By on August 30, 2015

Sergio and 1.4L Turbo MultiAir in better times at Dundee. Chrysler Photo

We have to hand it to Larry P. Vellequette at Automotive News for getting FCA’s Don Marchionne riled up. In addition to getting Sergio talking yesterday about automakers having a history of bending the unions over, the outspoken executive has now called for a General Motors takeover via a series of hugs increasing in their intensity each time.

“There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you,” said Marchionne to Vellequette. “Everything starts with physical contact. Then it can degrade, but it starts with physical contact.”

And no, that’s not even the best part.

Marchionne asserts he and the board of directors have no choice but to pursue General Motors based on the numbers.

“We’re not talking about marginal improvement in margins,” Marchionne said, “we’re talking about cataclysmic changes in performance, just huge.”

And how sweet is that EBITDA figure?

“Look, the combined entity can make $30 billion a year in cash. Thirty. Just think about that fucking number. In steady-state environments, it’ll make me $28 to $30 billion.”

Yet, General Motors refuses to look at the numbers, with GM CEO Mary Barra stating in June that GM is busy “merging with ourselves.”

The relatively short piece from Automotive News is filled with that will likely become a Greatest Hits album for both Vellequette and Marchionne with lines like:

“It would be unconscionable not to force a partner,” he said

“I’ve offered to sit down with them and take them through the numbers,” said the Italian-Canadian CEO as he sipped an espresso and swiped through documents on his tablet, giving his visitors a cursory look at various charts and graphs he says make his case.

“They won’t listen. And that kind of abject refusal to engage … the capital markets won’t understand why you are rejecting the discussion.

“You may reject the deal but you can’t reject the discussion. If you’re refusing to talk to me, and you have seen nothing, you either think you’re above it all, or you think the capital markets are full of schmucks that owe you something.”

“There have been responses of people who have shown interest in discussing,” he said. “Are they the people I wanted to get the response from? The answer is probably not. There are people who are interested in doing deals. I’m not interested in doing deals with them … because there’s a better deal.”

“Why,” asked a high-ranking GM executive, “should [GM] bail out FCA?”

Asked directly, a GM spokesman wouldn’t call Marchionne’s analysis wrong but said GM officials believe the company and its shareholders are better off on their own.

Last emphasis mine.

If GM officials think that shareholders want anything other than increased profits, those officials are going to be in for a rude awakening — when they’re out of jobs after the dust has settled.

Everyone, especially a shareholder, has a price.

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62 Comments on “Marchionne Calls For GM Takeover Just Short of Hostile...”


  • avatar
    RideHeight

    Des..peraaaado,

    why don’t you come to your senses?

  • avatar
    Commando

    HowTF do you force a merger with a company that can eat your lunch and still feel hungry afterwards?

    • 0 avatar

      Look at the hostile take overs of the 80’s all it requires is some capital that thinks it’s worth it.

      • 0 avatar

        If Kirk Kerkorian were still around, he’d be all over this.

        • 0 avatar
          RobertRyan

          “Why,” asked a high-ranking GM executive, “should [GM] bail out FCA?”
          I can only imagine how many GM investors were squirming after seeing those words. Either that or they have very short memories

          • 0 avatar
            APaGttH

            But it is exactly what it is if GM or anyone else sucks in FCA – it is a bailout.

            As noted by dal20402 below what FCA has is Jeep and…well…HEMI and…as far as GM is concerned…Jeep.

            GM doesn’t need Ram – they have Silverado and Sierra. So does GM need a fullsize truck platform?

            Nope.

            GM doesn’t need Dodge as a middle of the road “performance” brand. They shot Pontiac in the head in 2009 – so what, they get stuck with Dodge to…shoot it in the head.

            Chrysler? Oh boy, Buick with style and old Mercedes technology and an aging RWD platform. Hmmm, I seem to remember GM has an even better RWD platform in Zeta, that is also aging, and they are ending in 2017. So what, they want another outdated platform tied to a brand that gives us the 200? OK, they get the Town & Country – GM did shoot minivans in the head.

            Fiat and European production? Oh OK – that’s why GM shed Saab, that is why GM was desperate to unload Opel. Just what they need, European distribution and manufacturing. Uh-huh.

            Alfa? Sergio’s ego trip.

            FCA is running out of R&D capital, they’re delaying everything and to the outside observer betting the farm it seems on Alfa, which defies all logic.

            Anyone that buys FCA is bailing FCA out.

            The tree Sergio should be barking up is Hyundai/Kia or the Chinese. MAYBE Tata, but that story is weak.

            They have a number of things that Hyundia/Kia would want beyond Jeep – namely engine patents and of course Ram. They also could use the Town & Country (yes, Kia has it’s own van).

            It is clear that Hyundai/Kia wants to do more RWD vehicles — it makes a shred of more sense.

            The Chinese would be interesting looking to expand distribution as their own economy slows down, and they choke to death in smog and traffic.

            Tata I don’t think has the resources to do it, but they’ve done a moderately good job of turning zombie brands around.

          • 0 avatar
            sportyaccordy

            Good post APaGttH. What does that stand for anyway?

            And you are 100% right. GM buying FCA would be taking on a ton of stuff it busted ass to shed. It’s a wonder FCA is turning a profit at all.

        • 0 avatar
          VenomV12

          I don’t know Mark, this is the kind of thing I could see someone like Bill Ackman getting all over.

      • 0 avatar
        SoCalMikester

        and it only ever works out for the people up at the top- the lenders. they slash and burn to create “synergy” while they rape and pillage both companies pensions and cash reserves.

        those that dont remember history are doomed to repeat it.

        • 0 avatar

          So cal Mike, I agree this will only work for the money providers Sergio the Agnelli family and a few other. It will also help a few of the large shareholders, in terms of the general economy and the state of the auto industry I have a feeling this will only make things worse in the long run.

    • 0 avatar
      Xeranar

      I’ve read quite a few great books on leveraged buyouts. They were huge in the 1980s but FCA has the capital and experience that if they worked with the right firm like Kolhberg, Kravis, & Roberts who leveraged Nabisco and RJ Reynolds along with a number of others. Pretty much as more of GM goes to the open market it increases the likelihood of FCA being able to buy them. Not to mention if the FCA is willing to float the UAW funds new ‘GM-FCA’ shares they’ll be likely to put up their shares without a fight and that’s a huge share of the needed votes.

      They don’t even have to buy out GM lock, stock, and barrel. They just need enough votes to do their work. It’s akin to the KIA-Hyundai alliance where it’s clear who’s the senior partner but they don’t own 51% of each other.

  • avatar
    sportyaccordy

    Don Marchionne is gathering the resources to make an offer they can’t refuse

    This is going to be a clusterfck of Time Warner/AOL proportions. Except with CARS.

    • 0 avatar

      “Don Marchionne is gathering the resources to make an offer they can’t refuse.”

      Literally.

    • 0 avatar
      dal20402

      He wishes he had such resources. All he has is Jeep and a few crate Hemis. GM’s right to think about this as a “bailout.”

      • 0 avatar

        He doesn’t need cars all he needs is capital to force GM to his way of thinking. It has nothing to do with cars.

        • 0 avatar
          baconator

          He’d need $9B just to get a 20% stake in GM, $45B to get all of the equity. He’s got $25B on the balance sheet, which is not nearly enough to launch a hostile tender offer. He’s just trying to embarrass the board of GM into telling Barra to take a meeting.

          • 0 avatar
            Xeranar

            You don’t need to use FCA equity at all in this fight. You just issue new stock and find an alliance within the institutional banking group to buy GM.

            Simply put: You just need Chase, Citibank, or Bank of America (along with a slew of unnamed foreign banks) that can back you 45B for a 40% stake, a 20% loan, and FCA takes on the remaining 40% debt (18B) which devalues the company but then when you sell off some of the brands/plants etc…It all comes into line.

            This all assumes that FCA pays out in cash for stock. In many cases with more trusted institutional actors (like the UAW Fund) it could simply swap stock for their shares and save cash.

            It’s also a bad deal for American workers in most cases as FCA-GM would compete in too many of the same markets with the same products.

          • 0 avatar

            In the linked article from automotive news Sergio refers to capital several times. I got the impression from the phrasing he has already onboarded some financial institutions and is looking to bring more on. What cash FCA has does not matter at all. Search Irwin Jacobs and hostile takeover he was great at using other peoples money to buy corporations many multiples the size of his own. The key is how much money can be made in the first 24 months of a merger to get most of the capital providers paid.

          • 0 avatar
            dal20402

            Banks would need to be pretty gullible to think that the redundant assets could be sold for reasonable value. The brands will be almost worthless. There will be no buyer in position to use the physical assets. This deal would make Marchionne into a billionaire, but would be a Charlie Foxtrot for everyone else.

          • 0 avatar

            I don’t think he means to do a take over and liquidate. I think the plan would be to keep the brands intact for now. What it would allow is massive cost reductions (read people) in R and D and management as well as possible capital cost reductions (shuttered plants) You would need to keep production staff as I imagine the plan would be to keep selling everything in the short term. Essentially you end of with x sales for gm plus x sales for FCA – 50% of R and D costs and management Should equal huge profits over the next 2 years before you would need to start rationalizing products etc.

          • 0 avatar
            Speed3

            @Xeranar –

            What I don’t understand is why the UAW would agree to help a FCA-GM merger. They know how much overlap the two companies share and now many layoffs would result. What would be in it for the UAW? All I see in this is Sergio getting his golden parachute when he retires from FCA.

          • 0 avatar
            28-Cars-Later

            Agreed.

  • avatar
    Truckducken

    God bless Sergio. This is great, and necessary.

    • 0 avatar
      highdesertcat

      Yup! Look at what he’s done for Chrysler/Dodge/Jeep. Imagine how well GM could do under FCA ownership, once the UAW is marginalized at GM like they were marginalized at Fiatsler.

      Hooray for Sergio!

      But in reality, the US government will never let this takeover happen. The consumers’ loss…

      • 0 avatar

        He darn better get the UAW on board-heh.heh!-or they’re going to go screaming to the Obama Administration and faster than you can say Hemi he’s going to be hearing Anti-Trust til his ears bleed.
        Throw in the prelims to the elections w/the Dems running a socialist and a sinking front-runner,and Repubs scared shipless they’re going to be asked do they support union workers getting fired so a foreign billionaire can make a couple dozen billions,and there will zero political support.

  • avatar
    islander800

    Good Lord, you give the guy Chrysler and he thinks he deserves the world!

    As the Auto Extremist has pointed out for a long time, this King of the World wannabe is puffed-up hubris and arrogance in full flight. He thinks the American market will absorb over 100,000 Alfas a year by 2017. To see that come to pass, he’s raiding funding from future product development of … Jeep… , the current cash cow of Fiat Chrysler, to pour into Alfa. And “Fiat” has just been voted least favorite brand among new car purchasers, based on owner experience – number 25 on the list of 25.

    Enough said.

  • avatar
    nickoo

    This guy is full of hubris and none of his predictions have come close to coming true. He isn’t a very good CEO (He has ONE success under his belt, the new fiat 500) and isn’t a car guy. He absolutely doesn’t understand the American car market or how to utilize and position Chrysler’s assets. If he did, he wouldn’t need GM at all or even consider them. If I was a major FCA shareholder, I would be for pushing this guy out and spinning off Chrysler into an independent corporation so he could stop wrecking what little value they have left.

    There are people out there who LOVE Chrysler, Jeep, Dodge, and Ram, and there’s no reason that Chrysler and Dodge should have both been left to wither while he pushes his pipe dreams of Alfa and Maseratti.

    • 0 avatar
      derekson

      The bigger issue is letting Ram and Jeep products wither on the vine while they fund Alfa/Maserati. Chrysler and Dodge are somewhat understandable, but Jeep and Ram pickups are complete cash cows for FCA right now. Risking those sales and profits by extending the life cycles is really foolish and shows a complete inability to properly prioritize.

      • 0 avatar
        Ihatejalops

        Well he certainly doesn’t understand his brands or how to separate them. It’s comical.

        Ram: Trucks only.
        Jeep: SUV’s, CUV’s and maybe 1 luxury SUV
        Dodge: inexpensive performance cars/CUV’s only.
        Chrysler: Combine with FIAT and create inexpensive, reliable transportation. Change name to FIAT.
        FIAT: See above
        Alfa: “Luxury” cars to compete with MB & BMW in certain segments. Cars do NOT cost more than 70K and a bottom of 35K. FIAT has zero vehicles over 35K.
        Maserati: High end luxury. Nothing under 65K
        Ferrari: Well we all know that guy
        Lancia: Ha! Kidding.

        This structure, retained with fervor and never deviated from, would give him the product mix and enough differentiation to help take over the market.

        With that said, I’m surprised Google hasn’t just bought one of the brands/factories for their self driving prophecy.

  • avatar

    Marchionne wants to take over entire US autoindustry all Big 3. After GM next will be Ford. He will achieve what Italian mafia failed to (take over American Government). If he pulls it off he will be a f..ing legend in Italy – the man who put Goliath to his knees. Everyone in the world hates America – He will be a hero.

    • 0 avatar
      RobertRyan

      @ Inside Looking Out
      I suspect without a takeover the Chrysler will eventually die or be broken up and sold. Ferrari etc will be a separate company, so is CNH/ IVECO, both will survive quite well. Not so much Fiat cars

  • avatar
    Fred

    If I was GM and forced to take on FCA, here is what I would get rid of RAM. I got enough trucks don’t need anymore. I’d keep Jeep. What good is the rest of Chryslers products? Fiat. Pain in the butt Italian unions. Cars that few want. I don’t really know, merge with Opel, make cheap cars for Europe. What I don’t get Ferrari? Is that what you want Sergio? Then bring us your money. Oh, and you’re fired.

  • avatar
    LS1Fan

    Can we verify it wasnt a bourbon-enhanced expresso he was drinking?

    The antitrust implications alone would stop any FCA-GM merger cold.The job losses in various districts as duplicate divisions and facilities are shut down (Don’t need GMC when you have Jeep, don’t need Cadillac or Buick ever…) would be a major political problem for Congress. Laid off workers are unlikely to vote for the incumbent party.
    Unless this guys got Capone level political muscle in DC, he needs to lay off the booze-enhanced coffee binges.

    • 0 avatar

      If he goes the hostel takeover route it gets harder for the ant trust stuff to work. It can and it will likely get tossed about by GM to stall the deal. But in all likely hood they should OK a merger we still have a fair amount of choice in cars in the US and the government did try to get GM and Chrysler to merge before.

  • avatar
    thelaine

    Donaldi Trumpini

  • avatar
    Silence

    Wow. Uncle sweater has gone completely nuts.

    • 0 avatar
      PrincipalDan

      He’s one thin mustache shy of being a dead ringer for Father Guido Sarducci. In fact I can’t help but read the “hug” quote in Father Sarducci’s voice.

  • avatar
    mjz

    Man, Sergio must be looking at a Bob Eaton/Daimler style payoff if he can unload FCA. He is now coming across as truly desperate. Merging with GM is simply a bad idea. It does not have good synergy. A foreign partner like Peugeot/Citroen or even Opel, would make so much more sense. I would suggest a Chinese partner, but since their stock market implosion, that is less and less likely. I am very disappointed with The Great Sergio of late. I think he has done some really great things with Chrysler, but his relentless attempts to whore Chrysler out now is loathsome.

    • 0 avatar
      geozinger

      IMO, Sergio gets way too much credit for what he’s supposedly done with Chrysler in the US. Everyone was stunned when the revised Chrysler lineup came out after the BK and subsequent takeover; but the reality is the former Cerberus employees knew the company was on the chopping block and were dressing up those cars in anticipation of the whole company being sold off. Sergio stepped in at the right time.

      The return of the Fiat brand to the US was botched. The Dart, 500 and especially the 500L launches were very poorly executed. They seem to have gotten their act together with the launches of the Renegade, 200 and 500X. The Renegade and 500X are finally products that will hit the sweet spot in terms of demographics.

      I get what Sergio is saying about R&D, but that’s never stopped other car manufacturer’s from borrowing another’s technology when it suits their needs. So what’s different now?

      I’m inclined to agree with the folks saying that Sergio wants a Golden Parachute a la the Chrysler Daimler deal.

  • avatar
    redav

    Isn’t he supposed to retire soon? How much longer until he goes away?

  • avatar
    Pch101

    I wouldn’t take this too literally.

    Marchionne obviously wants a deal of some kind. It doesn’t have to be with GM. He’s creating buzz and momentum for whatever that deal happens to be (and doing a fine job of it.)

    • 0 avatar
      tresmonos

      FCA is f*cked. They utilize a double link suspension in a platform whose market leader uses a Chinese pot metal twist beam.

      Their platforms are bloated, rushed and behind the curve. Their shareholders are screaming due to piece cost. Their wire harnesses are 100% covered in the most expensive insulation due to engineering laziness (this may have changed recently). Their platforms use hydraulic AND electric gears for power steering. Let’s not even mention all the expensive powder coating done to engine bay components because Sergio likes the under the bonnet appearance to look sleek. Oh it’s got corrosion resistance already on it? Who cares, just apply powder on top of it and blow the $$.

      FCA has the worst combinations possible – Italian over design and Chrysler shotgun engineering. They are slowly getting it right (transmissions completely outsourced), but what they want is a lean backbone driving their platforms and design release. What they have is an Italian car serving a demographic that was buying Dodge Nitro’s and yelling at immigrants in Walmart yesterday.

      • 0 avatar
        bball40dtw

        I had a ProMaster and Transit back to back recently, and that was an eye opener when it came to product quality. Ford doesn’t do everything right, far from it, but I don’t even like putting “ProMaster” in the same sentence as “Transit”.

  • avatar

    I went and read the source article. After looking thru it a few times I think he only has eyes for GM. It’s not about long term synergy its about short to mid term market share and profits. I think hes letting his financial roots show. The question becomes how is he going to go about it. Will he pull in some big capital sources for a hostel takeover? Will he work with activist investors already at GM to try and force their hand? I’m thinking some combination of the two. The real question would be if he can convince enough of the capital. It sounds like he may have the short term numbers to do it. In the short term after a merger you could slash workers slash R and D projects for competing projects, slash capital spending on infrastructure. All the while instantly becoming the largest car maker with the best economies of scale. All of this should provide huge short term gains to the capital involved. Which is pretty much what he stated in the interview (fat stacks of cash FTW). Long term I agree it may well be another Daimler deal in the end, but I think there enough short term potential to get the billions in capital on Sergio’s side.

    On a personal note I find this fascinating from an business deal aspect but I really hope it doesn’t happen for my Mopar fan side.

    • 0 avatar
      VCplayer

      There’s just way too much overlap between the company’s assets. You end up with a bunch of overlapping R&D and manufacturing that will take years to consolidate. You might be able to boondoggle a bunch of investors for awhile, but I really can’t see this being a great idea in the long term.

      Nissan and Renault getting together made sense because they had very different manufacturing bases and different enough products that they weren’t just wasting all of their R&D from the past 10 years when they got together.

      Someone mentioned FCA getting with KIA/Hyundai above. That actually would make a ton of sense, but is not nearly as sexy of a sell.

  • avatar
    matador

    This reeks of desperation.

    FCA has nothing of interest in the US market for GM. Dodge? GM had Pontiac. Chrysler? GM has Buick. RAM? GM has trucks, and could likely federalize the Opel Movano for vans. Jeep? Maybe, but the GM Denali-trimmed vehicles serve a similar market.

    Chrysler may be in good shape, but they are on outdated platforms with little in the pipeline, they don’t even offer a CUV that I’m aware of outside of the 500x and maybe the Renegade if you call them that, and they don’t carry a very good reputation.

  • avatar
    CJinSD

    Doesn’t anyone remember that Fiat has tried to force GM to buy it in the not so distant past? It cost GM billions to escape, and hastened the bankruptcy they blamed on the mortgage industry.

  • avatar
    mtr2car1

    This idea makes a ton of sense when you look at what he’s standing next to at the podium – engines…engines and technology.

    VW has proven that multi brands is not a big deal.

    The savings between the two comes from NOT having 2 groups develop a 2.0 liter engine; NOT having 2 groups develop hybrid or fuel cell or battery technology; NOT having 2 groups develop infotainment systems.

    In the old days, having 6 versions of the GM10 platform was a waste of money, today that’s the least of the costs, what Marchionne is preaching is that having 8 company’s independently develop what is essentially the same items is dumb.

  • avatar
    Sky_Render

    Forgive me for not getting excited, but your $30 billion in savings is most likely thousands of “downsized” employees who are now out on the street with no job. So screw your merger.

  • avatar
    Edsel Maserati

    MJZ nails it. This is a classic case of a big exec who earned a lot of stock options and stands to gain a fortune in a takeover. When Bob Eaton engineered Mopar’s sale to Mercedes years ago, it was all about Eaton’s stock holdings. It was a brutal thing to do the company. But our system of awarding CEOs with unreal amounts of stock options just guarantees mergers galore.

    According to the Detroit Free Press, Marchionne owns 13 million shares of FCA, or one percent.

    So he’s just another megalomaniac more concerned with deals than product. Did he really have to force out Montezemolo so he could sit astride Ferrari?

    Also, I don’t mean to be hostile, but I really the phrase that’s going through this thread: “hostel takeover.”
    Sounds like the latest slasher film.

  • avatar
    87 Morgan

    The job losses alone would be devastating. The dealer network alone in the states would be horrifying to watch dissolve. Most mid size metro stores have 100 employees. This merger would give easily 5k too many store fronts selling the same product. You have 500,000 out of work right there. Plus, factor in the bank debt of the shuttered store fronts that took on ass loads of debt to make their facilities image compliant and you are talking billions of dollars.

    **** I know a lot of the folks here loath the dealer. Many for good reason. But, their employees are not all bad, have families and largely make an honest living. You have bad actors in all industries. Maybe some day we can start the truth about veterinarians blog; who for the most part are dirt bags that prey on the weak minded and their adoration for fido. Sure, I’ll pay you $295 to brush my dogs teeth….

  • avatar
    thornmark

    Anyone would be crazy to deal w/ this loon. Chrysler should cut off the canker known as Fiat and merge w/ a viable company. Fiat is crap, distilled.

    Autoextremist has this guy’s number:
    http://www.autoextremist.com/

  • avatar

    Has Marchionne come unhinged from his greed? Next I expect him to start speaking French, put a hand in his sweater, and talk about invading Russia.

  • avatar
    thornmark

    FIAT ranked the worst car brand by United Staters:
    http://www.usatoday.com/videos/money/cars/2015/08/31/71274340/

  • avatar
    Big Al from Oz

    This does raise the question of how far can the auto industry rationalise globally?

    I do see the day when the auto industry is similar to aviation. How many airframe manufacturers were there 60-70 years ago. For that matter how many vehicle manufacturers where there that long ago?

    I’d bet within half a century there will only be a handful of auto manufacturers. The cost is now becoming very prohibitive to just roll out new vehicles as the cost of developing the required technology must be shared. This sharing will last for so long.

    Sergio will find his partner, it might not be GM. GM will also find partners in the future.

  • avatar
    Jeff S

    There is always Tata and Geely. Tata and Geely would have access to the US through FCA dealers.

  • avatar
    RHD

    Marchionne fails to understand how dropping F-bombs reduces his credibility.
    Ah, Sergio, how about you make better quality cars first, then start thinking about the funny money games?

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