MERGER

Fab Five

1. UAW Strike Labors On – The UAW, itself embroiled in scandal, went ahead and launched a protracted strike against GM. Originally expected to end within a few days, the strike lasted longer than a month, causing the longest shutdown in the past half-century. GM lost billions of dollars during the strike, agreeing to keep one plant open and save some jobs. We think the labor victory will ultimately prove shallow as it’ll force GM to find additional ways to save money long term, with job loss gradually increasing.

2. Carlos Ghosn Debacle – Is he guilty or not? Former Nissan CEO Carlos Ghosn was jailed in November 2018 for a variety of charges, including fraud. What was shocking wasn’t so much the alleged scandal, but how the Japanese justice system treated the former executive. Ghosn was isolated, often without legal representation, and the charges against him seemed stacked. On the next to the last day of the year, Ghosn flew to Lebanon where he most likely will stay and avoid a return to Japan. The story isn’t over yet nor are the many twists and turns that defined this relationship.

3. FCA-PSA Merger – One year after its Sergio Marchionne died, Fiat Chrysler Automobiles has fulfilled one of the CEO’s important goals: a full merger with another automaker. FCA, the product of a big merger earlier this decade, is set to join forces with France’s PSA Groupe to form the world’s fourth-largest automaker. The deal should conclude by late 2020, but we may not know for a few more years the status of various brands (including the eponymous Chrysler) and certain models (the Dodge Challenger and Charger, for example).

4. Introducing An All-New Corvette – We won’t see a new Corvette for a few months, as production was delayed due to the strike as mentioned in our first story. What’s significant about the Corvette is that GM will finally transition its sports car to a mid-engine layout. As a result, even the base Stringray will immediately become the fastest Corvette ever. Also of note is the base price, as that will come in at under $60,000. Soon after the new model arrives, we should hear about follow-up versions with more powerful engines and the lofty price tags to go with it.

5. Ford Adds an Electric Mustang – Ford’s Mustang is America’s pony car, but it will soon be joined by an all-electric SUV. The Ford Mustang Mach-E is its name, an all-new model built on a separate platform, but sporting the iconic model’s name. With many Mustang styling cues, the EV gives a connection to the coupe, but the resemblance ends there. We dislike Ford’s decision and have followed the anger of Mustang faithful, including some who feel deeply betrayed. There’s still time for Ford to change the name, but we doubt it will.

Honorable Mention

Among the other stories of note for 2019 include Nissan’s drop in market share, the Tesla Cybertruck debut, the expanding financial backing for upstart Rivian Automotive, the electric truck/utility vehicle maker, and the ongoing shift away from cars to crossovers and trucks.

Stories about driverless cars and full electrification dominated; we’re also on the cusp of seeing the first Chinese automotive brand arrive stateside.

Possible Scenarios

Looking ahead, we expect many of the current stories to play out, with perhaps a few twists along the way. Auto Trends expects another blockbuster merger announcement in 2020 with perhaps Volkswagen and Ford tying the knot. A suitor for GM seems possible, but will Hyundai/Kia make the bold move to acquire or will it allow a Chinese company to jump in first? Finally, we’ll continue to see more car models die, but a few will hang on and likely thrive in a smaller market.

Image by Gerd Altmann from Pixabay

Fiat Chrysler Peugeot: Now What?

December 19, 2019 by admin Leave a Comment

Chairman of the Managing Board of Groupe PSA Carlos Tavares and FCA CEO Mike Manley share a congratulatory handshake after concluding the merger agreement between their two companies.

Save for regulatory scrutiny, antitrust review, and shareholder approval, Fiat Chrysler and the PSA Groupe are set to merge. The two automakers agreed on a framework for merging the two companies, which will create the world’s fourth-largest automaker after the Volkswagen Group, Toyota Motors, and the Renault-Nissan-Mitsubishi Alliance.
We’re still about a year away from the merger’s completion. In the meantime, we’ll be waiting for word on the new name for the entity. I like “Global Motors” but I think GM would object.

Capacity, Electrification, & Autonomous Vehicles

No matter what happens over the coming months, a lot of what you’ll be hearing will be speculative especially as the companies have been relatively mum on where things are going. We do know no plants will be closed or jobs lost, but with a build capacity of 14 million units and current annual sales of 8.7 million units, there is ample room for consolidation. And it is doubtful we’ll see a significant increase in sales to narrow that gap, although Jeep and Ram may fuel much of the growth moving forward.

But there are certain trends such as electrification and autonomy that will impact the newly minted automaker. Like it or not, the industry is going through an upheaval, but I will say that full electrification isn’t likely to happen in the short term, if ever. Instead, we’re likely to see some sort of “hybrid” system based largely on hybrid electric vehicles. As for autonomy, large cities are the likely place to roll out the technology, but getting it to the masses will take many years and require an enormous amount of capital.

From the left side of the Atlantic, there are a few things we’re all wondering about and are certain to become the topic discussed at your favorite cars and coffee or other automotive meetups in the coming months. Here’s a sample of key questions we believe are foremost on Mopar fan minds.

Which brands will die?

The current FCA stable includes Fiat, Chrysler, Alfa Romeo, Dodge, Lancia, Jeep, Maserati, Abarth, and Ram. That’s nine brands to manage and will soon climb to 14 with the Peugeot, Citroën, DS, Opel, and Vauxhall brands. It isn’t inconceivable that an automaker would manage so many brands – the Volkswagen Group is comprised of 12 brands. Even so, we could see a few brands dismissed. Dodge and Chrysler are most vulnerable and Vauxhall could simply be folded into Opel.

End of muscle cars?

FCA has done quite well with its muscle car lineup, with the Dodge Challenger firmly in second place behind the Ford Mustang and ahead of the Chevrolet Camaro. Having the four-door Dodge Charger to complement the sport coupe has always been a plus. Yet, these two models are aged and may not have enough life in them to continue for many more years. One way the models survive is if PSA has a platform to support them. That’s not known, although the new company could tap the Alfa Romeo Giulia/Stelvio’s platform for them.

When will Peugeot begin selling its cars here?

Long absent from the US market, Peugeot has fixed its eyes on returning by 2026. These plans were put in place in 2018, with the company establishing new US headquarters in Atlanta. That timeline was moved up by a few years earlier this year, even before the announced merger. No matter what happens going forward (merger or no merger), Peugeot plans to make its return, according to Car and Driver. Likely, they’ll import models built in Europe, foregoing US manufacturing, at least initially. That’s a sensible approach as FCA capacity is nearly full stateside, while European plants for both FCA and PSA are underutilized.

What’s the role of Opel going forward?

GM owned Opel (and Vauxhall) from 1929 to 2017, before selling the brands to PSA. Since then, Buick has continued selling several Opel products under its name including the now-discontinued Cascada convertible and the Regal sedan/hatchback/wagon. That agreement is coming to an end and soon Buick will sell crossovers only. That could leave the door open for Opel to arrive stateside on its own, but we doubt that’ll happen, at least not before Peugeot.

Getting it Done

No doubt, the FCA-PSA deal will get done. There are some issues to settle, including GM’s suit against FCA alleging racketeering over labor negotiations (which allegedly favored FCA at the expense of GM). Some are arguing the suit is GM’s attempt to thwart the merger and nothing else. Regardless, the matter should be settled before the merger is finalized.

With FCA and PSA united, expect other automakers to explore ways to combine synergies through alliances, acquisitions, and mergers. My personal “favorite” alliance is VW-Ford, as the two automakers are currently collaborating on self-driving cars and electric vehicles. That may leave GM as the last “American” automaker standing, besides Tesla, Rivian, Bollinger, and a few other upstarts.

Photo copyright Fiat Chrysler Automobiles.

Up Next: Ford-Volkswagen Tie-up?

October 31, 2019 by admin 4 Comments

What a week it has been. More like a half-week, actually.

For it was within that abbreviated timeframe we officially heard that Fiat Chrysler and the PSA Groupe (Peugeot and Citroën) were talking merger. The news spilled out late Monday and by Wednesday the two automakers came to terms. Today, news of the planned merger was announced, setting in place what will become a near $50 billion entity, which currently produces 8.7 passenger vehicles annually.

Merger talk doesn’t take place in a vacuum. Indeed, soon after the FCA broke off talks with Renault to merge in June, rumors of PSA’s interest in FCA came out. All we’ve heard is what was reported this week. But talks have been going on for some time, carried under the cloak of secrecy.

We shouldn’t be surprised that the two automakers are connecting as the entire industry is ripe of consolidation. With the deal nearly certain to pass, it likely will trigger further consolidation with perhaps Ford and Volkswagen following. Yes, these two automakers seem like prime candidates for an alliance or outright merger. There are several reasons why, which we’ll explore here.

Volkswagen and Ford: The Next Tie-up?

1. The two companies forged a global alliance.

In January 2019, Ford and Volkswagen announced that the two companies were forging a global alliance, but without cross-ownership. Pickup trucks and commercial vans were the first vehicles mentioned where collaboration will take place.

2. An EV/AV alliance follows.

In July, Ford and Volkswagen announced that the two automakers would begin sharing electric vehicle (EV) and autonomous vehicle (AV) technology. VW is investing in Argo AI, which is Ford’s self-driving technology, while Ford will build at least one vehicle based on Volkswagen’s Modular Electric Toolkit (MEB) architecture for sale in Europe.

3. Ford cuts back on cars.

The Ford Motor Company still produces cars, but the U.S. market will soon offer only the Mustang, pickup trucks, and lots of utility vehicles. With a VW tie-up, Ford might find it affordable and sensible to sell small cars again in the U.S., especially as the merged entity shaves costs. In any case, if the market suddenly shifts to cars again, Ford will have the platforms in place to build what’s needed.

4. The Rivian factor.

We already know that Ford owns a slice of Rivian, the upstart electric vehicle maker. Rivian will begin producing an SUV and pickup truck by the end of 2020. Ford will have access to Rivian’s skateboard electric vehicle architecture, which is certain to produce at least one model for the Ford brand. Volkswagen wants a pickup too and might utilize Rivian besides tapping the Ford Ranger for its own purpose.

5. Big is better.

When it comes to building passenger vehicles, the bigger you are, the better. Or at least that is the thinking in this industry. Yes, “economies of scale” and “synergies” are realized through smart collaboration. But there is another factor, bragging rights, which the new company led by Volkswagen would claim as sales would top an estimated 14 million units annually, putting the new automaker well in front of the pack.

What About GM?

With FCA and PSA hooking up and Ford and Volkswagen presenting a strong argument for consolidation, what about GM? At one time we might have seen GM go it alone or acquire another automaker, but that’s not going to happen.

Fresh on the heels of a costly labor agreement with the UAW, GM is ripe for the picking. We don’t see Toyota or Hyundai/Kia interested nor is it likely Honda with its independent streak planning to do likewise. There’s a chance GM might find a place in the Renault-Nissan alliance, but we think a Chinese suitor is just as likely.

In any case, the industry is changing and most likely will see additional mergers, acquisitions, and alliances in the months ahead. FCA and PSA triggered the tsunami. Now we’ll witness how other automakers avoid getting consumed by the waves of change.

Deal Undone:
Fiat Chrysler Renault Merger

June 7, 2019 by admin 2 Comments

It was a merger of equals, bringing together automakers with a strong presence in Europe and the Americas. The deal seemed to emerge from nowhere and just as quickly it died. Whatever thoughts you had about a Fiat Chrysler Renault tie-up, it isn’t going to happen. At least not in the near future.

Fiat suddenly pulled out of the deal on Wednesday, reportedly weary of the delays it ultimately pinned on the French government. Renault itself was onboard — but the company is also partially owned by the French, thus government involvement was and is an important consideration in the manner the automaker is operated.

Ghosn is Gone

Apparently, the French were waiting on Nissan’s feedback, a company allied with Renault. Although not directly involved in the merger, Nissan would have a significant say in how the alliance would continue after the merger. At first, the Japanese automaker seemed indifferent to the merger, but the French were concerned that the alliance might unravel later. Further, where Carlos Ghosn once held Renault, Nissan, and Mitsubishi together, his leadership is no longer a factor. In fact, Ghosn is in legal trouble with Nissan and that dilemma extends to the Japanese government itself.

Oh, what a tangled web we weave! (When first we practise to deceive!)

Although deception isn’t listed as one of the reasons for the failed merger (with apologies to Sir Walter Scott), a lack of trust certainly was. Indeed, the post-mortem showed much weariness on Fiat’s part in getting the French government’s approval, which again, was based on Nissan’s backing. An initial delay turned into a second delay, which soon morphed into a postponement of at least five days. That last setback was too much, so FCA officially canceled the deal.

Bigland Whistleblower Lawsuit

While all this was happening, another story emerged that might have helped scuttle the deal. On Wednesday, FCA’s head of Ram truck sales, Reid Bigland, filed a whistleblower lawsuit against his employer. This stunning development comes as the federal government continues to review the automaker’s sales figures.

In particular, the SEC noted that the company reported inflated sales, which could have an impact on investors. In his lawsuit, Bigland charged that FCA pinned the blame on him and withheld most of his compensation in 2018, in part to cover fines it attributes to the executive. The executive is seeking to clear his name and regain lost compensation, reportedly in the millions of dollars.

Bigland is also the only FCA executive to sell all his shares in the automaker. That said, CEO Mike Manley sold $3.5 million in company shares immediately after the FCA-Renault merger was announced. Exactly what the sales figures and share selling have to do with the aborted merger isn’t known, although it adds an interesting wrinkle to the story.

FCA: Moving Forward

With the failed merger now in its rearview mirror, FCA will have to address the Bigland suit and settle with the federal government. It is never a good thing when a top executive files suit, especially one from one someone so influential. Bigland is also the CEO of FCA Canada.

Besides the Bigland suit, the company must continue its focus on two core brands: Jeep and Ram. Jeep has become the company’s star player, driving sales and profits to bolster the company. The automaker plans to build a new manufacturing plant in Detroit, where it will produce a pair of full-size and upscale Jeep models.

The Ram brand is also thriving and delivers its own share of the profits. The redesigned Ram 1500 recently nudged the Chevrolet Silverado out of second place among full-size pickup trucks and continues to garner a larger slice of the sales pie.

Finally, FCA will have to plan a future without another automaker, at least not with Renault. Had it merged with Renault, it would have gained access to the French brand’s electric vehicle platform, saving the company billions of dollars. As it now stands, FCA will bear that cost alone along with the added expense of developing autonomous vehicles in-house.

Fiat Chrysler Renault Merger Talk Heightens

May 28, 2019 by admin 5 Comments

A blockbuster merger of automotive manufacturers may produce the world’s largest automaker, especially if two outside automakers are also brought in. Fiat Chrysler, itself the result of a 2014 merger between European and North American manufacturers may soon tie in with Renault, the French automaker.

Renault is currently reviewing an offer from Fiat Chrysler to merge the two companies with each taking a 50 percent stake in the other. FCA produced 4.8 million vehicles last year to Renault’s 3.9 million, for a combined 8.7 million units. However, Renault is worth 10 percent more than FCA, which means the latter will supply more cash to even the transaction. Renault is worth more in part because of its investment in an alliance with Nissan and Mitsubishi.

Marchionne, the Capital Junkie

A Fiat Chrysler merger with another automaker is something the late Sergio Marchionne insisted must happen to ensure FCA’s long-term survival. The former CEO and Chairman of FCA died unexpectedly last year, never seeing his dream fulfilled. However, it was Marchionne who outlined in his seminal 2015 report, “Confessions of a Capital Junkie,” industry consolidation.

Specifically, Marchionne explained that consolidation is the key to remedying the destruction of capital. In particular, he noted that both regulatory- and consumer-driven improvements such as tighter emissions controls, new powertrains, safety upgrades, infotainment services, and the push to autonomous drive, are expenses difficult for manufacturers to bear, especially those with a lower sales threshold. Further, Marchionne indicated manufacturers would need to sell at least 6 million vehicles annually to remain profitable, something they could accomplish through either a merger, acquisition or by means of a partnership, such as an alliance.

With a combined 8.7 million annual units (assuming the combined entity could maintain its momentum), Fiat Chrysler Renault would easily pass Marchionne’s threshold. However, it’ll take years for real cost savings to kick in as the new entity gradually merges platforms, shares powertrains, and utilizes technologies across the affected brands.

Jeep is the big prize FCA brings to a Renault merger.

FCA and Renault Brands

For FCA, the automaker brings with it several brands, including Jeep, Ram, Chrysler, and Dodge, serving North America primarily. Fiat, Alfa Romeo, and Maserati are especially strong in Europe. As for Ferrari, the Italian sports car brand is now a separate entity and would not be included in the deal.

As for the French automaker, it brings the Renault, Dacia, and Lada brands to the merger. It also owns the Alpine sports car marque and has an 80-percent stake in Renault Samsung Motors, a Korean manufacturer.

By default, Nissan and Mitsubishi are also included as Renault has a stake in Nissan, which has a stake in Mitsubishi. However, much friction exists between Renault and Nissan over the firing and legal detention of Carlos Ghosn, who was the CEO of all three firms. Renault had been pushing for a full-blown merger with Nissan, but the Japanese automaker has fiercely resisted that move. With FCA onboard, Nissan’s stake in the new entity will be diluted, which might impact the alliance.

So Much Potential

An FCA-Renault merger brings with it much promise, but also many risks. Although FCA is successful, the previous DaimlerChrysler model was not. The new entity faces challenges, including bringing different cultures together. Further, France and Italy have vested interests in the industry, with France holding a stake in Renault. In any case, it appears the French government favors the merger.

FCA’s strongest brand is Jeep, which it is quickly transforming from a regional player to an international powerhouse. Indeed, the automaker will likely press forward with a plan to build a new manufacturing plant in Detroit to produce the Jeep Wagoneer and Grand Wagoneer, upscale models designed to take on Land Rover (Discovery and Range Rover series). Jeep’s growth is phenomenal and doesn’t appear ready to slow any time soon.

The Ram brand brings big profits to FCA with the large pickup truck adding a half-million sales annually. The new entity may find fresh markets for Ram, including perhaps Russia where Lada rules.

As for the Dodge and Chrysler brands, the survival of these two marques may depend largely on just how far the merged company plans to extend its reach. Both have had a place in the American automotive landscape, with a limited reach beyond. And both have lost several models over the past few years as FCA emphasizes utility vehicles and trucks over cars.

See Also — Fiat Chrysler Automobiles: No Takers

Emerging Alliances Point to Further Auto Industry Consolidation

March 28, 2019 by admin

What a month! March 2019 may go down as a pivotal time in automotive history as auto industry consolidation talk strengthens anew.

The news is coming from all corners of the globe as multiple players talk, while others forge alliances. Consolidation certainly isn’t anything new, but the future absolutely points to a host of mergers and alliances taking shape.

2019 Ford Ranger — Volkswagen and Ford are forging a pact that might lead to a Ranger-based pickup truck for VW.

Ford, Volkswagen Tie One On

Heading the alliance news this month is a not-yet-signed agreement between Ford and Volkswagen. According to Reuters, the two automotive giants have been in talks for months and appear ready to sign a pact.

That agreement may involve Volkswagen purchasing a stake in Argo AI, which is Ford’s artificial intelligence company. Argo AI represents the blue oval’s autonomous vehicle and artificial intelligence aspirations, a company launched in 2016. Volkswagen doesn’t have an equivalent business, thus investing in Ford’s venture would give it instant access to AI.

At the same time, Ford appears ready to supply Volkswagen with a pickup truck. The German automaker doesn’t have a model for the American market, though its car-based Amarok is sold in multiple markets. Although the type of truck has not yet been identified, we believe a model closely based on the midsize Ford Ranger pickup truck seems likely.

Daimler, Geely Go Beyond Ride-Hailing

Daimler and Geely are expected to soon sign an agreement which would allow the Chinese automaker to purchase a 50-percent stake in Daimler’s Smart small-car brand. Smart has been languishing for years and talk of the brand’s demise emerged just this week.

But Smart may find new life yet as an electric car manufacturer with the Chinese market its main source. The Financial Times reports that an announcement will be confirmed at the Shanghai Auto Show in April.

The two manufacturers are no strangers, although Daimler’s Mercedes-Benz and Geely’s Volvo brands are direct competitors. In 2018, the two companies joined forces to form a China-based ride-hailing company reports CNN.

A Suitor for FCA

The late Fiat Chrysler executive Sergio Marchionne fashioned one of the most unlikely alliances earlier this decade as he married a pair of Italian and American automakers, but he was never satisfied that it would last apart from further consolidation.

Indeed, Marchionne was one of the earlier proponents of global consolidation, noting as far back as in 2009 that there would be “six survivors in the global volume sector.” Marchionne stated his viewpoint during the midst of a worldwide downturn in auto sales that nearly sunk Chrysler and GM and put other manufacturers in jeopardy.

See Also — Auto Industry Buzzword: Collaboration

Marchionne passed away in 2018, but the spirit of FCA consolidation lives on. Notably, in the past few weeks, we have heard that both France’s PSA Groupe (Peugeot, Citroën, Opel, et al) and the Renault-Nissan-Mitsubishi alliance seems interested in acquiring FCA. Jeep and Ram are FCA’s two strongest and most profitable brands and are the top prizes here. At the same time, a merger or an alliance might help FCA improve its performance in Asia, especially in China where it is particularly weak.

But these two possible companies/alliances aren’t the only ones interested in FCA. Several years back the Volkswagen Group targeted Fiat Chrysler, but its overtures were rebuffed. More recently, Hyundai expressed its own interest in the company, but it wasn’t planning to make a move until after FCA’s share values fell.

Limited Agreement Auto Trends

While further consolidation seems likely, more limited agreements between competing manufacturers will continue to emerge.

One of the results of this kind of agreement brought the Toyota Supra back to the market. The Supra’s return comes thanks to an agreement between Toyota and BMW, as the former used the latter’s Z4 platform to build its sports car. Toyota has also worked with Subaru to produce its 86 sports car, and may continue that pact for a new generation model.

Toyota, thanks to its size and deep pockets, may yet avoid the entire alliance and consolidation trend. With stakes in Daihatsu, Suzuki, Subaru, and Mazda, the company can turn to its partners to supply vehicles it doesn’t have. Further, it may work with its associated companies to spread development costs as needed without ceding control.

Fiat Chrysler Automobiles: No Takers

June 10, 2015 by admin 3 Comments

The Fiat Chrysler merger drama continues. The current narrative has boss Sergio Marchionne asking activists to pressure GM to buy FCA.

Fiat Chrysler chief executive Sergio Marchionne has been pressing hard to find a partner for his company. Trouble is, there are no takers and not a whiff of interest has been expressed by a single manufacturer within and without the industry.

That hasn’t stopped Marchionne (pictured, right) from employing tactics that are raising eyebrows everywhere, including at the General Motors Company. Indeed, GM has confirmed that Marchionne reached out to CEO Mary Barra earlier this year in a bid to arrange a meeting to discuss a possible alliance. However, that overture was rebuffed.

Now, Marchionne is appealing to investors in a bid to force GM’s hand. Its part of his personal quest to push for industry consolation, a move that he claims would save manufacturers billions of dollars in start up costs.

Sources, including the Wall Street Journal, claim that Marchionne has been energized by activists at GM who have successfully pushed for the company to raise its stock dividend and buy back billions of dollars in stock. To that end, Marchionne is appealing to these same activists to help move the needle.

But Mary Barra insists that her company won’t and cannot be distracted as GM continues with an internal consolidation that has saved the company billions of dollars and should continue to reap benefits as it seeks to gain a leading position on return of capital. Moreover, the company is eager to bring the ignition switch matter to an end, a debacle that has claimed the lives of at least 111 people to date.

With each pronouncement that Marchionne makes at a press conference, an industry event or elsewhere, reactions are coming from other quarters, including the rank and file that stands to lose the most, if FCA were acquired, as well as from dealers who wonder if the delay in important new product, including the next generation Ram pickup truck will have on its sales.

2016 Alfa Romeo 4C

And then there is the curious stance Marchionne is taking with advancing Alfa Romeo, an upscale vehicle line that has just begun to sell cars in the US after a two decade hiatus.

Alfa Romeo returns to the US market this year and will offer 400 copies of its 4C Spider. But that’s just a tiny slice of the 150,000 Alfa units per year FCA says that the market will sustain by 2018. Its part of a $7 billion investment FCA is making that is supposed to yield 8 new Alfa Romeo models and raise global sales from 74,000 annual units to 400,000 vehicle sales within the space of four years.

That ambitious goal has its share of naysayers who doubt that Alfa can muscle into a market dominated by such luxury makes as Mercedes-Benz, BMW and Lexus. In essence, Marchionne is attempting to elevate Alfa within years for what has taken decades for brands such as Acura and Infiniti to find favor amongst discriminating consumers.

Ram ProMaster City

Ram and Jeep are the two most valuable FCA brands.

Industry scuttlebutt has Marchionne talking up a merger with GM to perhaps force another manufacturer’s hand, namely the Volkswagen Group. Volkswagen has expressed interest in buying one or more Fiat brands in the past and could leverage FCA to dramatically heighten the company’s ascendancy in the United States.

Certainly, acquiring FCA would push Volkswagen Group US sales into second place behind GM and ahead of Ford and Toyota, an especially enticing move that would give this German manufacturer an edge it hasn’t been able to realize on its own. Consequently, it would also push VW’s annual sales to about 15 million units or well ahead of Toyota and GM.

Marchionne’s motives regarding securing a suitor may not be clear, but some analysts are sensing his desperation. Whether that worry is authentic or contrived, the best approach here might be for executives to simply wait and see.

Why No One Wants To Hook Up With Fiat Chrysler (FCA)

April 14, 2015 by admin 1 Comment

Rumors of a possible Fiat Chrysler (FCA) alliance with another automaker have been circulating for the past several months. That’s understandable as FCA chairman Sergio Marchionne has iterated that his company’s best chance for long-term survival may be tied with the fortunes of another automaker.

Highly-regarded Reuters is one of the latest publications to advance the prospect of an FCA alliance with some other manufacturer. However, for Marchionne there does not seem to be too many viable prospects willing to merge or ally themselves with FCA. And without such an arrangement, Marchionne’s once bright legacy may yet turn opaque.

Here’s what Marchionne wants and what will likely thwart his effort:

A General Motors merger.

FCA boss Sergio Marchionne.

GM, along with Toyota and Volkswagen, is poised to sell 10 million vehicles worldwide in 2015. GM has been close to this lofty threshold before, but has never sold as many vehicles as it is doing right now. Indeed, once on life support, then bankrupt, GM has stormed back and is breathing fresh life into its four surviving US brands. It is also preoccupied with reviving its European operations.

The only enticement in FCA for GM might be the Jeep brand. Jeep, along with Ram trucks, are the two profit drivers for that company’s US operations. Beyond that, Fiat can give GM quick access to Europe, but then it would find itself competing against better entrenched manufacturers, especially Volkswagen.

Don’t expect GM to show any interest in FCA. At the same time, they’re working diligently to advance their own agenda and an FCA collaboration would only impede its effort.

A Ford Motor Company acquisition.

No, FCA is not in a position to acquire Ford. Ford, on the other hand, might consider FCA, but only if it was in its best interests. Be that as it may, there is nothing to suggest that FCA has anything that Ford needs or wants, except Jeep.

Like GM, Jeep could be of interest, but both automakers are doing quite well with their own lines of utility vehicles. Further, Ram trucks are redundant and would only discombobulate matters. And Hellcat poses a challenge to Mustang, while Ford has its own super car aspirations in the GT, so toodle-oo to Viper.

Like GM, Ford has no need for FCA. In addition, the blue oval has a solid product line and is now working diligently to rekindle the Lincoln flame.

See Also — Up Next: Ford-Volkswagen Tie-up?

Looking Beyond America

Marchionne is not just looking at his US competitors for a possible alliance or merger, but he is scoping the global market. Certainly, a possible target would be PSA Peugeot Citroën, but the French manufacturer is busy trying to heal itself. Likely, any interest from PSA is several years away or well after Marchionne relinquishes his role.

Other opportunities might require considering a smaller scale confederacy and include Asian manufacturers such as Suzuki, Isuzu and Mazda, small companies that could benefit from a strategic alliance. Of course, all three are strong in Asia, the very market where FCA’s penetration is the smallest.

Marchionne’s Motives for FCA

While preserving his legacy may be one reason for finding a partner for FCA before he leaves the scene in early 2019, the CEO’s overarching intention may be something completely different. Specifically, FCA doesn’t have the financial strength of its top competitors and may have difficulty weathering the next downturn, what is likely to arrive before his exit.

Indeed, FCA has two shortcomings or weaknesses that may manifest in an entirely negative way in the coming years: a high debt load and a low operating margin of 3.4 percent (compared with 5.4 percent for the industry average). Both are serving as ominous signs that FCA’s short-lived glory days may be in its rear-view mirror, what may best explain Marchionne’s eagerness to find a partner for FCA and the reluctance of competitors to forge such an alliance.

***Photo courtesy of by Agência Brasil, a public Brazilian news agency.***

5 Reasons Why Volkswagen Fiat Chrysler Makes Sense

November 7, 2014 by admin 2 Comments

Imagining Fiat Chrysler as part of the Volkswagen Collective.

Speculation about a possible blockbuster Volkswagen Fiat Chrysler merger has come up again. Last summer, Volkswagen and Fiat flatly denied that they were discussing a merger, despite a high-level meeting between key executives.

This week, former Hyundai CEO John Krafcik speculated in his address to the Automotive Press Association at the Detroit Athletic Club that such a merger between the companies would be a “brilliant” move. He noted that the combined entity would provide a better mix of vehicles, one better split among cars, utilities, pickups and luxury vehicles.

We’re not saying such a merger would happen or that it even should happen. Still, it isn’t hard to grasp what benefits might come out of such an arrangement.

Volkswagen Collective

1. Economies of Scale

The bigger you are the better job you can do in spreading your costs around. Volkswagen has invested tens of billions of dollars in modular platforms, what makes it possible for the automaker to build a variety of different vehicles on the same footprint. The upfront cost is daunting, but once implemented it can yield huge savings.

Fiat Chrysler is struggling to enter different segments, something they would be able to do faster by harnessing Volkswagen’s flexible platforms. Product development overhead would be reduced, giving the newly-expanded Volkswagen Group a competitive advantage.

2. Deeper Market Penetration

Volkswagen is big on producing mass-market cars, utilities and luxury vehicles. Where it is nearly completely absent is in pickup trucks. Sure, you have the Amarok, but the big profits are in the large trucks, such as with the Ram 1500. By absorbing Fiat Chrysler, Volkswagen gains another market segment and a highly profitable one at that.

Ram Trucks with Volkswagen Group backing would be better able take on Ford and General Motors, the two top pickup truck producers. And if the midsize truck segment strengthens, Volkswagen backing could enable Ram to bring back the Dakota or something like it.

3. Improved Product Mix

The better your product mix, the more likely you will attract customers. In the previous section we touched on market penetration, but it is product mix that can expand your customer base.

Take one look at most Fiat Chrysler brands and they’re missing a product or two that could make a difference. With Volkswagen backing, each brand could fill out its product lines and become better suited to take on its competitors. The Chrysler brand could become a formidable competitor to Toyota, Chevrolet, Honda, Nissan and Ford. Jeep might push into Land Rover territory by sharing an SUV platform with Audi. Options that were not attainable before would suddenly be made manifest.

4. Volkswagen Brand Problem Solved

Let’s be clear about one thing: the Volkswagen brand is struggling mightily in the US. Successful nearly everywhere else, VW cannot let loose the baggage that has held it back, namely perceived lower quality cars sold at a premium price. Besides, not too many people are excited about the Passat.

A merger wouldn’t necessarily benefit the Volkswagen brand stateside. Even so, it probably wouldn’t matter. The Volkswagen Group could reposition VW in the US and Canada to take on a more premium status, along the lines of Buick and Subaru.

5. Consolidate Brands

Volkswagen currently manages 12 brands and is doing a much better job of it than GM did when it had 8 brands. Some have criticized Volkswagen for being brand top-heavy, but that hasn’t hurt them.

Likely, Volkswagen will seek some sort of brand consolidation if it snaps up Fiat Chrysler. The least painful decision would be to fold Ram back into Dodge. Or, Dodge might be eliminated, Ram kept and Dodge products moved to Chrysler.

The Jeep and Fiat brands look good to go, but if one had to leave that would be Fiat. A doubtful decision, but a possibility. More likely, Volkswagen would eliminate Lancia, keep Alfa Romeo and if Ferrari and Maserati are part of the deal, those brands would survive too. Without any brand elimination, the consolidated Volkswagen Group would comprise 20 brands. That’s hard to imagine!

Volkswagen Fiat Chrysler

What are the chance of a blockbuster Volkswagen Fiat Chrysler merger taking place? That’s hard to say. There are some people who think that there are cultural obstacles, but they are equating Daimler (an earlier owner of Chrysler) with Volkswagen. Not all Germans are alike…or are they?

Likely, Sergio Marchionne would retire if such a merger was agreed upon. And Chrysler executive salaries would undergo scrutiny, a cost that always raises eyebrows with foreign manufacturers.

Fiat Chrysler Automobiles: Done Deal

January 31, 2014 by admin 2 Comments

Chrysler is the automotive manufacturer that refuses to die. Since the late 1970s, the company has experienced several near-death experiences, managing to get back on its feet with a lot of outside help.

Government Loan Guarantees

In 1979, Chrysler received $1.2 billion in loan guarantees, designed to keep the automaker afloat. It also renegotiated hundreds of millions of dollars in debt, forcing its creditors to absorb those losses. Later, the company launched its K-Car line and an untold number of variants including its highly-popular Plymouth Voyager and Dodge Caravan minivans.

Although hardly out of the financial woods by the time it bought out AMC in 1987, the move enabled Chrysler to get what it really wanted: Jeep. It also began one of its most ambitious product undertakings launching an all-new Dodge Ram pickup truck, its Viper sports car, the Jeep Grand Cherokee, and its line of LH front-wheel-drive large sedans. Chryslers resurgence and improved outlook caught the attention of Daimler-Benz, the German automakers and producer of Mercedes-Benz.

Daimler Buys Chrysler

In 1998, an all-new DaimlerChryslers entity was launched, what was supposed to have been a merger of equals, but never was. The two companies never managed to make a go of it, leading to a messy divorce that was finalized in 2007; the Chrysler portion was sold to Cerberus, a private equity firm.

Cerberus wasnt able to reorder Chrysler, watching its losses mount as the economy slid, with the automaker filing for bankruptcy two years later. That led to a historic government intervention that bailed out both GM and Chrysler, and gradually folded the latter into the arms of Fiat, the Italian automotive manufacturer.

Fiat Takes Control

Since 2009, Fiat took control of Chrysler and was awarded increasing shares in the automaker as it met each required threshold. Fiats intent from the start was to acquire Chrysler and snapped up the 41.5 percent stake it did not own earlier this month, paying the UAWs trust $4.35 billion to do so.

On Jan. 29, 2014, Fiat Chrysler Automobiles N.V. (FCA) was formed, a company organized in the Netherlands, but a resident for tax purposes in the United Kingdom. Shares of Fiat stock will be exchanged one-for-one for FCA stock, with common shares listed on the New York Stock Exchange (NYSE) as well as on the Mercato Telematico Azionario (MTA) in Milan, Italy.

Fiat Chrysler Automobiles

Very little in the day to day operation of the combined automaker will likely change. Fiat and Chrysler have been working toward this day for more than five years, with Sergio Marchionne guiding the transition. What is new is the logo, a modern design that will soon be seen everywhere. It is the work of RobilantAssociati, but there is much significance in its design.

In developing the design, the branding project looked to demonstrate a transition from its past without severing its roots while also reflecting the global scope of FCAs work.

There is a geometric configuration at work in the logo too with the F, derived from a square, symbolizing concreteness and solidity. The C, derived from a circle, represents wheels and movement, and also symbolizes harmony and continuity. The A, derived from a triangle, indicates energy and a perennial state of evolution. Both Fiat and Chrysler corporate logos will give way to the new logo although both Fiat and Chrysler car brand logos are expected to remain unchanged.

Sergio Marchionne Comments

Following the vote by Fiat S.p.A.s board to approve the corporate reorganization and formation of the FCA, CEO Sergio Marchionne remarked how the two companies worked tirelessly …to transform differences into strengths and break down barriers of nationalistic or cultural resistance. Marchionne noted that the now global automaker has a mix of experience and know-how on a level with the best of our competitors.

Theyll need that to compete in a market where Toyota, Volkswagen, and General Motors are the top three manufacturers and with Hyundai-Kia, the Ford Motor Company, Renault-Nissan, and Honda competing for the same customers. Moreover, with increased consolidation and cooperation likely in the coming years, FCA will need to continue to form its own framework for success, including crafting it own partnerships.

Long-Term Business Plan

As far as the company’s long-term business strategy, the automaker will submit a business plan to the financial community by early May 2014. Fiat Chrysler Automobiles has reassured supporters that the merged entity will not reduce headcount and that it will continue to maintain operations in Turin, Italy, and in Auburn Hills, Mich., avoiding potential political controversy in both nations.

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Photo courtesy of Fiat Chrysler Automobiles N.V.