By on May 28, 2015

Fiat Cinquecento Ready For The Wedding Circa July 2011

FCA CEO Sergio Marchionne believes consolidation will occur as early as 2018. Meanwhile, Opel won’t be taking FCA’s hand in marriage.

Opel CEO Karl-Thomas Neumann stated a merger between his company and FCA was not going to happen, though he agreed with Marchionne in principle regarding such mergers, Reuters reports, especially in regards to volume, scale and utilisation.

Opel’s decision to remain within the General Motors family follows a similar rebuff by GM CEO Mary Barra, who received an email from Marchionne in March suggesting the two combine forces. When asked about the email on a recent visit to FCA’s factory in Melfi, Italy, Marchionne said he writes “lots of emails,” adding he doesn’t talk about such major decisions as consolidation via email.

Meanwhile, Marchionne is holding onto the idea of consolidation overall, believing the industry will see the first occurrence as early as 2018. He didn’t specify his company would be the one heading down the aisle in said consolidation, however.

[Source: neekoh.fl/Flickr/CC BY 2.0]

Get the latest TTAC e-Newsletter!

38 Comments on “Marchionne Hearing Wedding Bells By 2018, No Marriage With Opel...”


  • avatar
    turf3

    1) IN princiPLE, not ON princiPAL.

    2) What is this guy’s motivation? Where does the money trail lead? He seems to have an obsession.

    • 0 avatar

      His obsession is he doesn’t want to go down in history as the guy who killed FCA.

      Only Jeep and Ram are worth anything.

    • 0 avatar
      Lorenzo

      The company he haded before Chrysler was gifted to him has accumulated something like $32 Billion in debt. Jeep and Ram are keeping the debt payments current, but there’s not enough left over for new models.

      He needs a new partner with lots of cash or the ability to turn out new models with advanced tech to keep up with emissions/mileage/safety regulations, preferably both. FCA’s debt load would sink a smaller partner, and bigger partners don’t want him or the Fiat people to join them.

      He possibly thought he could pump out world-market Jeeps to generate cash, but it’s not happening, and he doesn’t have the money to update the entire model portfolio, much less replace it over time. Low oil prices are helping, but the regulatory constraints will only get tighter.

      • 0 avatar
        28-Cars-Later

        He doesn’t have the cash as you point out but I would lobby for a change to those constraints, at least if I was playing the long game. FCA product sells well and probably at healthy margins because Americans want what Sergio is selling.

  • avatar
    dcars

    Fiat has to offer a suitor something they don’t have. GM has cars in all segments so why add FCA’s limited lineup of cars to the mix?

    • 0 avatar
      bball40dtw

      All GM would want to do is take Jeep and burn the rest to the ground.

      • 0 avatar
        Pch101

        “All GM would want to do is take Jeep and burn the rest to the ground.”

        I doubt that he wants GM per se. Rather, he wants a relationship with a European automaker such as the Opel/Vauxhall side of GM or PSA in order to form a defensive line against VAG.

        Marchionne needs to share R&D with somebody so that he can expand and update the lineup at a lower cost, as he defends his ground in Europe. He can’t take the offensive in Europe without first playing defense.

    • 0 avatar
      heavy handle

      GM is nominally present in all segments, but they’re not competitive, especially outside of the US and Canada.

      • 0 avatar
        bball40dtw

        But is FCA competitive outside of US and Canada? Would Fiat be alive right now if obscene RAM and Jeep profits weren’t propping up the dumpster fire that Fiat is everywhere else?

        Let’s look at their brands before the Chrysler acquisition:

        Fiat – trash
        Alfa – dying trash
        Lancia – dead trash
        Maserati – low volume
        Ferrari – low volume and being spun off

        • 0 avatar
          heavy handle

          FCA has Maserati and Alfa in the premium space, and they have an actual profitable small car (the 500). GM has no premium brand outside the US, and has never made a dime from small cars.

          BTW, Buick isn’t premium in China. Their only popular model, the Excelle, competes with the Focus and Jetta.

          I’m sure Fiat would have survived without Chrysler. They have a talent for being in the right place at the right time, with a bucket of cash. If Chrysler wasn’t available they would have bought something else, maybe even GM.

          • 0 avatar
            bball40dtw

            Alfa is nothing. It’s premium Italian Mitsubishi.

          • 0 avatar
            heavy handle

            I guess it’s one month until we see what Alfa has to offer.

            Let’s hope the new car isn’t trying too hard (like Maserati), or not hard enough (like Jaguar).

          • 0 avatar
            sportyaccordy

            I dont think there is much money in developing all new small cars at all. That market segment is pretty steady, and market share is pretty locked in. I dont see how Chrysler/Fiat/GM could make something to dethrone the Civic/Corolla/Focus/Golf globally. The Civic and Corolla have both amortized their development costs several times over in age and volume. The Golf is newish, but its engine has roots going back over a decade, and its platforum will underpin pretty much every VWAG car that isn’t related to the 911/A4-8/Panamera. Focus is the only real crapshoot, but it’s way more competitive than the Dart and a little better than the Cruze IMO. Cruze isn’t even a GM, it’s a Daewoo. Truthfully FCA/GM would be wise to focus efforts elsewhere, which they have. Their little SUVs seem to be doing OK.

            This situation is looking desperate though. Does Marchionne see death around the corner?

          • 0 avatar
            bball40dtw

            My issue with Alfa is that FCA, Segio to be exact, has set lofty goals with no product. I know the reveal of the sedan is supposed to be less than a month away, but I don’t see how they are getting to 150K units in North America in three years. They better cull the Dart and throw an Alfa badge on it. American consumers are not going to be jumping out of the brand they are in for a brand that was last marginally popular here before Bobby Kennedy was assassinated.

            Good news for Alfa – they’ve already more than doubled their sales in the US over last year.

            Bad news for Alfa – it was 255 units…

          • 0 avatar
            Scoutdude

            Fiat did not buy Chrysler they were paid by the US govt to take Chrysler. They could not afford to buy anyone. In fact they had a deal to sell themselves to GM at one point. The deal was GM invested in Fiat and if Fiat didn’t improve it called for GM to buy the rest of Fiat. GM ended up paying millions to not buy Fiat and give them back the portion they already owned. Without being paid to take Chrysler and the profits that Jeep and Ram generated Fiat would have been in bankruptcy by now. Ferrari and Maserati would have been sold to the highest bidder, Alfa and Lancia would have died and Fiat would have been given away.

          • 0 avatar
            28-Cars-Later

            Good post Scoutdude

        • 0 avatar
          VolandoBajo

          FCA is the embodiment of “always a bridesmaid, never a bride.”

          No one wants to be that guy that married the ugly, overweight girl with a mound of credit card debt.

          And if someone were to bite on a merger, I don’t know how Marchione thinks he’s going to come out of it alive, unless one of his conditions of merger is a golden parachute that doesn’t serve as a poison pill to the acquisition of the only two profitable brands, Jeep and Ram.

          Glad to hear you agree with my assessment of Fiat, @bball40dtw seems someone else got all incensed that I questioned the quality reputation of the marque. But I’ll go with your analysis.

        • 0 avatar
          GeneralMalaise

          What an asinine assertion.

          • 0 avatar
            VolandoBajo

            @GeneralMalaise Without a back-reference, the way comments work (or don’t work, as the case may be) on this site, it is impossible to tell what assertion you felt was asinine.

            But were you the person who took me to task for saying that Fiat had a history and reputation for building unreliable cars? The Abarth 500 may be (and I do mean “may be”, not “is”), and exception to this, but I am still devoid of any evidence that would indicate that over the last half century the marque has accumulated any kind of reputation for reliability and longevity, other than “little”.

            Or, given the nature of this site, were you referring to some other assertion?

      • 0 avatar
        anomaly149

        Erm, GM sells around 10 million vehicles a year, and are in the top 3 OEMs. How exactly aren’t they competitive?

        FCA, post-merger, is on the order of 7th or 8th globally, 5 million-ish vehicles back per year. (or, put different, half the volume of GM)

        • 0 avatar
          heavy handle

          GM has great volume but, other than trucks (and military contracts), what do they sell at a profit?

          They’ve been losing billions in Europe every year for decades. Their cars sell at huge discounts in the US, and they don’t lead in any segment. They are effectively pulling out of Russia and Australia. Granted, they do alright in a few low-margin markets: Thailand, Brasil, China, but they don’t dominate any of these.
          In other words, the whole company is being propped-up by the fact that some Americans take out huge loans to drive around in pickup trucks. Haven’t we seen this before, with the company now known as “Old GM?”

          At least FCA is selling Jeeps worldwide, and has shown it can turn a profit on cars. Sure, they can’t negotiate the next decade on cruise control, but at least they seem to be making an effort.

  • avatar

    Marchionne’s flailing about looking for a suitor may kill FCA outright.

  • avatar
    Big Al from Oz

    I really find it amusing how the pro US vehicle guys smash Sergio and FCA.

    If it wasn’t for him you wouldn’t have Chrysler/Jeep/Ram. He has saved their asses.

    Look a the Fiat and associated Italian vehicles like US vehicles were only a short while ago, trash.

    Many seem to forget that Sergio had made large changes to the “Italian work ethic” across all of Italy’s industries since the GFC.

    It will hopefully get better on the Euro side of FCA. Don’t write them off yet. Look at your own US industry, from putting out sh!t product overall to what it is now.

    I do think Sergio should look towards Asia, that is the future. The US and EU are mature markets and will find it harder to make money in Asia than an Asian company.

    • 0 avatar
      derekson

      Someone would have bought RAM and Jeep in liquidation. Chrysler and Dodge would probably be dead though, yes.

      I imagine a Japanese or Korean company would’ve bought RAM. Maybe Hyundai? Jeep would have been a very valuable property, and any number of companies would’ve taken a shot at buying it. Hell, maybe Daimler would’ve grabbed it to realize their original plan for spinning off a Jeepless Chrysler.

      • 0 avatar
        Pch101

        “Someone would have bought RAM and Jeep in liquidation.”

        The Ram brand didn’t exist until Marchionne created it. Prior to that, it was just a nameplate in the Dodge lineup.

        “I imagine a Japanese or Korean company would’ve bought RAM.”

        No way. Nissan could have taken a run at Chrysler and was a logical candidate, but Ghosn didn’t show any interest. Toyota and Honda prefer organic growth to acquisitions, so there is about zero chance that either of one would have been interested in either Chrysler or GM.

        Daimler pretty much paid Cerberus to take Chrysler. The Germans didn’t know what to do with it, and weren’t going to suddenly figure it out during the depths of a financial crisis.

        The only two logical and acceptable candidates for leading these turnarounds were Ghosn and Marchionnne, but only one of them was interested. If there were Chinese parties interested, then those would have surely been unacceptable to the federal government that was paying for the party.

      • 0 avatar
        Scoutdude

        Yes, Jeep and Dodge trucks were the prize that Daimler hoped to get from buying Chrysler. Fact is that shortly after taking over Chrysler they put the Chrysler brand up for sale. They got zero takers. Fiat among others made it known that they would buy Jeep. Daimler then offered Dodge as part of the deal. Again they had zero takers. After a couple of years of Chrysler and Dodge being up for sale they finally relented and called up all the suitors that were lining up for Jeep and said they would sell Jeep as long as the buyer took Dodge and Chrysler too. Again they had zero takers.

        Finally they found someone with absolutely no experience or knowledge of the auto industry (Cerebus)to take the entire mess off of their hands. However to do so they agreed to take back the paper and continue to provide parts support. Cerebus thought they could do a standard LBO deal that they had done so many times in the past. Sell off the hard assets, the property and plants with a lease back deal, and then show a short term increase in profits and then take the shell of a company public. That was why they did the lifetime power train warranty to pump up sales. Then to make it look like they were making a profit they went about systematically denying warranty coverage. In some cases it was an outright denial of claims, they specifically held their dealers hostage. They told them if their warranty charges were too high that they would be cut off from the lease/ rental return remarketing sales and have their quotas cut on popular selling vehicles. They also hid the impending warranty costs by specifically stopping production of parts required for the warranty repairs. They didn’t outright deny those claims they just postponed them indefinitely by refusing to supply the parts needed to perform those repairs.

        Of course in the mean time the economy collapsed and they were left holding the bag of real estate that wouldn’t sell, increasing complaints about the denial of warranty work and lots and lots of the worst MPG vehicles in the industry coming off lease at a time when no one was buying low MPG vehicles. Many of them could not be sold, to the few dealers they hadn’t cut off, for half of the residual.

        It was not a smart move for the gov’t to pay Fiat to take Chrysler. In the long term it would have been cheaper to bail them out like GM and wait until things turned around. It probably would have resulted in a lower long term cost to the gov’t than bribing Fiat to take them. If they would have done that we would still have Chrysler while now the profits that Chrysler are generating would be going to American share holders rather than being used to keep Fiat alive.

    • 0 avatar
      VolandoBajo

      @Big Al We would still have Jeep and Ram, if only because they were bought up out of a liquidation proceeding. And if we lose Chrysler, how is that any worse, or even as bad as, losing Mercury, Pontiac, Oldsmobile, Plymouth, etc.? What great Chrysler products have come out of the Sergio/FCA era?

      Give me back my Panthers, and you can keep your Chryslers.

      But don’t call the Fiat “trash until a short while ago”…a handful of Fiat fan-bois will rise up in defense of the glorious history of the marque.

      In a college town in FL years ago, the only single marque independent garages in town were one for VW’s, largely due to the volume of vehicles on the road at that time, and Fiat, largely due to the frequency of their visits to the shop, as their volume on the road was nowhere near that of the VW’s. And the Fiat mechanic always had a backlog of repairs on his lot, to boot.

      I’d rather have to deal with two British vehicles with Lucas electrics (which I did at that time, a Mk II Jaguar and a 600SS Norton), than have to troubleshoot and maintain a Fiat (which I tried to do for a couple of friends, to keep them from being eaten out of house and home by their “sporty” “economical” little cars.)

      And I believe the jury is still out on how much of a quantitative change Sergio has made to the traditional “Italian work ethic”. More power to him if he is succeeding, but I would be skeptical, absent the publication of productivity statistics.

  • avatar
    Big Al from Oz

    Why doesn’t Sergio buy out Holden, HSV, FPV in Australia!

    This isn’t as stupid as it sounds.

    He will buy into companies that specialise in high performance rear wheel drive vehicles.

    Maintain the design and engineering from these companies and start to produce competitive German prestige vehicle competition.

    GM made a bad move with Cadillac. Caddy should of been dropped and GM should of used the HSV name to produce a global prestige vehicle.

    Sergio do this. You will get your hands onto GM and Ford tech. This is much needed in the Italian side of your business.

  • avatar
    STRATOS

    This is all about greed .There are billions of dollars for the Agnelli family and some for Marchionne himself if they can boost up the share value faster, before they sell out.This is not about synergy of efficiency of resources.He wants to retire as very rich man to reward himself for the hard work he put in in the past.

  • avatar
    GeneralMalaise

    Must be very sloooooow car news days around here… jaysus.

  • avatar
    anomaly149

    The answer is probably (or should probably be) Suzuki. FCA isn’t what it ought to be in southeast Asia or India, and a tie-up with Suzuki would be good for both. Tata doesn’t offer much (FCA really doesn’t need JLR to compete with their other in-house luxury brands). Mitsubishi, Subaru, and Mazda probably have keiretsu behind them too powerful to be bought. No one else is appealing (Germans, French) or likely interested (Japanese Big 3, GM, Ford, Hyundai-Kia).

    They also need to get their Chinese in-market tie-ups to be more than just stringing GAC along for slightly less terrible import hurdles.

  • avatar
    z9

    I’m pretty sure I saw that exact Cinquecento when walking around Rome a few years ago.

    The above comment about the Agnelli family’s interests is probably very close to the real story. Italy is a family business culture more than an entrepreneurial culture. By the time a business passes to a third or fourth generation, there isn’t always a lot of motivation to increase market share or take risks. The primary motivation is to preserve the asset pool.

    • 0 avatar
      Lorenzo

      The Agnelli’s are rich enough to hire the best financial advisers. They’ve broken up the huge Agnelli conglomerate into multiple pieces, retaining a portion of each spinoff through the holding company Exor. The family itself is no longer exclusively Italian, with members living all over the world.

      The Agnelli family head of Exor and FCA Chairman John Elkann, was born in New York City! Since He took over in 2010, the auto group has spun off the truck and other divisions, leaving to Fiat Auto Group most of the debt. In 2013 the Financial Times estimated Fiat’s accumulated debt at 28 billion Euros, about $32 billion today.

      The plan to sell out what was left of Fiat to GM failed, but the Chrysler gift has kept Fiat alive. Sergio now has to find a way to hand off FCA to a merger partner and enable Exor to dump its 31% stake.

  • avatar
    seanx37

    Marchionne is correct in that there needs to be more consolidation. The problem is what happens then. A GM/FCA merger would be a disaster. Espcially here in SE Michigan. A Hyundai/KIA/FCA might make sense. Really, just for Jeep/Ram. And that is the issue with every possible merger. The only thing of FCA that make sense are Jeep/Ram and Ferrari. That is all anyone would want of them.

  • avatar
    VolandoBajo

    The fact that Sergio may be right that the industry needs more consolidation, does not mean that consolidation will necessarily take place. He just has to keep whistling that tune, as he has no other in his list of available songs to sing.

    People in Hell need ice water, but that doesn’t mean that they are going to get it. And the industry (or at least FCA) needs consolidation, to bail out their position vis a vis the Agnelli family and Cerberus, but that doesn’t mean that it will necessarily ever occur.

    Though I’m sure Sergio wishes that people like us who see what the emperor is clothed in would just shut up and go away, so he can market his new line of merchandise, which consists, in his mind, of not just cars, but an entire company.

    A bad deal is not made into a good deal merely because one party desperately needs it, or would greatly benefit from it.

    The Washington Redskins would be a better team if they had a more stable QB situation, but that doesn’t mean some other team is going to offer them a solution to that problem, either.

    For a deal to take place it has to at least appear beneficial to both sides…which is a big problem for FCA, as can be seen by failure of other industry leaders to even enter into serious talks about corporate marriage.

    Sergio is somewhat like the old Classics Illustrated comic books tale (I believe it was a Dickens tale, but perhaps Poe?) about a man who was tricked into buying a magic lantern for a penny. The catch was that he had to sell it for less than he paid for it, before he died, or else his soul would belong to Satan.

    So after much rending of garments and gnashing of teeth, he found a way to trick the person who sold it to him into buying it back as part of a package deal, for a half-penny, in one of the few places in the world where there were half-penny coins.

    Unfortunately for Sergio, he cannot seem to find anyone who is willing or able to buy into his company, even at the lowest price he is able to cut for the deal. And if this remains so, his fate is already sealed, though he continues to collect his salary and bonuses while he sits at the helm of an apparently doomed ship.

    Unless he sells a boatload of Hellcat engines, which would explain his desire to offer that engine in multiple vehicles. He could even cut the price on the TrailHawk a bit, I would bet, though that might not even be necessary, as he does enjoy a very good margin on that vehicle.

    The real question becomes can he keep the ship afloat long enough to make the Jeep/Ram franchise so profitable that he can move the whole thing without taking a financial bath. Even if it results in the death of Fiat, Chrysler and the rest, if he can package it up to get his price, he wins. Unfortunately, it will be an uphill battle all the way, and he is unlikely to find another player with both the liquid assets and the desire/knowhow to play that game.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Socrates77: The world is shrinking, only idiots think the capitalism is the way to go. Tge time for competition has...
  • manu06: I’ve downloaded an app called Radio Garden. It accesses thousands of radio stations around the world with a...
  • Carlson Fan: “GM had an airbag system to cover all 3 front passengers going back to the last of the Fleetwood...
  • Carlson Fan: I’d take the 6.2 as well, as long is it wasn’t in a Denali or High Country trim package,...
  • PrincipalDan: Boat? Bring Out Another Thousand. FYI the front bench comes with a revised airbag to cover 3...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber