Marchionne Makes Case For Consolidation With 25-Page PowerPoint
Not one to give up on corporate marriage, FCA CEO Sergio Marchionne posted a merger thesis on his company’s website prior to FCA’s Q1 2015 earnings call.
The 25-page PowerPoint presentation – titled “Confessions of a capital junkie” – makes the case for consolidation by outlining several key issues all automakers are facing, and the savings that could be garnered only through consolidation, Detroit Free Press reports.
Despite being blown off by General Motors, Ford, Peugeot and a handful of others over the past few weeks, Marchionne states the presentation doesn’t let his company off the hook as far as its current position “in the automotive food chain” goes, nor is it an attempt to sell FCA, a revision of his five-year plan, or his “final big deal.” Instead, he goes into the need to consolidate companies to better handle increasing capital investment costs as far as rapid technological development, climbing regulatory costs, and tightening emissions standards go.
According to Marchionne, consolidation would not only reduce the aforementioned costs, but better optimization of industrial allocations and “an exceptional value creation opportunity for shareholders” while leaving jobs, distribution and brands untouched.
[Photo credit: Italian Embassy/ Flickr/ CC BY-ND 2.0]
Sergio also said he'd consider merging with Apple or another technology company. How embarrassing for him
Firstly, there is no such thing as a "merger". There are only acquisitions. When a deal is called a merger (and especially if it's called a "merger of equals"), it signals failure. Acquisitions succeed when there is a clear sense of who is taking over whom, and the culture of the acquiror prevails from the outset. It's easier to do this when then acquiror is substantially larger than then target, and has a dynamic leader and management team. And that management needs to have a clear sense of what it wants from a deal. Mass for it's own sake doesn't work. Cisco and NCNB (now Bank of America) are classic examples of companies that knew what they wanted an acquisition program to achieve, and how they would realize value from a deal. Too many CEOs turn into deal junkies, looking for growth for its own sake - perhaps because it justifies higher compensation packages for themselves? Applying this to the auto sector, if FCA wants to be a buyer rather than a seller, there's not much to pick from - maybe Suzuki (if Suzuki can remove VW from the picture), maybe Mazda, not much else. Sergio's quest doesn't look to me as likely to bear fruit.
Sergio Marchionne seem to be selling the idea that big corporate monopolies are good for the economy. And he is right, they are good, very good in fact, for the economy of the one percenters. The Bilderberg group has been working on achieving this same very goal for the last 60 years or so. It will come as no surprises to learn that Mr. Marchionne himself has for a very long time been a regular attendee to this infamous Bilderberg group. But I'm sure is just a coincidence...
Sergio needs to look at someone in the EU to take control of. Or at a minimum buy into to give him some leverage at the table. He also needs someone to finance his goals. Sergio missed a great chance the French government grabbed in buying into Renault from under Ghosn's nose and Ghosn's pi$$ed at that, by the way. Fiat is faltering in the EU, which is a pity. Fiat needs to find a middle size manufacturer that's progressive to side with. Mazda would be ideal.