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4 ways FCA-PSA merger could be a plus

DETROIT — In a merger deal announced overnight, Fiat Chrysler stands to gain electric vehicle technology while PSA Peugeot Citroen could benefit from a badly needed dealership network to reach its goal of selling vehicles in the U.S. The merger would create the world's fourth-largest automaker with a combined market value of around $50 billion. Neither company would comment. Experts say the two automakers will be able to share car, SUV and commercial vehicle designs, helping each other fill weaknesses and share costs that will make them a strong global player. "We view the combination of these two companies as reasonable given global competition, high capital intensity, and industry disruption from electrified powertrain as well as autonomous technologies," Morningstar analyst Richard Hilgert wrote in a note to investors. Here are four areas that could be crucial to the two automakers' success: Technology For years, Fiat Chrysler has lagged its rivals in electric vehicle technology, with its former CEO once trying to discourage people from buying its only fully electric car in the United States, the Fiat 500E, because he lost money on each sale. The company has made progress on gas-electric hybrids and may have plans for more fully electric vehicles, but PSA has valuable technology that FCA can use, said Navigant Research analyst Sam Abuelsamid. Peugeot was relatively late to the electric vehicle game but is now working fast to catch up, notably with fellow French rival Renault. CEO Carlos Tavares has made a point of stressing the company's need to adapt to changing technology at car shows and earnings calls. Last year he announced plans to offer 40 electric models across its lineup by 2025. "Electrification hasn't been a huge part of their play up until now," Abuelsamid said. "Between the two of them, I think they could generate some scale for whatever they're doing, sharing component costs, development costs across electrical platforms," he said. More electric vehicles also would help FCA meet pollution and fuel economy regulations in Europe. As far as autonomous vehicles, neither company is among the leaders, Abuelsamid said. But that's a technology that's years into the future, giving them time to share the huge expenses and catch up together. FCA also has alliances with other companies such as Google spinoff Waymo that could bring autonomous vehicle technology to the market when ready, Abuelsamid said.

Marchionne's FCA-GM merger might come after Ferrari spinoff

Sergio Marchionne is continuing to rumble about working out a merger with General Motors, but don't expect anything big to happen before at least early next year. That's because Marchionne would likely wait for the Ferrari spin-off to be complete before beginning his next big deal, according to Automotive News. While the Ferrari IPO on the New York Stock Exchange is expected in the coming weeks, that only concerns 10 percent of the shares. The remaining 80 percent of stock is being distributed among shareholders in 2016. Piero Ferrari holds the final 10 percent with no intention to sell. This strategy allows FCA to claim 80 percent of the Prancing Horse's profits in the automaker's 2015 financial results. According to Automotive News, the tactic has other advantages, as well. FCA would be flush with cash by waiting for the spin-off to be complete, and it would keep Ferrari separate if a GM merger actually happens. Marchionne thinks Ferrari could be valued at over $11 billion in the IPO, and it could make FCA $3.3 billion richer when complete. Marchionne believes a combined FCA/GM could sell 17 million vehicles a year globally and rake in $30 billion in earnings. In the CEO's opinion, the two automakers are wasting money by developing components to do the same things on their vehicles. Although, so far the General's top execs are rebuffing all of his advances.

Dealer chain accuses FCA of paying dealers to pad sales [UPDATE]

UPDATE: The story has been updated to include a full press release from Fiat Chrysler Automobiles on the Napleton Automotive Group's allegations. A Chicago-based dealership group has filed an explosive lawsuit against Fiat Chrysler Automobiles accusing the company of paying dealers to fake new-vehicle sales, Automotive News reports. Edward Napleton, president of the Napleton Automotive Group, filed the suit on Tuesday. It claims that FCA offered Napleton money to fudge end-of-month sales figures. According to the filing, dealers would report false transactions, only to "back out" at the start of a new month "before the factory warranty on the vehicles could be processed and start to run." According to Automotive News, FCA was aware of the false reports and rewarded dealership managers for hitting sales targets. The lawsuit cites one example at Napleton Arlington Heights Chrysler Jeep Dodge Ram where an FCA business center manager offered Napleton $20,000 "to falsely report the sales of 40 new vehicles." The payment would be disguised "as a co-op advertising credit to the dealer's account." Such a move would prevent a sales audit, AN reports. Napleton rejected the deal, telling FCA it was illegal. He later learned a similar arrangement was made with a competing dealer to falsify the sale of 85 vehicles. They were given "tens of thousands of dollars as an illicit reward for their complicity in the scheme." FCA has vehemently denied the accusation in a statement obtained by Automotive News. "While the lawsuit has not yet been served on FCA US, the company believes that the claim is without merit and was filed by internal counsel to the dealer group as FCA US has concurrently been discussing with the dealer group the need to meet its obligations under some of its dealer agreements," the statement said. "The company is confident in the integrity of its business processes and dealer arrangements and intends to defend this action vigorously." There are additional allegations, as well, claiming FCA "strong-armed its dealers to achieve sales numbers" and accusing the company of maintaining a "pattern of conduct towards its dealers [that] has been one of coercion and threats of termination having nothing to do with the actual performance of its dealers." FCA is riding a wave of 69 consecutive months of year-over-year sales gains. More on this one as it becomes available. FCA Strongly Rejects Allegations by Two U.S.