the US, a market that is immensely profitable, but is also brutally competitive. Beyond domestic manufacturers such as Packard, Checker and Studebaker, a host of foreign makes have thrown in the towel too, including Isuzu, Yugo, Daihatsu, and Suzuki.

However, one of the two French manufacturers could make a return, especially if partnered with a company already present in the US. Renault’s logical partner is Nissan, as both companies own a slice of each other and are jointly led by Carlos Ghosn, the Brazilian-born CEO for the two automakers. Its a successful alliance that has produced numerous cars for the two companies since the confederacy was forged in the late 1990s.

On the other hand, Peugeot-Citroen is not so lucky. A brief partnership forged with GM in 2012 was ended less than two years later as Peugeot sought assistance from Dongfeng, a Chinese manufacturer to support its operation. Of the two French companies, Peugeot’s financial picture is the weakest.

Renault to the Rescue?

Turning back to Renault, this automaker could very well find its way back across the Atlantic, especially if Fiat Chrysler works out an agreement for the French automaker to supply it with vehicles. Indeed, FCA CEO Sergio Marchionne announced last week that his company would no longer build its compact Dodge Dart and midsize Chrysler 200 sedans, choosing instead to devote plant capacity to build more Jeeps and Ram pickup trucks. That move means FCA should become more profitable as well as more attractive to a potential suitor.

At the same time, Marchionne said it would turn to its competitors to supply these models, but the likelihood that a Ford, Toyota or a Hyundai would dilute their own model lines to accommodate FCA seems very unlikely.

Renault may be the most logical supplier for FCA as it has two models — the midsize Latitude and the compact Mégane — that might possibly be rebadged and sold in the US. Both models are underpinned by platforms shared with current Nissan products (Altima and Sentra), but otherwise the cars are all Renault.

The downside in choosing the Mégane is that it isn’t a sedan — Renault builds hatchback, coupe and wagon variants, but no four-door sedan. That said, the hatchback might be a fit for a market that is finally accepting this body style again. Currently, Renault builds the Mégane at four plants scattered across Europe and might be in a position to supply the next generation Dodge Dart.

The second model is the Renault Latitude and this one is already sold in Mexico, where it is known as the Renault Safrane. Interestingly, the Renault Latitude/Safrane is built in Korea by Renault Samsung Motors, a minor car manufacturer operating in a market dominated by Hyundai and Kia.

Busan Plant Capacity

Although the Korean company has built more than 2.4 million cars since its 2000 introduction, its Busan manufacturing plant has the capacity to build 300,000 vehicles annually. Supplying the Latitude as the Chrysler 200 in the US and Canada would keep the Busan factory humming and give Chrysler a much-needed product.

Will Renault respond if Marchionne comes calling? There is a good chance that they would. In 2013, Mitsubishi sought a similar tie up with Renault to supply it with a midsize sedan for the US market, but that deal collapsed. In any case, Mitsubishi is barely hanging on in a market where demand for Renault-supplied vehicles would be much smaller than that of a network composed of Dodge and Chrysler dealers.

At the same time, any Fiat Chrysler and Renault relationship could push out further, perhaps including Nissan and forming at least one kind of a business relationship Marchionne desires.

These are interesting times in the auto industry. Then again, the industry is always fascinating.

Mitsubishi Draws Closer to the Renault-Nissan Alliance

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Lancer replacement likely coming from the alliance.

Mitsubishi is discontinuing its Lancer as well as its heralded Lancer Evolution models, and that is not sitting well with enthusiasts the world over. Arguably, the Evolution is one of the more exciting small cars on the market, the heart and soul of this small, Japanese automaker.

Quite frankly, Mitsubishi is simply too small to go it alone and can no longer afford to produce new, small cars. In a world where large automakers and alliances are thriving, any company the size of Mitsubishi has to find a way to survive or it will die.

Mitsubishi Lancer Evolution.
The Lancer Evolution might return thanks to Renault.

Help From Renault-Nissan Alliance

Despite our own contention that Mitsubishi is on life support and may soon go the way of Daihatsu, Isuzu and Suzuki — quitting the US market — this manufacturer apparently has no plans to leave. Instead, the company is building strategic alliances to help it survive. The Renault-Nissan alliance is one such arrangement that will provide at least two new models going forward.

We already know that the next generation Mitsubishi Galant will be based on the Korean-made Renault Latitude, what was the contention of Car & Driver, among others. Even back then — Nov. 2013 — speculation about a Lancer replacement was being discussed.

Two New Models

Well, the current buzz is that Mitsubishi has reached an agreement with the Renault-Nissan alliance to supply two new models for Mitsubishi. One model would be a midsize sedan sold in the US and Canada only, the second model would be a compact sedan marketed globally according to Automotive News. Both models would be based on an existing Renault model and may yet be a few years away from introduction.

Likely, we’ll see the Mitsubishi Galant replacement by 2017 with the compact arriving perhaps in time for the 2016 model year. If that is the case, then the compact’s timing would coincide with the discontinuation of the current Lancer/Evolution model line, scheduled to end following the 2015 model year. However, you can consider this model dead on arrival if it does not incorporate the Evo’s DNA — Mitsubishi fans won’t be fooled by a warmed over Renault.

The Much Ballyhooed Evo

Over the years, the Evo has been prized for its many special features, including its Recaro seats, a twin-scroll turbocharger and hot styling inside and out. The Evo is also all-wheel drive, giving it an edge in a segment matched only by the Subaru WRX. In other words, Mitsubishi can forge whatever alliance it wants, but the the new Lancer/Evo better have the “cred” to go with it.

Mitsubishi made a decision a year or two ago to concentrate on building crossovers going forward. The segment is booming and profitable, with the Outlander and Outlander Sport now comprising about half of Mitsubishi’s US sales. The automaker also sells the tiny Mirage hatchback, but when it comes to cars this small-time Japanese automaker seems content to rely upon alliances to fill in the rest of its thin product line.

A Second Crossover?

Beyond the Outlander/Sport, Mitsubishi does produce a larger utility vehicle for other markets. Automotive News says that Mitsubishi has a replacement larger utility coming in 2018, with plug-in hybrid models of both utilities planned. Thus, we may yet see another crossover model in the US, what would help provide better representation for the smallest of Japan’s surviving car manufacturers maintaining a North American presence.

With two supplied models on the way, will Mitsubishi join the Renault-Nissan alliance? That isn’t likely as the two companies have multiple arrangements with other manufacturers already in place. For its part Mitsubishi also has an alliance with Citroen, part of the PSA Peugeot Citroen company that competes directly with Renault.

See Also — Will Fiat Chrysler Rescue Mitsubishi?

Photo courtesy of Eric Hall.