Volkswagen Demands Marchionne's Head

July 27th, 2012 8:29 AM

Fiat & Chrysler CEO Sergio Marchionne’s pointed remarks have attracted the ire of Europe’s 500 pound gorilla Volkswagen. VW demanded that Marchionne steps down as president of the European auto manufacturers association ACEA. If he won’t resign, Volkswagen could resign its ACEA membership – which would send the club into instant irrelevancy, not to mention insolvency.

“Marchionne is unbearable as president of ACEA,” Volkswagen communications chief Stephan Grühsem told Reuters. “In our view, his comments are unqualified yet again. We’re therefore calling on him to step down.” If Marchionne won’t heed the call from Wolfsburg, Volkswagen’s “exit from the manufacturers association is an option,” Grühsem told Germany’s Spiegel magazine.

In an article in the New York Times, Sergio Marchionne accused Volkswagen of exploiting the European crisis to gain market share by offering aggressive discounts, “It’s a bloodbath of pricing and it’s a bloodbath on margins,” Marchionne told the paper.

Marchionne currently holds the rotating appointment of the presidency of the European manufacturers club. After he took over, his remarks and initiatives often were regarded as overly reflecting the interests of Fiat and possibly other scratched and dented European makers only, and to run against the interests of the powerful German contingent. By openly attacking Volkswagen, Marchionne burned a bridge too far.

Marchionne is not very popular amongst Europe’s auto CEOs. Privately, some call him an upstart clown, or worse.

#ACEA #BertelSchmitt #Fiat #Germany #Italy #Marchionne #Volkswagen

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Lorenzo on Jul 28, 2012

In the most recent photo of Sergio I've seen, he's growing a beard again. Maybe that's what has VW po'ed. OTOH Sergio is speaking for the other members. In times like these, the big players really put it to those lesser members and force them into consolidation or bankruptcy. In America in the early '50s, the market was booming, but the big three competed with each other for market share with annual model changeovers smaller makers didn't have the resources to match. The result was Hudson, Packard, Nash and Studebaker couldn't compete alone. Packard was forced to join Studebaker in a decade long death spiral, while Hudson and Nash lasted longer as AMC. VW may be only using its economies of scale without regard to the others, or it's actually TRYING to reduce the clutter of smaller European makers and their excess capacity. Considering how long it took Saab to die, how long it's taking for Adam Opel to be put down, and the political obstacles to closing excess plants in high wage countries, the VW method, if that's what they're doing, is a better way to rationalize the industry in Europe. It would also make ACEA superfluous, so a VW exit might come soon anyway - why give the victims a soapbox?

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- NMGOM on Jul 28, 2012
  
  Lorenzo, That's a very interesting and realistic historical perspective. Yes, it may look brutal from the outside, but if VW can "clean" the European house of weaker car companies that are essentially socialist basket-cases, and do so WITHOUT dumping or unfair trade practices, then, yes, it will increase its domination, but it will also make life better for Mercedes, BMW, Audi, Ferrari, McLaren and others who have well-defined markets and robust businesses. -----------
  
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- Doctor olds on Jul 29, 2012
  
  VW is just using their scale to grab market share. It may be predatory, but it is just business. GM's link with PSA is to give them regional scale similar to VW. The Opel nameplate, a Million a year brand, is likely to be here for a very long time, though its role may be more like Buick here, higher profit, lower volume. Chevrolet will grow to fill the value end of the market. Can't wait to see the S-Class / 7 Series competitor from Cadillac. The ATS has great potential there, too. Over time, similar dynamics created "The Big Three" in America, though tooling and product development costs were bigger factors here, particularly in the early years. Globally, the smaller players will have to link up with the big boys or die, though politicians most everywhere have a clear understanding of the value of a domestic industry and will undoubtly play a role in the outcome. This will be a long drawn out ordeal, perhaps leading to the fragmenting of the Euro. The Germans enjoy the advantage of a strong economy at the same time there currency,the Euro, is weakened by most other Euro economies. A great deal for Deutchland, while it lasts, but what is the end game when the Euro fragments?
  
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- NMGOM on Jul 29, 2012
  
  doctor olds.. Good analysis and prophecy. I wonder if suspicion about the Euro's integrity and longevity is why the Brits continue on with the pound Sterling (£)? Knowing the Germans, I also suspect that if the Euro even smells like its going to fragment irreversibly or lose permanent value,.....well, don't be surprised if the there is a return to the Deutschmark.... .....and the rest of Europe will have to shift for themselves. I think the Germans are growing weary of propping up everyone else's economy when others continue socialist featherbedding (e.g., Greece) and lack of strategic business planning (e.g., France).... -------
  
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- Th009 on Jul 29, 2012
  
  @doctor olds, "The Opel nameplate, a Million a year brand, is likely to be here for a very long time, though its role may be more like Buick here, higher profit, lower volume." This might be a feasible approach: drop the smaller Opel models (Corsa, Astra, Meriva etc) and either sell current Chevrolets in their place -- or rebadge the current Opels as Chevrolets where necessary. Keep Opel to the upper half of the market (Insignia, maybe Mokka and Antara, with premium trim only), and start the hard work to turn it into a premium brand (expect 10+ years to get credibility). Sell both Opel and Chevrolet (and Cadillac?) through a merged Opel-Chevrolet dealer organization. Once Opel has some real premium brand cachet, then you can build dedicated Opel-Cadillac dealer locations, and also consider introducing smaller premium cars to compete with the Audi A1, Mercedes A-class and others. But not now.
  
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GTAm on Jul 30, 2012

The sooner the Fiat, PSA, Renault, GM and Ford Europe shut down their idle factories and zeros the overcapacity issue they'll be able to compete better with VW on margins. Marchionne has been advocating this for a while now and actually Fiat already shut their Sicilian plant. But closing factories makes governments unpopular. That's why he's calling for a common decision from the big wigs in Brussels. This is a simple plan to save the European car industry and strengthen it for the long term. But VW sits in a different position. They see this as an opportunity to prey on the weaker makers and make Europe their own. So there is no union in Europe. It seems likely that VW cannot stay in the ACEA with this stance. I'm wonder what the repercussions would be if VW exits? With the fragility of the entire EU in balance Sergio is firing without fear. I like it. I'm sure there are analysts out there who have already drawn up several scenarios/outcomes from all this. All very interesting but I hope all the European manufacturers manage to survive. It would be a very dark day in the world for many if Germans were the only European manufacturers to survive.

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- NMGOM on Jul 30, 2012
  
  Hello, GTAm, Please see my interlinear comments below. "The sooner the Fiat, PSA, Renault, GM and Ford Europe shut down their idle factories and zeros the overcapacity issue they’ll be able to compete better with VW on margins." ----- N: I agree, but margins would only work as a short-term stop-gap. Eventually, they would also have to compete with VW on quality, model offerings, service, and availability,...and that's going to be much harder. ------ "But closing factories makes governments unpopular." ------ N: Very true. Can you imagine how popular any US administration would have been if GM and Chrysler were allowed to fail and disband without those government loans in 2009? Well, multiply that sentiment by a large number, and you get an idea of what it is like for more socialist-minded Europeans to deal emotionally with the shut-down of auto factories. (Incidentally, I was not in favor of the US auto bailout as it was done, but thought it would be healthier long term if GM, for example, were allowed to revert to its individual car companies. Tiny Japan has 6; tiny Germany has (had) 5, but the huge USA has 3! How does that promote competition?) ------ "This is a simple plan to save the European car industry and strengthen it for the long term." ------ N: VW may already see the demise or absorption of small, inefficient car companies as a way to save the European car industry,....and strengthen their own fortunes, of course. Others, obviously, may be less happy with their solution. ------ "So there is no union in Europe." ------ N: I don't know what the exact founding principles or precepts of the European Union are with regard to business operations like this, but I suspect they involve mutual economic aid in a broad sense. I doubt that they require a suppression of competition within any one industry for the sake of that level of economic unity. Do they? ------ "All very interesting but I hope all the European manufacturers manage to survive." ------ N: I think we all suspect that is not going to happen. The VW megalith has just become too large and too efficient world wide for very small or struggling car companies successfully to compete, except if they have unique market niches. If VW wanted to move into those niches, then absorption is an option, such as with Porsche, Bugatti, or Bentley. But I doubt that other German companies are threatened, like Mercedes or BMW. And British car niche-companies like McLaren, Aston-Martin, and Jaguar are actually finding a resurgence. In Italy, Ferrari and Pagani are doing well. In Sweden, Volvo has Chinese support, and Koenigsegg is a specialty company. But as for PSA-Citroën, Opel, Vauxhall, Fiat, and Renault....I believe they will be history by 2020. They are marginal on their own, and why would VW want to acquire them if their offerings would compete directly with VW products? But remember, VW isn't the only "bad guy" here. Japanese and Koreans are coming on like gangbusters in those economies and getting very popular, just as they did and are doing in the USA. So, even without the 5 in the ailing group above, I still count a lot of independent resident car companies in that very small European sphere: namely 10. Isn't that a bit much? -----
  
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