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 > FCA To Merge With PSA

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ShinerBock

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Posted: 11/01/19 06:49am Link  |  Quote  |  Print  |  Notify Moderator

RobertRyan wrote:

RobertRyan wrote:

Quote:

MUNICH (Reuters) - Volkswagen (VOWG_p.DE) is open to buying a majority stake in U.S. truckmaker Navistar “at some point,” it said on Monday, as the German automaker prepares its trucks business for a possible stock market listing that could help raise funds to expand.Volkswagen Truck & Bus acquired a 16.9 percent stake in Navistar International Corp (NAV.N) in 2016 and last week joined forces with Toyota’s (7203.T) Hino Motors as it strives to compete more effectively with global truck market leaders Daimler (DAIGn.DE) and Volvo (VOLVb.ST).

Volkswagen (VW) plans to convert its trucks division, which includes the Scania and MAN brands and a Brazil-based commercial vehicles business, into a public limited company as a prelude to a potential stock market listing.

“(Taking over Navistar) would make sense at some point,” Matthias Gruendler, the finance chief of VW truck and bus, told reporters on Monday.

A takeover would require between 3 and 4 billion in extra costs and could be shouldered without proceeds from a possible initial public offering (IPO), he said, without specifying whether he was talking about euros or dollars.

Quote:

The spinoff of TRATON will, in theory, allow Volkswagen to see earnings multiple expansion and increased valuation on at least a portion of its business.

Volkswagen has long been rumored to have interest in acquiring medium- and heavy-duty truck manufacturer Navistar in which it already holds a 16.8 percent interest (16.6 million shares). The two currently have a “strategic alliance” that provides joint collaboration on engine technology, the sale of engines and contract manufacturing.

Volkswagen’s management has brushed back Navistar acquisition talk in recent weeks, but in 2018 TRATON Chief Executive Officer Andreas Renschler said that an acquisition of Navistar would be a “good idea.”

TRATON reported revenue of 25.9 billion euros in 2018 with truck sales of 233,000 units and is viewed as the market leader in its core markets of Europe and South America. Navistar generated $10.3 billion in revenue during its 2018 fiscal year ending October 2018, representing roughly 14 percent of the U.S. market share. There is very little overlap in geographies currently as North America accounts for only 1.5 percent of TRATON’s vehicle deliveries. Additionally, Navistar’s $3.3 billion market cap is roughly one-quarter of TRATON’s value.


Just because he says he wants to do it, does not mean he can at this time or should. The US heavy duty truck market is very cyclical meaning that it generally has 2-5 good years with lots of truck orders followed by 1-3 bad years. We are just coming our of a 5 year boom meaning Navistar's shares are high. This means their value is high which means it will cost more for VW to purchase them.

If VW were smart, they would wait at least a few years for the Navistar value to drop and then acquire more assets into Navistar. It would probably take a few more cycles for it to be a full acquisition. This is what VW did on the last bust in the heavy duty market when they bought around 16% of the shares of Navistar several years ago. This is why we hear that VW has no current plans to acquire Navistar and will likely wait a few years when their value goes down.

It would be foolish of VW or any investor to purchase when values are high and are historically at their peak when they can wait just a few years for the value to drop.

philh

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Posted: 11/01/19 09:33am Link  |  Quote  |  Print  |  Notify Moderator

ShinerBock wrote:


That is not how it works. The CEO cannot override the board of directors. Board members are elected by shareholders(owners of the corp) to act on behalf of the shareholders.

Spot On

The Board members are responsible to the shareholders. Their primary responsibility is to increase shareholder wealth, not protect FCA or PSA.

I would not be surprised to see Jeep spun off, but I don't know who would buy jeep brand.

Chrysler will be a mere shadow in a decade.

colliehauler

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Posted: 11/01/19 09:54am Link  |  Quote  |  Print  |  Notify Moderator

philh wrote:

ShinerBock wrote:


That is not how it works. The CEO cannot override the board of directors. Board members are elected by shareholders(owners of the corp) to act on behalf of the shareholders.

Spot On

The Board members are responsible to the shareholders. Their primary responsibility is to increase shareholder wealth, not protect FCA or PSA.

I would not be surprised to see Jeep spun off, but I don't know who would buy jeep brand.

Chrysler will be a mere shadow in a decade.
Fiduciary responsibility

RobertRyan

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Posted: 11/01/19 01:26pm Link  |  Quote  |  Print  |  Notify Moderator

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Just because he says he wants to do it, does not mean he can at this time or should. The US heavy duty truck market is very cyclical meaning that it generally has 2-5 good years with lots of truck orders followed by 1-3 bad years. We are just coming our of a 5 year boom meaning Navistar's shares are high. This means their value is high which means it will cost more for VW to purchase them.

If VW were smart, they would wait at least a few years for the Navistar value to drop and then acquire more assets into Navistar. It would probably take a few more cycles for it to be a full acquisition. This is what VW did on the last bust in the heavy duty market when they bought around 16% of the shares of Navistar several years ago. This is why we hear that VW has no current plans to acquire Navistar and will likely wait a few years when their value goes down.

It would be foolish of VW or any investor to purchase when values are high and are historically at their peak when they can wait just a few years for the value to drop.

That is what I am saying and seeing. They will wait for more buoyant Global conditions before they make a move. Traton wants to overtake Volvo and eventually MB in the Global Truck market. Problem is MB and Volvo already own other European and Asian manufacturers

RobertRyan

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Posted: 11/01/19 01:31pm Link  |  Quote  |  Print  |  Notify Moderator

Philh wrote:

would not be surprised to see Jeep spun off, but I don't know who would buy jeep brand.

No the status quo will stay as Jeep is pretty profitable for FCA

FishOnOne

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Posted: 11/01/19 03:48pm Link  |  Quote  |  Print  |  Notify Moderator

ShinerBock wrote:

FishOnOne wrote:

Again in reality there never is equals... It may be reported that how it's going to be structured but it won't last.


Is this fact or opinion. If fact, then please show me the data you have that you know it won't last

FishOnOne wrote:

Here's a copy/paste: The companies would combine under a Dutch parent company, with a board of 11 members, five nominated by FCA and five by PSA. Carlos Tavares, CEO of PSA Groupe, would be CEO of the new company; FCA Chairman John Elkann would retain his role.

I suspect the CEO will fill the 11th spot or someone at the parent company, and if this report is correct with Carlos Tavares being the new company CEO it looks like PSA will eventually dominate the company.



In this scenario, FCA actually have more leverage because they have more board representation with the 11 member being John Elkann from FCA as chairman of the board. The board can hire or fire a CEO while the CEO cannot touch a board member. The board can also override the CEO if they have enough votes to do so. So FCA will have 6 votes on the board to PSA's 5. The CEO is from PSA who does not have a vote which means FCA can out vote PSA on anything they wish to. So saying that PSA will dominate the company is highly unlikely unless PSA gets one of the FCA board members to vote against FCA.


I've been involved in a company merger of equals and it was a slow shift to one of the two companies. The company used both names and after about 5 years one of the two were removed. I've seen the same happen to one of are competitors.

Again I'll stress to you that the company that is backed by the most cash will eventually take over. If this board doesn't get along (11 seats) with the direction of the dominant group this process of dominance will accelerate.

How many American's will be on this board?


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Reisender

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Posted: 11/01/19 05:01pm Link  |  Quote  |  Print  |  Notify Moderator

We spend quite a bit of time in Europe. I’m surprised Jeep doesn’t have a bigger presence there. Probably the only vehicles we ever owned from the big 3 that were any good. Our grand Cherokee was a nice vehicle for it’s time.

wilber1

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Posted: 11/01/19 06:13pm Link  |  Quote  |  Print  |  Notify Moderator

RobertRyan wrote:

Philh wrote:

would not be surprised to see Jeep spun off, but I don't know who would buy jeep brand.

No the status quo will stay as Jeep is pretty profitable for FCA


I agree, their business is building vehicles. Why would you sell off winners?


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RobertRyan

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Posted: 11/02/19 05:29am Link  |  Quote  |  Print  |  Notify Moderator

Reisender wrote:

We spend quite a bit of time in Europe. I’m surprised Jeep doesn’t have a bigger presence there. Probably the only vehicles we ever owned from the big 3 that were any good. Our grand Cherokee was a nice vehicle for it’s time.

Jeep is not a big seller outside of NA or more specifically the US. Seems like boomtine for SUV production by European and Asian manufacturers that have already established markets in Europe

ShinerBock

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Posted: 11/02/19 07:59am Link  |  Quote  |  Print  |  Notify Moderator

FishOnOne wrote:

ShinerBock wrote:

FishOnOne wrote:

Again in reality there never is equals... It may be reported that how it's going to be structured but it won't last.


Is this fact or opinion. If fact, then please show me the data you have that you know it won't last

FishOnOne wrote:

Here's a copy/paste: The companies would combine under a Dutch parent company, with a board of 11 members, five nominated by FCA and five by PSA. Carlos Tavares, CEO of PSA Groupe, would be CEO of the new company; FCA Chairman John Elkann would retain his role.

I suspect the CEO will fill the 11th spot or someone at the parent company, and if this report is correct with Carlos Tavares being the new company CEO it looks like PSA will eventually dominate the company.



In this scenario, FCA actually have more leverage because they have more board representation with the 11 member being John Elkann from FCA as chairman of the board. The board can hire or fire a CEO while the CEO cannot touch a board member. The board can also override the CEO if they have enough votes to do so. So FCA will have 6 votes on the board to PSA's 5. The CEO is from PSA who does not have a vote which means FCA can out vote PSA on anything they wish to. So saying that PSA will dominate the company is highly unlikely unless PSA gets one of the FCA board members to vote against FCA.


I've been involved in a company merger of equals and it was a slow shift to one of the two companies. The company used both names and after about 5 years one of the two were removed. I've seen the same happen to one of are competitors.

Again I'll stress to you that the company that is backed by the most cash will eventually take over. If this board doesn't get along (11 seats) with the direction of the dominant group this process of dominance will accelerate.

How many American's will be on this board?



If (and it I want to reiterate if again) this is the case, then FCA will be the one taking over since they lead PSA in net worth, net revenue, and total assets by tens of billions of dollars. So if the company with the most assets is generally the company that takes over as you say, then it would be FCA in this case.

Not sure what Americans being on the board has anything to do with it. There are many non-Americans on the board of American companies. A board member's loyalty lies with his company that employees him, not the country he was born in. It is in their best interest that the company is and stays profitable or the shareholders will vote him out.

* This post was edited 11/02/19 08:07am by ShinerBock *

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