General Motors, FCA Recruit Advisors Amid Merger Standoff

Cameron Aubernon
by Cameron Aubernon
general motors fca recruit advisors amid merger standoff

The Lifetime movie starring FCA has reached the “dangerous stalker” phase, as the automaker and General Motors recruit advisors amid a merger standoff.

Despite GM and CEO Mary Barra both rebuffing FCA’s and CEO Sergio Marchionne’s attempts to consolidate the two automakers and their respective resources, the former has brought aboard Goldman Sachs and Morgan Stanley for advice in handling the latter’s attempts to force the issue, Reuters reports. FCA is being advised by UBS, with help from Lazard via the automaker’s founding Agnelli family.

For months, Marchionne has been beating the drum of consolidation, going as far as to recruit GM investors to force the automaker’s board to meet FCA at the negotiation table. His reasoning amounts to reducing costs involved in developing platforms and technologies for new vehicles by spreading those costs throughout two or more merged parties.

However, for FCA to make GM theirs forever and always, sources close to the matter claim the automaker would need to pay $77 billion in an all-stock transaction, based on GM’s shareholders demanding a 35 percent premium regarding market capitalization, as well as a significant payout on their shares.

The hostile takeover would put FCA under financial strain, as well. Its market value — most of which is linked to Ferrari, which is set to strike out on its own later this year — is around $57 billion, while capitalization is $20 billion, much smaller than GM’s respective figures of $84 billion and $57 billion.

(Photo credit: Shane Hayes/ Flickr/ CC BY-ND 2.0)

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  • Feds Feds on Jun 18, 2015

    It's the circle of life, and it moves us all... Am I the only one who remembers last time Fiat and GM were tied up? Fiat was running themselves so poorly that GM paid them $2 Billion to avoid having to take a majority stake in Fiat. Fiat turned that $2B into their current product portfolio, which is starting to get a little long in the tooth, so they go back to GM to try the whole shell game again.

  • Corey Lewis Corey Lewis on Jun 18, 2015

    So say you force it in front of GM board and investors. It still isn't gonna make this stank pile of dog crap smell any better just because you put it on a silver tray in the board room. CP, Sergio, CP.

  • Alluster Alluster on Jun 18, 2015

    Sergio should take the lead in fixing 'overcapacity problems plaguing the industry'. Give Jeep and Ferrari away for peanuts and shut down FCA. Problem solved!

    • Kendahl Kendahl on Jun 18, 2015

      Shut down the Fiat portion of FCA, keeping Ferrari, Jeep and Chrysler. No point in throwing out healthy babies to rid yourself of the bathwater.

  • Kendahl Kendahl on Jun 18, 2015

    FCA merging with GM or Ford reminds me of a photograph of a Burmese python that tried to swallow an alligator bigger than itself. Neither survived.