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Old 12th June 2015, 16:57   #1
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Default Fiat-Chrysler looking for a merger - Who is the best fit?

Fiat Chrysler Automobiles CEO Sergio Marchionne is looking at other automakers as merger candidates as the chances of striking a friendly deal.

Why?
He has been arguing that the global auto industry needs to consolidate in order to afford all the emissions and safety technologies.

The current Auto industry spend considerable amount in R&D in 2014 and the returns on invested capital are miniscule compared to other industries and cannot afford to do so.

Yet no one agrees to join him.

Suitors:

GM:
The most preferred from Fiat;s point of view, but rebuked by GM, since GM has other plans and would lose focus on its strategy.

PSA:
Least preferred by Fiat, but is still kept as an option.

Fiat is considering France’s PSA Peugeot Citroen as a fallback option, since it is not big as the Fiat boss would want to be. Also PSA is mostly has only European dominance.

VW:

The German group is another alternative to form an alliance.
Would seem a good alliance as VW is weak in the US market where SUV's and pickup tracks are preferred and that is where Fiat Chrysler is strong.

But the problem here is VW would like to have full control of the companies it buys, whereas the Agnelli family that controls FCA doesn’t plan to sell its stake.

Asian Brands:

Fiat is interested but not optimistic, because all of the Asian players are, at best, tough to persuade to do a deal.

Honda and Hyundai have never had an interest in deals and prefer to go it alone, aside from Hyundai’s alliance with Kia Motors Corp.


Mazda is tied in with Toyota. The two companies signed a deal in May to explore ways to share fuel-saving technologies.

Suzuki is 19.9 percent-owned by Volkswagen and the two companies are locked in a legal dispute at a London arbitration court as the Japanese small-car specialist wants Europe’s largest automaker to return the shares it holds. VW has refused to do so.
GM once owned a stake in Suzuki and the partnership didn’t bear much fruit, so the Japanese company may be unlikely to get involved in another such deal,


Fiat Chrysler Automobiles CEO Sergio Marchionne is looking at possibility of forming an alliance with GM, but if not who is the best suited for this?

Looks to be VW is the best suited because it is could make its presence felt in US even tough in Europe it would be complex since it would have conflict with its own small car mix and Ferrari is already spun off.


http://www.autonews.com/article/2015...on-report-says

Last edited by Rehaan : 12th June 2015 at 19:27. Reason: Adding come underlines.
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Old 12th June 2015, 19:28   #2
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

Thread moved out from the Assembly Line (The "Assembly Line" Forum section). Thanks for sharing!
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Old 12th June 2015, 20:46   #3
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

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Originally Posted by volkman10 View Post
Fiat Chrysler Automobiles CEO Sergio Marchionne is looking at other automakers as merger candidates as the chances of striking a friendly deal.

Yet no one agrees to join him.

CEO Sergio Marchionne may not taste success here. Automobile companies are large entities and by their very nature do not like mergers, no matter how friendly. They usually like to fight it out on their own. At the most joint ventures in research relating to emission and safety technologies may be an option.
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Old 12th June 2015, 22:17   #4
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

Why does Sergio Marchionne want further consolidation? Consolidation has already happened to the extent that the world is left with only about a dozen or so automobile companies/groups/alliances that have little to no links/ties with others.

Yes, developing new vehicle platforms and meeting ever more stringent emission & safety norms (in the First World) does call for large amounts of money to be invested in R&D. However, car companies and even alliances/groups have found it prudent to collaborate with others for specific projects and technologies - examples are Renault-Nissan & Mercedes, Toyota & BMW, Peugeot-CitroŽn & Toyota, Peugeot-CitroŽn & Mitsubishi, GM & Fiat & Suzuki etc.

Is there more to this call for consolidation than meets the eye? Signor Marchionne seems to be trying very hard to get some company to form an alliance on his terms, and they just seem to be trying as hard to ignore/reject his call.

Is Fiat having its own "Daimler moment" with Chrysler? Daimler AG was quite eager to take over Chrysler Corporation and succeeded in doing so, although it was publicly termed a "merger". Soon the realisation dawned on them that the American five-pointed star was just too different from the German three-pointed one, and that instead of cleverly taking control of North American assets, they saddled themselves with plenty of liabilities (with the notorious auto union culture that drained American car companies being the most worrisome). This realisation having dawned on them, they were quick to do the sensible thing and unshackle themselves (by divorcing Chrysler).

I wonder if Fiat are now going through what Daimler went through, and are trying hard to find a way out?

If all is well with Fiat-Chrysler, and Fiat are indeed looking for a mutually beneficial alliance with another automobile group, then why not propose the same to Tata-JLR? They can take their collaboration/JV beyond India. Sergio Marchionne can have a word with his friend Ratan Tata and through him, put forth the idea to Tata Motors' current chairman. An alliance between Fiat-Chrysler & Tata-JLR would work out well as they seem made for each other.

Last edited by RSR : 12th June 2015 at 22:25.
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Old 12th June 2015, 22:57   #5
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

How about Fiat + Tesla?

Fiat's specialization is in small cars, Tesla's is in cutting-edge efficient energy utilization.

Though at the moment, Tesla might be a smaller force to reckon, but if these two companies can collaborate, it can change the world transportation system.

If this happens, it will come across as a radical collaboration and will raise the eye-brows of most stalwarts in the auto industry.

I'm running wild on my imagination, I guess!

Sergio, if you are reading this, pay me million dollars, for I might have initiated something which can change the future of your company!
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Old 13th June 2015, 00:56   #6
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

Which reputed car maker would like to dilute its brand name by associating with FIAT. We have been hearing about FIAT `soon around the corner' for many decades now. In India, the fact is that FIAT and GM have been done for a long time ago. Beyond some initial sales, they move metal only at a substantial discount.

I have been here on this forum for 8 years and all the FIAT buyers are on this forum. Beyond this, I doubt there are many customers in India who care for FIAT. 0.4% share in India in the year ended March 2015. It was more some years back but even then was pitiable. 26,000 cars sold in FY2003 but around 10,400 in FY2015, even as the market has increased from 0.7 million to 2.6 million.

Last edited by vasudeva : 13th June 2015 at 01:00.
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Old 13th June 2015, 09:39   #7
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

Quote:
Originally Posted by CliffHanger View Post
How about Fiat + Tesla?
Fiat Chrysler CEO Marchionne did not put a name to this ideal partner.
This leaves investors to examine various possibilities and the pros and cons of each with consolidation and economies of scale being the goal for Fiat.
Currently, nearly 50% of the company's voting power is controlled by the Agnelli family, and this family seems determined to maintain their control.
For the Agnelli family to retain control, Fiat Chrysler would need to be the larger company in the merger since its current debt situation does not put it in a position to raise debt to fund a buyout of a larger competitor.

That is the reason VW is most frequently proposed partner which has built a brand empire of its own and would gain access to a valuable line of SUVs.

The CEO further added that Volkswagen was not an ideal partner but he did have one in mind!

Though Fiat CEO had met Elon Musk- CEO of Tesla, no talks on merger has come up but only on 'potential cooperation' in the future was discussed.


http://www.fool.com/investing/genera...ming-soon.aspx

Last edited by volkman10 : 13th June 2015 at 09:40.
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Old 13th June 2015, 09:52   #8
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Default re: Fiat-Chrysler looking for a merger - Who is the best fit?

Quote:
Originally Posted by volkman10 View Post
Fiat Chrysler CEO Marchionne did not put a name to this ideal partner.
This leaves investors to examine various possibilities and the pros and cons of each with consolidation and economies of scale being the goal for Fiat.
Currently, nearly 50% of the company's voting power is controlled by the Agnelli family, and this family seems determined to maintain their control.
For the Agnelli family to retain control, Fiat Chrysler would need to be the larger company in the merger since its current debt situation does not put it in a position to raise debt to fund a buyout of a larger competitor.

That is the reason VW is most frequently proposed partner which has built a brand empire of its own and would gain access to a valuable line of SUVs.

The CEO further added that Volkswagen was not an ideal partner but he did have one in mind!

Though Fiat CEO had met Elon Musk- CEO of Tesla, no talks on merger has come up but only on 'potential cooperation' in the future was discussed.


http://www.fool.com/investing/genera...ming-soon.aspx
OT:

Hey, I have to tell you that I benefit from all the news articles you collect across the globe and post in team-bhp, and I have been seeing you doing this for a long time now. You are a one big information source to keep track of most automobile news across the globe.

Kudos to your passion and Thank you very much!
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Old 13th June 2015, 17:23   #9
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

Been following the news since a while and I must say, Marchionne sounds very desperate. Things might be uglier behind the scenes than what Fiat-Chrysler is showing to the outside world.

The big boys (GM, VW, Ford, Renault, Nissan, Mercedes etc.) have already made their merger moves / disassociations in the last decade. Things have fairly settled down among the larger car makers and I certainly don't think any of them would be interested in Fiat-Chrysler. They have absolutely nothing to gain as both - Fiat & Chrysler - are in weak positions.

If any kind of partnership is reached, I think it will be with a cash-rich company from unexpected quarters (e.g. China?), or one from another domain (e.g. technology) which wants to taste the mass market.
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Old 13th June 2015, 19:10   #10
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

This is Fiat-Chrysler's 20F SEC filing for annual year 2014. You can also view older filings.

https://www.sec.gov/Archives/edgar/d...014123120f.htm

Chrysler was anyway a dog (BCG matrix) in the car business for a long time and so has been FIAT except for very brief periods of some gains. Chrysler is mainly in NAFTA (Chrysler). FIAT generates most of its sales in Italy, Brazil, and some scattered small amounts in China, other EU.

If you review older 20F filings, you will find that FIAT has been long been share in almost all major markets, including its home country of Italy.

That would have been cause for Mr. Marchionne to be sacked long time back but he still stays on. Could be, he enjoys the confidence of the board who feel he remains the best of the lot that is there and wants the job. Also likely is that no major senior auto executive in the auto world wants to take up such a toxic position, and achieve an extremely difficult turnaround.
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Old 13th June 2015, 19:21   #11
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

I'm curious what comes out of this; there's nothing to boast about for either Fiat or Chrysler, be it as standalone entities or as a group.

Quote:
Originally Posted by CliffHanger View Post
How about Fiat + Tesla?

Fiat's specialization is in small cars, Tesla's is in cutting-edge efficient energy utilization.

Though at the moment, Tesla might be a smaller force to reckon, but if these two companies can collaborate, it can change the world transportation system.
Tesla, although small, is a beast in itself. For expansion, Musk has bigger things to worry about: a general preference towards electric vehicles, favorable market, socio-economic conditions. I doubt Fiat+Chrysler can help Tesla with any of that. In my opinion, there's not a lot they bring to the table for Tesla. Expertise in small cars: I'm sure Tesla will figure that out by the time they get there.
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Old 13th June 2015, 20:02   #12
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

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Originally Posted by libranof1987 View Post
there's not a lot they bring to the table for Tesla.
Precisely! Not just Tesla anyone for that matter. Fiats are largely outnumbered in their home country by Peugeot, Citroen, Volkswagens and to a smaller extent Opel, Ford, Toyota, Nissan and Renault too. This is the situation in Italy. Any other European country, its very rare to find a Fiat or Chrysler. If they are so bad at home, why would any do business?
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Old 13th June 2015, 20:04   #13
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

Marchionne seems desperate, but John Elkann won't give away his family's property for cheap. That maybe the reason no one is coming forward to take the bait. Wish TATA'S had the financial muscle to buy. I think the next recession will be the turning point for FCA. With plans of a Ferrari IPO, the family is preparing to book profits and take the golden goose out of the sinking ship.
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Old 15th June 2015, 13:11   #14
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Default Re: Fiat-Chrysler looking for a merger - Who is the best fit?

Quote:
Originally Posted by The Rationalist View Post
Marchionne seems desperate
Desperate indeed. No one shouts out from the rooftops "Hey, I'm looking for a partner...ANY partner" as Sergio is currently doing. The last time we saw this level of desperation was from General Motors in the Rick Wagoner days (he was snubbed by Ford then). A storm is brewing.

Quote:
In a dramatic departure from the discreet, clubby culture of inter-automaker relations, Marchionne seems to be pursuing a merger partner for FCA while following a media-saturation strategy taken right from the Kardashians.
Source & Full Bloomberg Article
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Old 15th June 2015, 13:46   #15
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Red face Re: Fiat-Chrysler looking for a merger - Who is the best fit?

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Originally Posted by GTO View Post
Desperate indeed
I would not say its desperate. Consolidation in the automobile sector is indeed the need of the hour. Every Manufacturer has this "I know the issue, I can fix it on my own" attitude while in reality everyone is bleeding. Now here's a man who is trying to push the idea of consolidation forward and he is being labelled as lone knight in the rusty armour. In Marchionne's words every manufacturer is developing the same technology which has minimum returns. The investors too feel the call for consolidation move aimed in right direction looking at the market condition.

http://www.bloomberg.com/news/articl...n-by-investors
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