Marchionne Still Wants Fiat Chrysler Merger With GM - What Is The Motivating Factor Here?

An FCA/GM merger makes NO SENSE. Ram, Dodge, and Chrysler are simply not needed in GM's world. Sure, Jeep would be a score, but....

The obvious merger would be with Geely.

He sees bad days ahead for FCA and needs help.

FCA is worth more with a break up first. Sell Jeep to Ford or GM. Sell RAM (plus the minivans?) to the Koreans, Nissan, or the Chinese. VW wants Alfa. Ferrari has already been spun out. If Geely (they could use dealerships)doesn't want the rest shut it down. The extra capacity is in Fiat, Chrysler, Dodge, etc.

Ferrari is in the process of being spun out, but is not "out" yet. If I were a potential merger partner, I'd want Ferrari in. With the Ferrari thing delayed until late fall, I'm wondering whether Ferrari will sweeten the deal.

Hyundai would probably jump at the chance to get Ram + Jeep.

People talk like he can spin off bits and pieces and it sounds good for a corp finance movie but the reality is that breaking Fiat/FCA up to sell is something he cannot do. The Italian government has a social/economic/political interest in keeping Fiat afloat (think of all those labor union votes) so merge is the likely option (acquisition is not because FCA is not strong enough). The issue is who is willing to merge with FCA. It's not like this is something that just came up, it's been bat around for the last 10 years but Fiat (and even now as FCA) is still unattractive to the other car mfrs. To the Western car mfrs, FCA has inferior technology, lack R&D assets, and poor brand reputation. Which makes the Chinese car mfrs the viable alternatives as a partner but even the Chinese car mfrs are consolidating. I don't want to use a political analogy but it's akin to Israel kept yelling to anyone that would listen "Iran nuclear is going to be a threat to everyone so everyone should banish Iran from the global community" whereas in reality, Iran nuclear is only a threat to Israel. Well, Marchionne is doing the same thing here, he's been yelling at the top of his lungs about the car industry is going to implode unless everyone consolidate and "FCA is a willing partner" whereas in reality, it's FCA that needs to be saved. The other car mfrs are doing OK for the most part.

You are correct that it is FCA that is weak but it's not alone. After Toyota, GM, VW, Ford, Honda, Nissan,etc., there are a lot of weak competitors. The merger of two weaklings doesn't make anything stronger. Mary Barra has it right stay focused and don't get involved in a resource consuming merger especially something that is weak. But Jeep has two dedicated factories making the key products and is easier to slice off and pick up by someone else as a single product line purchase. Much of the weakness in the industry is the results of governments like Italy keeping dying firms going, however weak, for political reasons. They might as well burn the money. The world won't miss Fiat and others. The remaining firms will be stronger. Think Studebaker, Packard, Hudson, et.al. going away in the USA. Now the issue is global.

Geely acquiring FCA would make loads of sense for Geely.

The motivating factor is that FCA's long term prospects are weak. FCA needs to share costs with other manufacturers in order to stay financially viable. Other manufacturers with simplified operations don't need FCA to reduce their costs. Ram and Jeep are its only brands of any real value.

I agree with ya there. The Fiat-Chrysler merger was daring & had all kinds of drama. But the combined automaker doesn't have much planned for any of it's lineups for the future. I just went to the Chrysler web site - they only have 3 vehicles to offer! Really? And Dodge has 7 vehicles, but 3 are rumored to be discontinued. No wonder FCA is struggling - it aint competing like it should.

Marchionne is trying to do something GM tried to do some years back - consolidate brand lineups so cheaper cars are sold by one mainstream brand & then sell the more expensive /luxury cars under the luxury brand. It didn't work as we see Cadillac planning to add new vehicles to its lineup to better compete with the other luxury automakers & their "fuller" lineups.

Dodge doesn't even have small or midsize CUVs to offer. HUH?! No midsize sedan, OMG! And thinks they can do without the Durango & Journey. Chrysler don't have a midsize SUV/CUV or large SUV, wtf? The 300 & 200 are cool, but....where's the fun sporty CUVs? FCA is just embarrassing now....

Vette71 and Paradox - I agree. The problem is that FCA can't spin off the Jeeps and Rams because it won't save the rest of FCA, which is what Marchionne has to look after. It's like saying my house is pretty bad but the bathrooms had been re-done and it looks great so I'm going to sell that. Even with Rams and Jeeps, they're prized in N America as I doubt they have much value outside of N America (and that's from my 10 years living abroad).

Is FCA worth saving? That is the question. My view is that as an entity it is not. The same goes for Peugeot, Renault, Mitsubishi, Saab (done), etc. The worldwide industry has too much duplication and too much capacity. A shakeout is over due. If FCA were to go into bankruptcy creditors would insist on Chapter 7 liquidation as their best shot at getting something back. That means selling off the good parts and liquidating the rest. Turn over Fiat to the Italian government to run if they insist that it live. FCA is not an Italian company, but is a Dutch holding company with Italian and American subsidiaries. Right now the American parts are making money and have value. Not so for Fiat. The next financial crisis will be the end of FCA, and others.

I don't entirely agree with the people who say that Ram and Jeep are of Value - the question is - of Value to WHO? The fact is - they are not really of value to GM. GM has their own small trucks - and SUV's - and has already done the development work on its next generation of CUV's. Gm has its own new engines and has new transmissions coming out too. While the name "Jeep"might have some value - GM does not need the product behind it. And GM has already shown that adding another 4x4 name is not needed (With Hummer). GM is not in the business of selling expensive low volume sports cars - so even Ferrari would not be a good mix - unless they could somehow associate it with Cadillac - without harming Ferrari - something I do not think could be done.

The fact is - FCA offers NOTHING to GM but a load of debt - and I would expect that Mary Bara would prevail in a proxy fight on this.

Merging GM and FCA could very well destabilize them both to the point of financial collapse, but Ram and Jeep would be immensely valuable to Hyundai/Kia for example.

You can not judge the validity of GM acquiring Jeep based on their poor decision to acquire Hummer.

GM looked at Hummer as a means to make their truck division more profitable. With Hummer, GM looked at company that had a brand name that was already established in the luxury market that customers were interested in buying product, something that only a few GM vehicles had accomplished at that time.

GM and Ford have no competitor vehicles to the Grand Cherokee and the Wrangler. GM, Cadillac in particular, has nothing to go up against MB GL, BMW X5, Touareg/Cayanne/Q7 and Land Rover. They have smaller ones and truck based giants. GM has no middle diesels but was in on the development of the FCA diesel. Of course that diesel in an aluminum F150 would be something else! Wrangler is unique with a huge dedicated owner base, especially in the USA.

Merging with the entire FCA would likely destabilize any other firm which is why no one answers the phone when Sergio calls.

Marchionne's motivating factor was clearly stated in the article:"to consolidate the automotive industry."

If a merger were to happen:

- Ram would be held and GM trucks killed or Ram would be sold to MB/Nissan
- Buick would stay because of China
- Chevy would be whittled down to the Camaro, Vette, Volt and mixed vehicles(gov/con)
- Jeep held and Fiat makes small cars & E series car derivatives
- Cadillac sold
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