Why General Motors doesn't wish to wed Fiat Chrysler
If this is love, it's unrequited.
Fiat Chrysler Automobiles (FCAU) CEO Sergio Marchionne has his heart set on a union with Detroit giant General Motors (GM), but it seems clear that GM is determined to resist his overtures.
That seems clear from the tone of GM CEO Mary Barra's comments to reporters Tuesday in describing an email from Marchionne.
"There was an email that was very much vetted with management and our board," the Detroit News quotes Barra as saying ahead of the company's 50-minute annual shareholders meeting in Detroit. "And after we reviewed that, we are committed to our plan. We think that's in the best interest of General Motors shareholders, and we have strong support."
Barra's comments followed a Wall Street Journal report that Marchionne was calling on activist investors to persuade GM to consider merging with his company.
One industry analyst said a GM-Fiat Chrysler merger makes little sense.
Both automakers already have strong truck and SUV brands, so a deal would not fill out a hole in either company's product line. Karl Brauer, a senior analyst for Kelley Blue Book, adds that GM already has an advantage over Fiat Chrysler in small cars and hybrid vehicles.
"A merger with a European, Japanese or Korean automaker, including Volkswagen, Honda or Hyundai would be a much better use of FCA's assets," he said.
Finally, Fiat Chrysler needs GM more than GM needs Fiat Chrysler. Marchionne has made progress merger two large automakers and expanding Chrysler's sales and revenue over the past five years. Yet for Marchionne the question is now where to go from here amid ferocious global competition for marketshare.
Integrating Fiat into Chrysler "has required heavy investment, and while Chrysler is succeeding in the U.S., the Fiat side of the company continues to struggle," Brauer said. "This is holding back FCA's profitability, which means future investment will be limited compared to other large automakers."
Brauer believes Marchionne realizes that, in the long-term, Fiat Chrysler may fall behind in the race to snap up market share as the global demand for cars and trucks expands, especially in emerging economies.
"He wants to merge with another big player to improve FCA's financial assets and global reach before that happens."
And Noah Joseph at AutoBlog reports Marchionne - who consolidated Fiat's operations before the company merged with Chrysler last year - has been a strong advocate of consolidation, arguing that the industry needs to combine to share resources and cut overhead.
Along with his pursuit of GM, Marchionne has also approached Volkswagen, Peugeot and Ford (F) with similar merger proposals, Joseph reported.