If VW Were To Buy Fiat, Would Toyota And GM Be Able To Keep Pace?

VW has one of the best recall rates in the US. So does it really matter if you visit the dealer one more time to have the warranty cover something, or get recalled two to three times because the car wasn't put together correctly in the first place?

If VW were to buy Fiat, Toyota, Honda, Hyundai/Kia, Ford, and GM would laugh all the way to the bank. VW already has its brands stepping on one another and they have serious reliability/durability issues they have not adequately addressed. Now factor in FCA which would only add more product overlap and would inherit FCA's less than amazing attention to quality. This will be one of the most epic business blunders of all time.

@MattDarringer

Right now Honda is so far at the back of the pack it isn't even funny.

Toyota still can't figure out how to make a car with a personality.

Hyundai however is a force to be dealt with. Quick moving and high quality. They are the most serious threat.

IF (a big if), VW did purchase FCA, they could address the build quality issue with both brands.

Now to the durability issues you are referring to, I would love for you to post examples from this decade.

@Agent009 the flaw in this is that VW would have to spend tens of billions to get the product like sorted out and that would take time away. Counting Honda out would be unwise...ditto Toyota. Yes Auto Union would the largest on the planet but it would be the largest and most unwieldy corporation in the history run by a psychopath (Piech) with Fourth Reich aspirations. This move would be VW shooting itself in the foot.

Current VW product glitches:

DSG transmissions are showing a trend of failure at around 75K miles
The 2.0T is having catastrophic failures that are at the recall threshold
The TDI has injector issues that VW is quietly fixing to avoid a recall
The new TSI engines run hot and there have been a few fires

add that to the ongoing electronic glitches and VWs are not a wise move

It is interesting that the article is written from the perspective of an investment banker, not anyone who runs a business. These investment bankers make their money on a percentage of the deal and aren't around to actually integrate the businesses. Will the Fiat family take the money and run? It has happened before; Chrysler execs cashing out by selling the business to Mercedes. Remember?

Why would VW want FIAT? What does FIAT have that VW would really want?

It already has a number of high priced Sports cars to compete with Ferrari.
It already has AUDI to compete with Maserati
It already has enough small cars to bury the 500.

What else does Fiat Have? Other than a loyal home market! The Dodge Dart and the Chrysler 200 are not special - and are heavy and small inside for their class. I guess only Jeep.

Unless they want Fiat to close it down and eliminate a competitor - I don't see any reason to buy it.

@TomM the Dart and the 200 may not be "special" but they are not the piles of garbage known as the Jetta and Passat. Dart VS Jetta for reliability? Dart! I predict the 200 will fare better than the Passat as well. The warranty incidence rate is high on the Jetta and Passat and simply isn't on the Dart.

If anything Fiat should want no part of VW and if Fiat were to merge with anyone, merging with Mazda and/or possibly Hyundai/Kia would be a brilliant move.

Matt, I don't buy the line you continue to spew about VW quality. My 2006 Jetta 2.5 was flawless, if you don't count the recall for incorrect headlight aiming caps. Serious problem, that one :).

My daughter's 09 Jetta TDI has had no issues, other than an unintentional mis-fuel with gasoline. All it needed was a flush and it's been running fine for two years since.

My current 2011 Tiguan has had only one issue: the RNS-510 has had continual issues and VW is likely going to replace it again, this time with a newer model. Oh yeah, I'm out of warranty and they are still doing it. Just because you say all those things doesn't make them true.

I would be amazed to hear that there was a CEO on the planet that doesn't have a plan to increase market share. Just because Piech has a plan is no guarantee that the plan will work whether he gets his hands on Fiat or not. I haven't looked into the overall market share of Toyota or Honda lately but if they can compete successfully with the Germans and Italians as separate companies, I see no reason why they would have any additional problems competing with them as a combined unit.

I don't see this happening, VW has cooled its buying frenzy and they are at a point where there are significantly diminished returns on any new brands. I know that purchasing power on materials is always brought up as possible with more volume but product wise you are almost moving backwards with yet another volume brand.

I don't think it's wise for FCA to sell to VW and I also don't think that VW will want to buy FCA in the end. The problem with VW is their efficiency with their main brand. Their profit margin on VWs is, from what Google says, of about 3%...probably the smallest in the whole brand portfolio. They certainly thought of Chrysler to boost sales in US. But they should better start adjusting their products (they have enough) to the US market and get a boost in sales out of that.

But sales in the US will never grow for as long as they have a reliability problem. And this is not something that only Matt is talking about (http://www.usatoday.com/story/money/cars/2013/10/29/consumer-reports-worst-cars/3304413/). In Europe VWs score much better in reliability but they also are more expensive! It seems in the US they cut too many corners to sell for a lower price. I guess their modular building style is meant to increase the reliability while keeping production costs under control. Lets see if they get this right.

VW may have an exceedingly easy time of gobbling up Fiat and Chrysler. Shareholders who will be voting on the FCA merger in a week or so have have been told by analysts NOT to approve the merger because it will be detrimental to the shareholders. Should the merger go through, the Agnelli family which currently owns 30% of Fiat would come to control 46% of FCA.

If the Merger did not happen, VW would be free to pick off Chrysler and Fiat separately. For VW, Chrysler is by far the better acquisition.