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Fiat Chrysler (FCA) and Peugeot-owner PSA have officially signed the papers to join via a binding agreement for a 50/50 merger of stock. PSA shareholders are set to receive 1.742 shares in the new and merged company, for each PSA share they already own. Vice versa, each FCA shareholder will receive 1 share of the new firm, for each FCA share they already hold.

The deal will conclude in around 15 months, creating a joint firm estimated at €170 billion in sales per year, or 8.7 million vehicles sold each year. As a consequence of the deal being struck, shares in PSA have risen 1.5% in Paris, whilst FCA stocks rose 0.3% in Milan.

A joint statement clarified that this deal will allow both firms to “address the challenge of shaping the new era of sustainable mobility,” whilst saving the companies around €3.7bn a year.

“Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology, and services,” Carlos Tavares, chairman of Peugeot-maker PSA, said in the joint statement.

Moving forward, Tavares will take up the role as CEO of the merged company for the next five years, taking a seat on the board.

Ordering a product recall can give even the hardiest CEO cold sweats, yet if the latest BMW recalls tells us anything it’s that a lengthy delay can cause even more problems. How should businesses approach a recall and what are the best ways of preventing a quality failure? Vincent Desmond, CEO of the Chartered Quality Institute (CQI), discusses with Finance Monthly.

For CEOs and other senior management life is complex in the current climate. There is a confluence of consumers and customers expecting rapid innovation and change in products and services, while at the same time any mistakes are increasingly likely to be held up to public scrutiny. This is all taking place in a globalised backdrop where information can be spread quickly and effectively online.

The questions for any CEO and senior management team confronted by a potential recall, therefore, are; how far are we willing to gamble with trust? What does our response say about us as an organisation and how will that impact our long-term sustainability? What systems can we put in place to prevent similar issues recurring?

With any product or service issue understanding what the fault is, how many people could be affected and what the risk is will be established in the first instance. On a moral level it’s cut and dried. Doing things that aren’t in the interests of your customers or wider society, particularly those that lead to loss of life is morally indefensible. From a societal and business perspective, however, there are mixed messages.

In the case of BMW, the decision was made in 2011 that they would recall vehicles due to an electrical fault that could lead to complete loss of power in some models in the US and other markets, but not the UK. The death of former British soldier, Narayan Gurung brought this decision to light after he swerved to avoid a BMW suffering an electrical failure. Subsequent media attention led to an initial recall of 36,000 vehicles in 2017 and a BBC Watchdog investigation led to the carmaker recalling a further 312,000 in May this year.

“In essence, BMW appears to have taken a short-term view to avoid the costs of a major UK recall. This will have been informed in part by conditions in the UK where the cost of litigation tends to be a lot cheaper and Government issued compulsory recalls are uncommon. One of the questions that remains unanswered, however, is what will be the longer-term impact on the BMW brand, as a result of this decision and the way it has been handled?

Whereas in the business to business market reputational issues have led to swift punitive actions, such as in the case of Bell Pottinger and Cambridge Analytica, the behaviour of consumers has proved much more difficult to judge. Despite controversy around the Volkswagen emissions scandal for example, the company sold a record 2.7 million cars in the first three months of 2018.

A decision-making process that focuses exclusively on the short-term concerns of the existing executive and financial stakeholder only, however, will inevitably impact long-term sustainability. For any leadership team this is the point at which you need to go back and establish what are our values and are they informing our decision-making process? More so than ever before, businesses, need to consider their impact on customers, wider society and the environment not just short-term returns.

For organisations such as BMW and Volkswagen, who trade on their German engineering heritage, taking a new approach to commercial realities is essential. With shorter development times and product cycles, the focus needs to be on prevention rather than cure. This is where extra emphasis at the quality planning stage, identifying and avoiding risks before they occur will pay dividends.

Potential product recalls cannot be judged in isolation. It’s in the long-term interests of organisations that CEOs and senior management take a systemic view of how to deliver for all stakeholders upfront, to avoid having to remedy issues at a later stage.

Data released in Creditsafe’s Prompt Payment Formula 1 Standings, has revealed that, on average, Formula 1 teams pay 16% of their invoices late by an average of 10.5 DBT (days beyond the agreed payment terms), despite a combined turnover of over £3.6 billion.

Red Bull was found to be the worst offender, paying almost a third (31%) of its invoices to suppliers late by as many as 16 days beyond agreed terms. This is despite the team’s success, coming third in last season’s constructors’ standings, the exciting team rivalry between Daniel Ricciardo and Max Verstappen, and a turnover of close to £200 million.

In comparison, despite a disastrous 2017 season ending in ninth place and multiple engine failures affecting the team’s performance, McLaren was found to be the most prompt payer of the group, with 93% of its invoices paid on time. Of the 7% paid late, McLaren had a DBT of nine days.

Similarly, Torro Rosso, which came seventh in last season’s standings, was the second most prompt payer of the group, paying less than 10% (9.02%) of invoices late with a particularly low DBT of five days. While Ferrari joined Torro Rosso with the joint lowest DBT, 22% of its invoices were paid late, dragging it down the standings.

Led by Drivers’ Champion Lewis Hamilton, Mercedes topped the F1 Standings in 2017, but in terms of late payments, the team sat firmly in the middle of the table with 11% of invoices paid late and a slightly below average DBT of 11.

Rachel Mainwaring, COO, Creditsafe Group said: “In recent years we have seen the emergence of a late payment culture in the UK. Even in Formula 1, with the huge amount of money that is available to teams, late payment is rife and noticeably, none of the teams pay their invoices on time.

“Late payments can be a huge problem for businesses, whether dealing with the huge sums of money in F1, or smaller amounts of daily business expenses. It can leave companies with a potentially dangerous financial shortfall and all businesses, particularly those at the top of the podium should be fulfilling their obligations to suppliers.

“However, it is interesting to see the lower performing teams, such as McLaren and Torro Rosso, beating out competitors when it comes to prompt payment. There’s no doubt that if McLaren’s reliability last season had been as good as its prompt payment rate (97%), Fernando Alonso would have been a happier driver!”

Creditsafe’s Prompt Payment Formula 1 Standings

  Team % Invoices Paid on Time % Invoices Paid Late Number of Days Beyond Term (DBT) 2017 F1 Constructors’ Standings Annual Turnover
1 McLaren Formula 1 92.69% 7.31% 9 9 £    179,781,000.00
2 Scuderia Toro Rosso 90.98% 9.02% 5 7 £    131,976,503.84
3 Renault Sport Racing Ltd 89.04% 10.96% 12 6 £    119,671,000.00
4 Mercedes-Benz Grand Prix Ltd 88.91% 11.09% 11 1 £    289,421,000.00
5 Scuderia Ferrari 78.38% 21.62% 5 2 £  2,540,519,579.34
6 Williams Grand Prix Engineering Ltd 77.41% 22.59% 15 5 £    167,415,000.00
7 Aston Martin Red Bull Racing 69.23% 30.77% 16 3 £    197,949,000.00

Data not available for: Force India, Haas and Sauber.

(Source: Creditsafe Group)

This could be the taxi of the future. The EZ-GO is a concept by Renault. It’s a fully autonomous ride-hailing service. It doesn’t require a driver to be present. And if necessary, it could be controlled remotely.

Hailing an EZ-GO is simple. It’s all done through the app. 1) Choose your experience. You can choose a private ride or share with others. 2) Reserve your seats.The EZ-GO would seat up to six. It could also take tourists on a guided tour. 3) Get in and go. The door lifts vertically allowing riders to walk in upright. A ramp also makes the EZ-GO more accessible. The interior is designed for comfort. Sofa-style seating. 360-degree windows. In-car WiFi and wireless charging. A display shows your travel information.

Renault sees a need for new mobility solutions in cities today. EZ-GO aims to solve those issues. Would you reserve this ride?

The latest car registration data brings worrying confirmation that the long run of a retail driven economy may be starting to falter. With the performance of the automotive sector so intrinsically dependent upon the nation’s levels of disposable income and access to credit, the recent performance of the sector in the 10 months to October 2017 indicates that car dealerships across the country may face an extremely challenging end to 2017 and start of 2018, according to Duff & Phelps.

“The recent public statements of the larger motor dealers are of profit warnings and of a softening of used car values. Further, the interest rate rise of 0.25% - the first rise since 2007 - will impact on a number of consumer reliant sectors, no more so than an industry fuelled on the availability of credit. Consumers have also had additional spending power as a result of PPI redress, but this will soon be coming to an end. The question therefore is how well prepared are manufacturers and their dealership networks to manage through what appears to be, the start of a potentially significant downturn?” states Michael Bills, Managing Director, Restructuring Advisory, Duff & Phelps.

“Overall, in the 10 months to October 2017, the market is 4.6% down compared with 2016 and 12.2% down on October alone. However, it is somewhat polarised between those manufacturers and dealers enjoying a modest increase in sales this year and those for whom the opposite is true. Certain marques are seeing reductions in sales demand of around 20% year-on-year. And there will be regional differences too that need to be considered,” added Robert Tallentire, Duff & Phelps.

What is certain is that for many in the industry this will be new territory, a new set of trading parameters that they have not experienced for quite some time. With some 169,000 people employed directly in manufacturing and in excess of 814,000 across the wider automotive industry, it accounts for 12.0% of total UK export of goods and invests £4 billion each year in automotive R&D.

More than 30 manufacturers build in excess of 70 models of vehicle in the UK supported by 2,500 component providers and some of the world’s most skilled engineers.

“The question is what resources and abilities can the average independent dealer draw on to confront the challenge. Manufacturer franchising agreements are not that flexible for the independent dealer with the infrastructure and staffing of the business dictated by franchise agreements. Will these rules be relaxed to maintain dealer networks as the UK goes through the seemingly unending and unsettling Brexit process?” continued Robert.

Dealerships are faced with a business structure predicated on a predominance of fixed costs with labour as the main variable. For many the volume driven bonuses from Q3 that they use to provide a cash buffer for the slower winter months ahead were not earned and consequently were not paid at the end of October. Where dealers have traded outside usual parameters in order to reach bonus volumes, they are potentially now sat on what look like over-priced used vehicles stock, that will be challenging to liquidate and turn into cash. Either way, it feels like there could be a prolonged period of working capital challenges before dealers have the opportunity of a good bonus month again.

For lenders to the sector, the change in fortunes in new car sales and the softening of used car values may have crept up unnoticed. Those that extended seasonal facilities in August and September in the anticipation of a strong end to Q3 and subsequent cash receipts may be wondering quite where they go from here especially after the announcement of the October car sales made by the Society of Motor Manufacturers & Traders (SMMT).

Michael concluded: “Manufacturers will not want to see long standing dealerships suffering and possibly even disappearing as a result of an economic slowdown. Accurate forecasting, planning ahead and embracing of the rescue principles which Duff & Phelps promotes will be necessary to manage a tricky economic period. Our UK advisory team is uniquely positioned to advise dealerships and their stakeholders in a variety of distressed and special situations. Our team has sector experts, recruited from the industry and with real ‘workshop floor’ dealership experience and we understand the challenges being faced, so we would urge those dealerships facing tougher trading conditions to contact us to steer a route through the winter months.

(Source: Duff & Phelps)

Following the recent government announcement of plans to prohibit all petrol and diesel vehicles by the year 2040, Britain is weighing up the idea of switching to ‘green’ driving more than ever before.

New research from leading comparison website MoneySuperMarket has delved into the mind of the consumer to determine just how viable this switch is. The research reveals factors such as the true cost of making the switch to electric driving versus driving a petrol or diesel car. It also explores the number of charging points currently available in major UK cities, a key factor in the viability of the plan to turn the UK electric.

The research also highlights the lack of knowledge currently being shared on the benefits of driving electric and public concerns about the feasibility of the 2040 ban.

Is the British Public Prepared?

With 49% of the British public stating that they have never considered purchasing an electric or hybrid car, it appears that education and pricing are crucial factors in the public’s apprehension to go electric. Some of the key findings from the research include:

51% of people surveyed stated price is currently the biggest barrier to them buying an electric or hybrid car.

Nearly 30% of people don’t buy electric or hybrid cars due to lack of knowledge of how they work.

62% of people don’t know that the Government offers discounts and grants on buying an electric or hybrid car

The True Cost of Driving Green

Beyond public opinion, cost is a major factor in the sustainability of the plan to move to electric and a concern for the public as a whole. Fundamental findings on the cost of buying and running electric, petrol and diesel cars revealed that, although cheaper to run, electric cars are not the most cost-effective motor to own overall. Some findings on the cost of running each car type include:

While the upfront costs of petrol vehicles were the lowest, the average running costs of an electric car are 20% cheaper than diesel and petrol engines, with an average saving of £2,109 across 6 years.

Filling up your petrol or diesel car is 5 times more expensive than electric.

Petrol cars boast the lowest average insurance premium (£697.19), whilst electric remains the most expensive to insure at £923.

If drivers switch to electric in 2018, they’ll save almost £8,000 on running costs by the time the ban is enforced.

Taking Charge in 2040

The government’s plan to turn the UK into a nation of electric car drivers rides not only on the cost of the cars over their lifetimes, but also on the feasibility of fuelling these vehicles. Having an appropriate number of public charging points will be key for the success of Britain’s electric switchover.

Data collected on the number of electric car charging points available to drivers in UK cities bring into question whether the UK as a whole is truly ready for an electric revolution. Whilst the capital performed well, with 210 charging points in Central London, other cities fell short. Large cities such as Liverpool and Cardiff had fewer than 10 raising questions over the preparedness of major UK cities for 2040.

For the full details on the true cost of driving green and how the UK is shaping up, click here to see the full research.

Methodology

To create an average for each fuel type, an average was taken of 3 of the top selling cars from petrol, diesel and electric respectively. Data for the upfront costs of each of the 9 vehicles were taken from their brand’s site as well as costs of servicing, road tax and MOT prices. The ‘lifetime’ was measured as 6 years with the average mileage of 7,900 miles a year entered onto the site nextgreencar.com to determine the fuel costs. The overall costs for each model were made into 3 separate averages for electric, petrol and diesel fuel types. The models used included:

-    Ford Fiesta Style – Petrol
-    Volkswagen Golf – Petrol
-    Ford Focus – Petro
-    Skoda Superb Estate – Diesel
-    Vauxhall Astra Hatchback – Diesel
-    BMW 3 Series Saloon – Diesel
-    Renault Zoe Signature – Electric
-    Nissan Leaf Acenta – Electric
-    BMW i3 – Electric

In order to find out the number of electric car charging points per city, the site www.zap-map.com was used.

(Source: MoneySuperMarket)

Two of the UK’s largest insurance companies, Axa and Aviva, recently disclosed increased profits and dividends at a time when drivers are paying out car insurance premiums at a record high average of £690 for comprehensive cover.

Aviva’s half year results for 2017 show that its overall operating profit rose by 11%, and that operating profit from UK motor insurance increased 9% (2017: £580m; 2016: £530m). The dividend paid out to shareholders went up by 13%.

Axa also reported strong half year performance: a 4% increase in underlying earnings, with 6% growth in revenue from UK motor insurance. Axa even concedes in their report to the stock market that the UK motor insurance market was a factor in their overall growth in the first half of the financial year.

“Axa and Aviva haven't missed a trick in blaming everything and everyone else for insurance premium rises – whiplash, fraud, insurance premium tax, the discount rate – but today we can see the real reason in black and white. Yet another boost in profits and yet more pay outs for their shareholders. They run a good line in shifting the blame but the facts speak for themselves - their whinging is to distract from what is really going on here, healthy profits and well feathered nests,” said Tom Jones, head of policy at campaign law firm Thompsons Solicitors.

In the last week, insurers have again come under fire as an investigation found motorists were being charged as much as 100% over the odds for repair costs. The Telegraph published evidence of Axa ‘instructing a repairer to charge "not at fault" customers a labour rate 54% higher than the rate paid by other customers’.

There are concerns that a potential government U-turn on the discount rate which affects the damages paid out by insurers to those with long term, serious and life changing injuries as well as the government's willingness to increase the small claims limit against inflationary logic will only see further increases in profits and remuneration for insurer CEOs.

“The insurers are constantly crying wolf and the government needs to stop pandering to them. They claim their backs are against the wall but in reality, as Aviva and Axa’s figures prove, it's all looking pretty sunny for them and their investors,” continued Mr. Jones.

“Motor insurance is compulsory in the UK yet those who provide it and are making good profit from it are unabashed in punishing the consumer by continually bumping up premiums at the same time as lobbying for changes that will restrict access to justice.”

(Source: Thompsons Solicitors)

We are so excited to present you 10 Cars Flying Cars which you can buy nowadays!

Frost & Sullivan expects automotive OEMs, start-ups, aerospace companies and other players to make significant investments in the flying cars market and showcase their prototypes in the next 10 years. Flying cars are poised to usher in a whole host of new business services by 2035, including aerial sightseeing services, air surveillance as a service, aerial critical aid delivery, air taxi pay-per-ride, and flying car corporate lease. The key to achieving mass commercialisation of flying cars and attracting more buyers will depend on increased safety features, optimal regulations, and affordable prices.

Start-ups across the globe which are actively involved in building a future flying car have been identified by Frost & Sullivan and will be presented at Frost & Sullivan's Intelligent Mobility event on the 29th of June in London. The majority of these companies are based in the United States, however, there are participants from a whole host of countries including the UK, France, Germany, Russia, Slovakia, Israel, Russia and Japan. Among the companies expected to launch flying vehicles by 2022 are PAL-V, Terrafugia, Aeromobil, Ehang, E-Volo, Urban Aeronautics, Kitty Hawk and Lilium Aviation, have completed at least one test flight of their flying car prototypes. PAL-V has gone a step further and initiated the pre-sales of its Liberty Pioneer model flying car, which the company aims to deliver by the end 2018. This and other industry trends will be discussed at Frost & Sullivan's Intelligent Mobility event on the 29th of June in London.

"It will be interesting to see the first applications of flying vehicles. Although the ultimate goal of manufacturers is to address the issue of personal mobility, commercial applications are expected to commence through recreational activities in the form of what could be termed as a single seater flying scooter," observes Sarwant Singh, Senior Partner Frost & Sullivan. "From flying vehicle rides in amusement parks, aerial sightseeing of landmarks, to a star attraction at events, the recreational potential of flying vehicles is limitless."

During its upcoming annual industry event ‘Intelligent Mobility’, taking place on 29th of June 2017 at the Jumeirah Carlton Hotel in London, Frost & Sullivan will offer visionary insights into the future of mobility from leading OEMs and tier-one suppliers, prominent industry thinkers, policymakers and disruptors from companies like Jaguar Land Rover, Facebook, Renault–Nissan Alliance, MAN Trucks, the Financial Times, Mahindra & Mahindra, Transport for London, the Centre for Connected and Autonomous Vehicles, as well as PAL-V International B.V. and Mohyi Labs.

(Source: Frost & Sullivan)

Silicon Valley's Tesla overtook GM as the most valuable carmaker in the United States last week said Toronto Sumitomo Trading International.

Modern technology is working its way into our lives and infiltrating every aspect of our daily routines, automobile industry is no exception, the increased reliance on software and renewable energy paved the way for Tesla to climb to the top of the industry and claim the title, the biggest carmaker in the United States by market capitalization.

Tesla's stock price hit 312.39 dollars Toronto Sumitomo Trading International analysts upgraded its stock from neutral to overweight and upgraded the price target. Tesla's stock price jumped to all-time highs increasing 3.26% from the previous week's close.

"The company now is valued at 50.887 billion dollars beating GM by one million dollars, something will lead to an interesting discussion when the two Chief Executive Officers meet at the white house with president Trump to discuss the tax reforms and infra structure" said Daniel Holland, Director of Corporate Equities at Toronto Sumitomo Trading International.

Toronto Sumitomo Trading International Research showed that considering the number of cars Tesla sold last year, its market capitalization now will be equivalent to 667,000 dollars for each car sold, or looking forward it will 102,000 dollars for every car Musk plans to sell in 2018. On the other hand, GM's market capitalization is equivalent to 5,000 dollars for each car sold in 2016. This offers a great insight into consumer trust in technology.

Tesla's stock price has increased by 35% over the last month aided by investors' trust in Elon Musk's plans to revolutionize both the energy and the automobile industries. Meanwhile, General Motors' stock price has been declining in the past few years.

Tesla's advocates believe the lose making company's price is justifiable based on long-term outlook, arguing its acquisition of SolarCity and building the new battery cell plant will drive production costs lower.

"Tesla's valuation as a car company is unrealistic, but if we look at it as a battery company which can expand and innovate, the valuation might work" said Michael Hudson, Head of Mergers and Acquisitions at Toronto Sumitomo Trading International.

Many skeptics believe that Tesla is overvalued and its highly inflated stock price has made it a target for short sellers who bagged a valuation loss of 2 billion dollars so far in their portfolios.

(Source: Toronto Sumitomo Trading International)

March is Fraud Prevention Month and Insurance Bureau of Canada (IBC) is highlighting that everyone can play a role in limiting the personal and financial costs of auto insurance fraud.

"Auto insurance fraud is a serious crime that costs Canadians billions of dollars each year," said Garry Robertson, National Director, Investigative Services, IBC. "It's an illegal, organized big business, largely unknown to consumers, that siphons resources away from our health care system, ties up our emergency services and courts, and drives up insurance costs."

The property and casualty (P&C) insurance industry is increasingly sophisticated in its ability to detect and prevent insurance fraud. This includes fraud perpetrated by organized crime rings that stage collisions and involves the collusion of service providers such as medical facilities, auto body shops, and tow truck operators. IBC and P&C insurers work closely with CANATICS, an organization that uses state-of-the-art analytics technology to help insurers identify possible fraudulent activity committed by these dangerous crime rings.

IBC and P&C insurers also work across Canada with law enforcement agencies, all levels of government, insurance broker organizations and other stakeholders to raise awareness and coordinate efforts to fight this crime.

"Insurers and their partners are already playing a significant role in reducing instances of auto insurance fraud. However, it is important that consumers know what to look for and to avoid becoming victims," added Robertson.

Consumers can help protect themselves against fraud by following these tips:

Do your homework when purchasing a used vehicle:

Avoid staged collisions:

Take extra care if you are involved in a collision:

If you think you have witnessed or been the victim of an insurance crime, call IBC's confidential TIPS Line (open 24 hours a day, seven days a week) at 1-877-IBC-TIPS, or submit an anonymous tip to IBC online.

IBC Initiatives to Identify and Deter Fraud

(Source: Insurance Bureau of Canada)

This week Shell announced that it has been chosen by Rolls-Royce Motor Cars Ltd as the exclusive manufacturer and supplier of Rolls-Royce Motor Cars Genuine Engine Oil. From October 2016, this oil has started to become available to Rolls-Royce Motor Cars Dealers around the world.

The new passenger vehicle engine oil has been developed and rigorously tested to meet the latest Rolls-Royce Motor Cars Ltd. passenger vehicle engine specifications and to work perfectly with their V12 engines. Shell PurePlus Technology, present in Rolls-Royce Motor Cars Genuine Engine Oil, helps protect the engine from power-robbing deposits and sludge. In addition, its properties enable the oil to reach peak operating efficiency sooner in challenging conditions with low oil consumption and long engine service life.

"We are delighted to have been chosen to develop and supply the new passenger vehicle engine oil for Rolls-Royce Motor Cars Ltd., using our most recent innovation – Shell PurePlus Technology," said Richard Jory, Shell's Global Vice President for Lubricants Key Accounts.

Shell PurePlus Technology is a breakthrough in how passenger vehicle engine oils are formulated.  It is a patented gas-to-liquid (GTL) process, developed over 40 years of research, which converts natural gas into crystal clear base oil. Base oil, usually made from crude oil, is the main component of finished oils and plays a vital role in the quality of the finished passenger vehicle engine oil. The base oil is produced at the Pearl GTL plant in Qatar, a partnership between Shell and Qatar Petroleum.

(Source: Shell)

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