Despite the good quarterly results, the promised couple Fiat Chrysler and Peugeot need each other more than ever. The $ 20 billion maker of Jeep vehicles on Wednesday announced strong third-quarter profit in its key North American market. Meanwhile, the European Peugeot, led by Carlos Tavares, increased its revenue faster than expected.
Unfortunately, neither of them has much business in China, which is rebounding, and new European lockdowns are on the way. Any rush to reach the 5,000 million euros of savings they expect from their imminent union (higher than the 3,700 million originally planned a year ago) is little.
Even with the pandemic in full swing, Fiat CEO Mike Manley was able to deliver a record North American adjusted operating profit of € 2.5 billion in the July-September quarter, equivalent to a generous 13.8%. of the incomes.
That had a lot to do with sales of expensive vans and sports cars in the United States, as well as a drop in marketing costs. Strong American performance sent Fiat as a whole back to black after a difficult second quarter; That prompted Manley to reset a 2020 earnings forecast.
Fiat’s North American strength helps offset the risk both now face in Europe. But it will not completely compensate for a new fall in the Old Continent. After a relatively calm summer, the increase in the number of Covid-19 cases has already triggered a series of new trade restrictions in Europe (see France, Peugeot headquarters). That will likely hurt demand in the run-up to the end of the year. Peugeot sold more than 80% of its vehicles in Europe in 2019.
China, where demand is picking up sharply, will not come to the rescue. Fiat made only 2% of its third-quarter sales in Asia-Pacific. And Peugeot sold about 3% of its cars in China and Southeast Asia last year.
Fortunately, their planned merger is progressing faster than expected. The duo are on the verge of getting European Union competition approval, so they could get married early next year.
It’s a way to save 5 billion euros in research and development, acquisitions and other areas where the two overlap. Those synergies are worth more than 35,000 million euros in current money. The pandemic just made them that much more valuable.