Ratings firm Fitch released a memo Tuesday outlining some possible problems relating to the proposed GM-PSA merger.
The gist of Fitch’s findings are similar to what’s been identified at TTAC; a joint-venture or merger between the two (merger, of course, in the Daimler-Chrysler sense of the word) won’t solve some of the underlying problems that are endemic to the European auto market, namely overcapacity, price wars, the evisceration of mainstream brands by low-cost nameplates and “political and social resistance to
Fitch also noted that “lengthy anti-competition reviews could be triggered” (I guess the EU needs a break from basking in the glory of their Nobel Prize)
a lack of improvement in profitability and cash generation in 2013 and 2014 leading to further significant negative free cash flow in 2014 could increase the similarity with Ford’s and GM’s cash burn in 2005-2008. This could trigger further downgrades to the ‘B’ rating category.