By on October 5, 2012

Fiat/Chrysler CEO Sergio Marchionne casts longing eyes at GM’s palsied German daughter Opel, still, or again. Fiat was interested in taking Opel off GM’s trembling hands in 2009. Fiat is ready again, says the Italian business daily Il Sole 24 Ore, if Fiat gets a similar deal as with Chrysler: Opel for nothing, preferably with a cash sweetener.

Says the paper:

The idea of the Italian-Canadian manager is to get Opel at virtually no cost, not unlike what happened with the first installment of Chrysler, and not unlike its proposal for Opel in 2009.”

Influential analysts urge GM to get rid of Opel which lost $16 billion since 1999. Morgan Stanley analyst Adam Jonas said that GM would need to spend up to $13 billion to convince a buyer to take the hot potato, and to fund Opel’s pension obligations. Marchionne is painfully aware of what it costs to restructure an ailing company in Europe.

For the deal to work, GM would have to dissolve its alliance with French PSA Peugeot Citroen, which is said to be on the rocks anyway.  Fiat’s losses in Europe are offset by profits from the U.S , where Fiat “controls Chrysler, giving it a huge cash pile that could be used for acquisitions,” says Reuters,

Il Sole 24 Ore says the deal would be complicated. GM may not want to strengthen its rival Chrysler, where Opel technology would surely end up. Managing two ailing brands, Fiat and Opel, also would be a challenge.

Steve Girksy, chief of Opel’s supervisory board, says his company is not for sale. “GM fully stands behind Opel. Opel is a fully integrated part of GM’s global footprint and vital for GM’s future success in Europe. The GM-PSA alliance is fully on track,” Girsky said in an emailed statement. What else should he say.

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23 Comments on “Sitting On A Chrysler Cashpile, Marchionne Covets Opel...”

  • avatar

    Somehow I rather doubt this will happen, The whole Country of Italy is in a real Recession, whereas the German Economy is the Bread Basket of the European Union.
    Just because Chrysler was given to FIAT for nothing,I rather doubt it will happen with Opel!

    • 0 avatar

      Germany is still hurting too, even if they are in better shape than the PIGS (Portugal Italy Greece Spain). If GM has any common sense it would give away Opel in a heartbeat. I know that Opel has a lot of technological expertise and the engineers there have built a lot of important products for GM, but still. GM is losing like what, a billion per quarter with these guys?? GM can spare itself the cash drain and use the savings to invest in R&D.

      • 0 avatar

        GM would be better off just shutting down the brand and some factories, keeping key R&D centres and rebranding the remaining cars as Chevrolets. Giving away technology to a competitor makes no sense.

        And another brand for Fiat? Marchionne already is unwilling to invest in new model development, how does this help?

  • avatar

    A little attrition may be what the European industry needs. Fiat has problems of their own, taking on the weight of Opel doesn’t seem terribly wise.

  • avatar
    juicy sushi

    Given the massive over-capacity issue in Europe, and given the squeeze on the mainstream models that FIAT and Opel put out, I have to wonder why Sergio would want this. Is he thinking that if he buys up all the capacity in Europe he can then dictate terms to labour and start axing where necessary without interference?

    • 0 avatar

      Opel offers 8% market share. That’s very appealing to a company that is in Chrysler’s position.

      Chrysler is too small. The market is trending toward consolidation, so if it doesn’t grow, then it’s going to die. Opel would provide opportunities to share platforms and parts that would provide scale to its operations.

    • 0 avatar

      I think he wants GM’s tech at a bargain-basement price to share with Fiat and Chrysler. Unfortunately I think that this could be SAAB all over again where GM would sell the brand and factories but would not allow the transfer of GM technology. I can’t see why GM would want to sell Opel, it would make more sense just to End-of-life the brand, shut most of the excess factories down and make what’s left the European arm of Chevrolet as th009 suggests.

  • avatar

    I think it would be great. Opel could use a little Italian passion, but there seems to be a lot of strings attached. SAAB would have been better. Maybe Ed could do an analysis.

  • avatar

    Opel can’t make a profit in the current environment. Why pay for the privilege of losing money? It only makes sense if he can get it for nothing, strip out what will strengthen Fiat and Chrysler, and shut the rest down.

  • avatar

    I may be an overly simple person, but GM and Opel remind me of the father who turns his store over to his two boys: Levi, the father likes, Sal, the father doesn’t. Levi runs the clothing side and Sal runs the shoe side. Both sides make the same amount of money, but the father charges all the expenses to the shoe side and says, “look my Levi is a brilliant business man and Sal is a putz. If Opel is providing technology and talents that is making GM money in other markets, don’t you have to take that into consideration?

    • 0 avatar

      This is the way that I see it. At the moment GM is effectively paying for Opel to be their engineering consultancy. People are saying that GM’s management in Detroit are too stupid to sell Opel – in fact they simply know that they’re tied in and have to bear the losses at the moment with the goal of improvement in the future.

  • avatar

    I don’t think Fiat really want much more than Opel’s sales figures and dealer network…

  • avatar

    I’m trying to understand how Opel would fit into the Fiat-Chrysler family? Even with condensing Chrysler-Lancia into the same brand, there are still Fiat, Alfa Romeo, Jeep, Chrysler/Lancia, SRT (will the Viper be a global vehicle? I think so), and Maserati. As Fiat-Chryser turns itself around, there is A LOT of room for growth in the first four brands.

    Opel is just not necessary, and from what it seems, restructuring Fiat’s European over-capcity will be enough of a challenge.

    • 0 avatar

      Fiat already has nine brands: Fiat, Alfa Romeo, Lancia, Maserati, Ferrari, Chrysler, Dodge, Jeep, RAM. SRT would make it ten, not counting Abarth.

      That’s actually more than the eight car brands VW has (VW, Audi, Skoda, SEAT, Porsche, Lamborghini, Bentley, Bugatti).

  • avatar

    Do it, Sergio. Opels are fine automobiles. Re-badge them as Alfa Romeos, build them in Brampton and sell them in Japan. Provided they have an aura of Compari and Gina Lollobrigida, they’ll make you a mint.

  • avatar

    Chrysler has about 10B in cash and ST assets (FIAT consolidated has about 25B) and GM has about 33B.

    FIAT has an EV/EBITDA of 2.3 and GM has 2.5. So investors think more of GM’s future than FIAT’s and adding FIAT would be technically accretive.

    How about GM buying Ferrari, Alfa, Jeep, and FIAT south america instead?

    • 0 avatar
      el scotto

      How about GM finishes up buying back GM first? Numerous articles and replies have been written on this site about the bailout and other shenanigans. If GM ever pays the US Government back, I don’t care what they do.

  • avatar

    Ever notice how car comapanies run by strong individuals who know cars do well, and those thta are more how shall i put it corpoarte suck. I have no doubt that opel like a lot of GM has much talent to build great vehicles. With direct an enlightened management it could do well.
    Ie not under GM.

    • 0 avatar

      That makes me think of the words of the late GM executive Alfred P. Sloan: “We’re not in the business of making cars, we’re in the business of making money”.

    • 0 avatar

      Ford is doing well, but Mulally isn’t a car guy.

      From what I’ve gathered, Ford’s problem was executive infighting. The rest of the organization was world class, but the executives would make their products incompatible so that other executives wouldn’t be able to take advantage of their success, which undermined the economies of scale that you get from being part of a big company. The word in the business press is that Mulally managed to stop that kind of bullshit and get everyone to work as a One Ford team, through a combination of personal leadership and circumstances that made these folks willing to try something different. However they’ve done it, though, Fords products have become way more appealing to me personally as they’ve brought their good small cars to the USA, and theyve just fielded a serious competitor to the Prius.

      Anyway, this is a counterexample to your hypothesis about what kind of CEO a car company should have. Picking a good CEO involves far more than that – they need to be the right person at the right time. And, while a lot of CEOs don’t seem to earn their golden parachute, the ones who actually can turn a company around actually do generate much more value than they earn through their obscenely large compensation packages. I can only think of about three CEOs who match this description, and the problem is figuring out which person is which, before you hire them… Caretaker CEOs shouldn’t make any more than other skilled workers.

  • avatar

    Apparently Sergio does not see Opel as damaged goods, the trick of course is getting it for next to nothing and going to war on BMW and Mercedes home turf.

  • avatar

    No doubt GM is preparing for life after Opel, having switched most of their international car lines to GM-Daewoo product like the Spark, Sonic and Cruze. Opel has opened up shop in Australia, for example, under its own name and is marketing the Astra, which used to be a Holden.

    Funny how the US market probably depends more on Opel product than most of the others with the Regal and Verano.

    A tough choice has to be made. Do you cut and run in Europe or do you ride the recession out like everyone else? So far, GM has chosen the latter.

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