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FCA-Renault merger faces tall odds delivering on cost-cutting promises

FRANKFURT/DETROIT — Fiat Chrysler Automobiles and Renault promise huge savings from a mega-merger, but such combinations face tall odds because of the industry's long product cycles and problems translating deal blueprints into real world success, industry veterans told Reuters. BMW's 1994 purchase of Rover, and Daimler's 1998 merger with Chrysler both made sense on paper. The companies promised to hike profits by combining vehicle platforms and engine families. Both combinations proved unworkable in reality, and were unwound. Renault and Nissan, which have been in an alliance since 1999 designed to share vehicle components, have only managed to use common vehicle platforms in 35% of Nissan's products despite an original target of 70%, according to Morgan Stanley. FCA and Renault have raised the stakes for themselves by ruling out plant closures. That increases the pressure to achieve more than $5 billion in promised annual savings from pooling procurement and research investments. The two companies have yet to fill in many of the blanks in the merger plan put forward by Fiat Chrysler. Renault's board is expected to act soon to accept the proposal, but that would lead only to a memorandum of understanding to pursue detailed operational and financial plans. A final deal and the legal combination of the two companies could take months to complete if all goes well. Pressure to cut automotive pollution is driving the latest round of consolidation. Automakers are looking at multibillion-dollar bills to develop electric and hybrid cars and cleaner internal combustion engines. Fiat Chrysler and Renault are betting they can design common electric vehicle systems, then sell more of them through their respective brands and dealer networks, cutting the cost per car. Developing all-new electric vehicles can bring more opportunities to share costs from the outset, industry experts said. "With the emergence of connected, autonomous, electric and shared vehicles, carmakers face immediate investments, so new opportunities for sharing costs have emerged," said Elmar Kades, managing director at Alix Partners. However, most electric vehicles lose money. This is a challenge for city car brands in Europe in particular. Both Renault and Fiat rely heavily on this segment for sales.

These EVs are the worst when it comes to depreciation

The Renault Fluence Z.E. tops the list of the worst depreciating cars according to a ranking compiled by Glass' Information Services, holding just 27.21 percent of its value after a year of ownership and 12,000 miles on the clock. Just as well that you can't buy the sedan anymore in either electric or ICE versions, since it was discontinued last year. This car took a particularly rough hit when Better Place declared bankrutpcy, since the electric Fluence was a specific fit for the aspirations of the battery-swapping company. The Citroen C-Zero hits the list at number four, the Nissan Leaf E at number five, both holding onto just a third of their value after a year. The C-Zero is a rebadged Mitsubishi i-MiEV, and if you bought one stock for the full UK on-the-road price of 26,766 pounds, you'd have a car worth 8,583.86 pounds twelve months later, according to Glass. We're not sure about the wording of the press release, though - it states that those three cars "lost more than three-quarters of their value." Yet the Fluence E Z.E. is the worst offender, and it doesn't dip below 25 percent of its original value. As with those electrics, the rest of the list is made up of aged or barebones ICE models, some of them touted elsewhere for their popularity. You can find the full list and the valuations in the press release below. ELECTRIC CARS AMONG WORST FIRST YEAR DEPRECIATORS Fluence, C-Zero and LEAF all lose more than three-quarters of their value 15/07/15 - Three electric cars are among the worst first year depreciators in a "Bottom 10" released by motor trade valuation market leaders Glass's. The Renault Fluence, Citroen C-Zero and Nissan LEAF E have all lost more than three-quarters of their value after covering 12,000 miles during the last 12 months. Rupert Pontin, head of valuations at Glass, said: "The motor trade and the used car buying public remain interested in electric cars but are still reticent to actually buy them in numbers – and these depreciation figures reflect that fact. "To be fair, these three EVs are among some of the least attractive on the market – the Fluence and C-Zero both have a 'last generation' feel while the LEAF E is on the bottom rung of the LEAF range – but their presence does reflect the fact that the EV sector remains sluggish." Other models in the list include the lowest-powered, entry level versions of some generally popular but aging models such as the Vauxhall Insignia and Renault Megane.

Nissan's current Rogue renamed Rogue Select, will live alongside next gen

Despite the fact that an all-new generation of its Rogue crossover goes on sale in November, Nissan will continue to sell the current model alongside its replacement. The existing C-platform-based Rogue, which will be renamed Rogue Select, will start at less than $20,000 when it goes on sale in January 2014. At present, a base 2013 Rogue S prices out slightly higher, from $20,310, but we wouldn't be surprised to see the 2014 Rogue Select come to market with more standard equipment and simplified trim options. It will continue to be built in Kyushu, Japan.
According to Nissan, the unusual move is "to satisfy demand for the popular compact sports utility vehicle, currently second-highest seller in Nissan's lineup, as well as provide customers an additional choice in the segment." It's hard to hard to argue with the numbers: Nissan cites 2012 calendar-year sales of 142,349 Rogue units in the US, with 2013 sales increasing 16 percent through August despite the vehicle's age.
The strategy may also give Nissan the chance to ask for more money for the second-generation model (which is based on a new Common Module Family platform shared with partner Renault) while keeping it clear of residual-value-damaging fleet sales. The new Rogue looks to be both larger and more luxurious, with an available third-row seat, and it should be more economical to produce, as it will be built in Nissan's Smyrna, TN plant.