Foreign Direct Investment in Latin America and the Caribbean 2017

106 Chapter II Economic Commission for Latin America and the Caribbean (ECLAC)
The 2008 financial crisis triggered intensive merger and acquisition (M&A) activity.
While some companies, such as those of the United States, sought to spin-off non-strategic
assets to improve their financial indicators, certain European and Asian companies,
particularly in China and India, found great opportunities to grow and gain access to
assets that enabled them to pursue a rapid process of technological and commercial
convergence with a view to improving and diversifying their product range. As the dominant
players started to focus on restructuring their production base —both geographically and
technologically— opportunities became scarce and mergers between manufacturers
gradually lost momentum. In recent months, however, there have been signs of a potential
new wave of transactions that could herald a new stage for the industry.
In August 2016, Toyota completed its total takeover of Daihatsu (in which it had held
a 51% stake since 1998) for US$ 3.132 billion. Toyota aims to turn its acquisition into a
manufacturer of low-cost compact cars for emerging markets such as China and India.
Through this operation, Toyota will provide technological support to Daihatsu, and the
two firms will share suppliers and commercial networks (Forbes, 2016a). In October
2016, Nissan acquired a 34% stake in Mitsubishi Motors in an agreement integrating it
into the Renault-Nissan Alliance; and the conglomerate thus became one of the three
largest vehicle manufacturers in the world, with annual production of almost 10 million
units. The firms estimated that the partnership would generate significant synergies
in the area of ​common platforms and joint purchasing, which could produce savings
equivalent to 20% of the investment. Also highlighted was their strong complementarity
in the development of autonomous driving technologies, hybrid vehicles and electric
cars (Fortune, 2016a).
Similarly, as discussed below, the progress of autonomous driving technologies,
artificial intelligence and low-emission vehicles force smaller manufacturers to seek
partnerships with some of their competitors to reduce costs, share R&D expenses
and stay in the market. In February 2017, Suzuki Motor and Toyota officially announced
that they were to start talks aimed at forming a partnership in areas such as shared
management, hybrid and electric vehicles, safety and autonomous driving technologies
(Automotive News, 2017).
In March 2017, the PSA Group bought Opel and Vauxhall (the Opel brand in the United
Kingdom) from General Motors for around € 2.2 billion (El País, 2017a). Of the amount paid
by the French group, € 1.3 billion represented the assets of the Opel-Vauxhall subsidiary,
while the other € 900 million were used to purchase General Motors’ financial arm in
Europe. In the latter case, the acquisition was shared equally between the PSA Group
and the French bank BNP Paribas, with the commitment to maintain the United States
subsidiary’s current network in Europe. Through this operation, the PSA Group seeks
to expand and strengthen its production base to position itself as the second largest
car manufacturer in Europe, after Volkswagen. The resulting enterprise will manufacture
over 5 million cars worldwide and generate some € 1.7 billion in synergies thanks to
the joint development and use of platforms and engines (El País, 2017b).
A few weeks after this transaction, and as part of the restructuring of its international
operations, General Motors announced it would abandon South Africa and India to focus
on its most profitable markets (The Detroit News, 2017). In South Africa, in addition to
no longer selling vehicles, General Motors will transfer its production facilities to the
Japanese firm Isuzu, a manufacturer specializing in heavy vehicles with which GM has
maintained a close relationship in recent years. In India, it will no longer sell vehicles
on the domestic market but produce for export only, mainly serving Mexico, South
Africa and Central America. A second General Motors plant in India stopped producing
in early 2017 and was sold to its Chinese partner, SAIC Motor (CNN Money, 2017a).