By on September 1, 2015

 

Mergers don’t excite me.

I’m not excited about the prospect of walking in to my neighborhood Jeep/Chevy/Buick/Dodge/GMC superstore and thumbing through the soul-less car stocks like a weekend trip to Costco.

Bark makes a good business case that Mazda and Subaru could help each other in worldwide sales, and brings up some interesting short-term mashups: rotary engines with all-wheel drive, a boxer in a Miata, et al. All those things sound fun like monster trucks and cans of Pabst on a Friday night.

But in reality, despite repeated calls from automakers that consolidation will mean the car business can stay “in business,” mergers don’t make better products — but they try to make shareholders happy, if they can even do that (see: Suzuki-Volkswagen, page 231 of your textbook). Shared R&D is often synonymous with “badge engineering” (Cimarron) and when it’s not, well, just look at Saab.

If history has taught us anything, mergers simply leave car people left out in the cold. 

After Fiat Chrysler Automobiles’ CEO Sergio Marchionne said this weekend that he’d press for consolidation — whether GM liked it or not — it got me thinking about how it would impact consumers.

In our theoretical world of a GM-Fiat merger on Sept. 1, 2015, there’d be signatures; on Sept. 1, 2020, there’d be cars. And by the looks of most automotive mergers in the past, they wouldn’t be all that good.

History is littered with failed automotive marriages (Ford and its polygamous relationship with European luxury brands, GM and Saab … and Suzuki … and Subaru … and …) with successful partnerships being the exception — not the rule. For every Renault-Nissans, there are three DaimlerChryslers.

If GM and Fiat were to elope tomorrow in all likelihood the platforms would stay where they are for a while — maybe an engine swap here and there — and the marquee stuff would live on. GM would still sell the Corvette, Jeep would still sell the Wrangler. (And the Viper would probably die to death, again.)

But at risk would be unremarkable mass-market cars built to appease a bottom line for a merger that started off with a profit to make. Sergio said the marriage could produce $30 billion a year in EBITDA, and you’d figure they’d be out for every dime. Remember: If GM killed Pontiac once, why not do it again with Dodge?

There’s also the risk of massive recalls on a scale we’ve never seen before. If you put a shared part, designed and built to a budget, on 15 million cars we’d be wise to buy stock in Advil — NHTSA will need all of it.

Perhaps for everyday consumers the differences would be hardly noticeable. The post-merger cars could blend together in a way they already have been blending for the last five years, and normal consumers couldn’t — and wouldn’t — care less.

But for car people, any merger means fewer products on the road and the cars foisted upon us would march closer to a joyless appliance, like our refrigerators.

And I can’t stand cars that are cold.

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122 Comments on “Mergers Don’t Make Better Cars...”


  • avatar
    Andy

    Competition is always – ALWAYS! – better for the consumer. Mergers make for mediocre products and they eliminate jobs.

    Plus, holy cow, if GM was already too big to fail, imagine how big of a government teat GMFCA would be sucking on!

    • 0 avatar
      MBella

      I agree. There has never been an example where a merger has resulted in a better offering for the consumer. Look at the airlines.

      • 0 avatar
        stuki

        Sloan’s GM likely improved things over a million cottage shops.

        Every guy in every garage making a different product, makes for lots of competition, but probably not the optimum result for most consumers.

        The more complex and restricted the environment; some times technically, but nowadays mainly regulatory and legally, the larger the optimum size is; since compliance has a large fixed cost component that needs to be amortized over units sold. Cut back IP laws, and similarly mindless regulations of other kinds, to a more reasonable 10% of what they currently are, and the optimum would be many more makers and much more competition. Benefiting both product variety and quality.

    • 0 avatar
      dantes_inferno

      > Plus, holy cow, if GM was already too big to fail, imagine how big of a government teat GMFCA would be sucking on!

      You are spot on. Well done, sir!

      Mergers don’t make better cars – they simply turn consumers into cash cows.

      Pardon me while I chew my cud.

  • avatar

    Except car companies with weak economics tend to try to extend the life of platforms, like Chrysler and their never ending stream of K Car derivatives that were mostly awful.

    • 0 avatar
      Andy

      Car companies with strong balance sheets also extend the life of platforms, because there’s no pressure to do better.

    • 0 avatar
      tylermattikow

      A new platform is not necessarily better than the old one. Look at BMW e46 vs e90, or the VW Passat. There was also nothing wrong with K-Car platform, some of the cars based on it had bad styling, build quality or drive train issues. Taking the cost and competition into consideration they were not bad. Your Honda or Toyota was going to cost much more for a smaller car. Since everything still rusted away a few years back then, it really didn’t matter if the Toyo was much more reliable. The K-car platform also didn’t stick around that long. Especially compared to the Ford Panther or GM G body. I’m not saying that the K-cars were great, they just don’t deserve to be everyone’s whipping boy.

      • 0 avatar
        Dave M.

        Good answer. It wasn’t a platform I was interested in, but that doesn’t mean it didn’t work for millions of people…

        I did like the Plymouth Acclaim as a modern day Valiant however….

    • 0 avatar
      SoCalMikester

      for the time i dont think they were awful, especially compared to the GM FWD competition. The 2.2 liter was better than a lot of engines at the time, and the platform itself spawned the game changing minivans.

      • 0 avatar
        dal20402

        In the early ’80s, they were what Chrysler needed. By the late ’80s and early ’90s, competing against the best-ever Accords and Camrys, and domestics like the Taurus and early W-bodies, they were a joke.

  • avatar
    Andy

    Put another way, do we really want the Wal-Mart of car companies to exist?

    Free market, yadda yadda yadda, let ’em f*** everything up if that’s what they want. But this is not a good move for anyone who isn’t already rich.

    • 0 avatar
      Steve65

      People who want a “free market” are either confused, or are billionaires.

      The inevitable result of a free market is consolidation into a handful of giant players, who then dictate terms to their customers who have no meaningful options.

      • 0 avatar
        mechaman

        I always find that term ‘free market’ a bit odd. As if it were a sentient organism that functioned all on it’s own ..

        • 0 avatar
          NMGOM

          mechaman – – –

          Don’t quite know how you got the jump from free market to living organism.

          But here is perhaps a better analogy from chemistry:
          It’s a big flask holding an equilibrium reaction between reductants and oxidizers. The former could be called “supply”; the latter, “demand” (that’s you and me). If you tweak one, the reaction (purchases) shifts one way; if you tweak the other, it shifts another way, adjusting prices of commodities.

          This mechanism is not sentient, but has a dynamic all its own. And it’s been around for thousands of years. It is in fact the natural state for the transactions of goods and services.

          ===================

  • avatar
    Steve Biro

    Fewer car companies almost always means fewer models and thus fewer choices for the consumer. I see nothing good for customers or employees coming out of a GM-Chrysler marriage. And how do they expect to get such a deal past the U.S. government?

  • avatar
    TR4

    It worked so well for BMC and Leyland in 1968. Oh, wait…

  • avatar
    Numbers_Matching

    Not all merger offspring have been mediocre. Some have been good. Example: Chrysler LX platform. Where would FCA be without this today?

    • 0 avatar
      bball40dtw

      The LX platform is a merger offspring? It was going to happen regardless of Daimler purchasing Chrysler.

      • 0 avatar
        Numbers_Matching

        With what suspension? trans? AWD system? These take time, money and expertise to develop.
        Don’t forget, Chrysler had not developed any RWD cars (except Viper) since the mid ’70s.

        • 0 avatar
          bball40dtw

          LH was able to go RWD. LX was developed from that and Chrysler was told to incorporate Daimler parts.

          I guess it’s a product of a merger because the first gen cars had, according to allpar, about 20% Daimler parts, but LX was going to happen regardless.

  • avatar
    RideHeight

    “soul-less car”

    Since that implies there are cars *with* souls, TTAC has given me religion.

    ‘Cause if a lump of metal, glass and plastics can have a soul so can I and doggies and kitties and birdies… Rejoice!

  • avatar
    SCE to AUX

    Daimler-Chrysler was a dud from the beginning, but FCA is a marriage made in heaven.

  • avatar
    jthorner

    Moan all you want, but in an era of ever escalating R&D costs and the search for economies of scale, mergers will keeping happening.

    Your recall argument is especially weak because more and more of the systems in automobiles are designed and manufactured by suppliers who serve many companies. Takata airbags are but one example.

    • 0 avatar
      RideHeight

      This. It’s like fretting GE and LG merging their appliance lines.

      Same flimsy, local badges.

      • 0 avatar
        CoreyDL

        My old GE alarm clock is still at my parents house. I got it when I was about 5 or so, and it has wood tone and came from Service Merchandise, IIRC.

        That makes it 25 years old, and it still works perfectly, in use by my mom daily! So I think GE electronics are fine on their own!

        Here she is!
        http://img1.etsystatic.com/000/0/6538476/il_570xN.304415045.jpg

        • 0 avatar
          RideHeight

          No fair going back in time. Everybody’s everything was built like ze brick outhouse.

          What few functions they performed, they did so forever. I deliberately keep an old Samsung microwave going because solid.

          But even it seems flimsy compared to the ’80s Toshiba it replaced.

          • 0 avatar
            CoreyDL

            That’s a good point. Let’s have GE make the electrics for Land Rover products circa 1980-2010. :)

          • 0 avatar
            RideHeight

            The only elderly products I’ve actively sought, willing to pamper indefinitely, are the market-buster Japanese things from the ’60s to early ’80s.

            God, the build quality they sold for a pittance before they felt they could charge more!

        • 0 avatar
          Ryoku75

          Buying and selling older 80’s era radios, the GEs tend to hold up the best, while the enthusiast-preferred “Made in Japan” Panasonics age and yellow like cheese.

        • 0 avatar
          redmondjp

          And sadly, Jack Welch shut down GE’s small consumer appliance division, claiming that the profits weren’t high enough.

          I’ve got a number of GE clock radios from the 1980s, and they were top-of-the-line. Look up model 7-4880 on google – I’m still using one of those.

          • 0 avatar
            bball40dtw

            I still have the 7-4612B clock radio from when I was a kid. It has awesome woodgrain.

          • 0 avatar
            CoreyDL

            Alarm clock twins! You even know the model number, ha.

          • 0 avatar
            bball40dtw

            I had to look it up. I would usually just say small brick looking ge clock radio with brougham wood grain.

          • 0 avatar
            Lack Thereof

            I had that same 7-4624B. I got it for christmas as a kid, right around 1988 or so.

            But I do have to say it did fail on me about a decade ago. The alarm started going off at random times, rather than when set. I had to make a 2 AM trip to the 24-hour drugstore to get a replacement the night it went nuts, in order to be up in time for work a few hours later.

            I never forgave it for failing, but to this day I haven’t found a satisfactory replacement for it.

          • 0 avatar
            CoreyDL

            @Lack Thereof

            Got to find one NIB on Ebay or something, I’m sure there’s one out there.

            Or, search out a Service Merchandise still in existence (ha).

        • 0 avatar
          krhodes1

          I have one of those sitting on my bedside table. Bought it when I was ready to leave for my freshman year of college, fall of ’87. Still works just fine. But it is just a $10 clock radio – what is there to break in it?

          • 0 avatar
            28-Cars-Later

            I was a kid during the 80s but aside from the goofy clothes, bad pop music, and Soviet threat of annihilation and all I think it would have been a great time to be a teenager/adult. Coming of age in the late 90s was cool and all but the whole tech crash and 911 thing were bummers for us late Gen Xers.

          • 0 avatar
            NoGoYo

            I certainly would like to have been going to college before 2008 rather than after…I can’t even afford my books right now, I only had enough money to pay for tuition.

            And hey, if I had actually been a kid in 1992 instead of just being born in 1992, I could have gotten a Sega Genesis when the Genesis was still a new, actively supported product!

          • 0 avatar
            Ryoku75

            I’m using a Sears Com/Trek currently due to the large read-outs, with a GE 7-4663A unplugged beside me, and my second malfunctioned Panasonic sitting beside my monitor.

            At NoGo: Games were great back then, had a Genesis with the Sega Channel, fun times, and we never saw “loading” on our TV sets.

          • 0 avatar
            CoreyDL

            I think I definitely picked the best time to go to college! Fall of 04 through late May 08. What an excellent time for new grad job opportunities!

  • avatar
    smartascii

    I realize that FCA products are not very high on the reliability charts, but what Marchionne was able to accomplish with the American brands has been pretty remarkable. If you don’t believe me, go climb into any Chrysler product from the mid 2000’s. Daimler squeezed every bit of inspiration and value out of that company, and crapped all over what was left. None of the products released in recent years would have been possible without the FCA merger.

    I’m just not sure what FCA and GM have to offer each other, because they both make mediocre trucks that sell well and mediocre cars that don’t. Neither one has a brand with high global regard, and Alfa-Romeo vaporware notwithstanding, neither really has a halo car that brings in aspirational buyers: The Corvette doesn’t sell Malibus, and no one has ever seen a Viper. I guess if Marchionne’s musings about cost savings were to materialize, they could try to out-Huyndai Huyndai, but if they can’t make an expensive, reliable car, I don’t see how they could make a cheap one.

  • avatar
    PrincipalDan

    This merger would make no sense, they are both full line car companies and that don’t really have any “holes” in their product portfolio to plug.

    This would be like Sears and JC Penny merging, I’d just end up asking “Why?”

    Even say Honda bailing out FCA the only pieces Honda would really want would be Ram trucks, Jeep, and V8 engines.

    The “small” automakers could benefit each other. Mazda, Subaru, Suzuki all have a decent world wide presence but not much of a footprint in North America, they should hook up with each other.

  • avatar
    OneAlpha

    Personally, I don’t think of big corporations as all working on the Weyland-Yutani model, but yeah, I have to agree with this.

    Make any organization too big, and it becomes incapable of doing its job.

  • avatar
    65corvair

    EBIDA isn’t considered to be a good accounting practice. It hides what is really going on or you would use traditional accounting methods.

  • avatar

    Some might say financial health was a result of the “lean production.” Seems like they go hand in hand.

  • avatar
    deanst

    Sergio has no interest in merging with GM. His real goal is to provoke a “merger” with VW. The germans are obsessed with size, and it would actually make some sense for VW – they have no pickups or CUVs worth mentioning for the north american market, and they could actually make Jeep a global brand. The biggest criticism of Audi is their bland designs, and putting their platforms under a Italian design could be a winning combination. The only obstacles are the inflated value of FCA shares and the Daimler experience.

  • avatar
    jimble

    The most successful automotive merger I can think of was Chrysler’s acquisition of AMC. Jeep got the corporate resources and stability to thrive, and Chrysler inherited AMC’s flexible and efficient product development methodology plus some advanced engineering from the Premier platform. I don’t see any similar benefits coming from an FCA-GM merger, at least not in the US market.

    • 0 avatar
      CoreyDL

      “AMC’s flexible and efficient product development methodology”

      Which was “We have no money, let’s change the door trim every five years!”

      • 0 avatar
        bball40dtw

        Hey, Chrysler got all those sweet Renault products in the AMC deal.

      • 0 avatar
        jimble

        https://en.wikipedia.org/wiki/Fran%C3%A7ois_Castaing

        • 0 avatar
          bball40dtw

          Corey likes to make fun of Chrysler/AMC because it’s easy. However, having François Castaing as the VP of vehicle engineering for Chrysler had much to do with the success of the merged/new company. He cut product cycles down and was responsible for flexible platforms that made Chrysler profitable in the 90s. Heck, his baby, the XJ Cherokee was responsible for 1/3 of the profits of the combined company before the Ram was designed, JGC came out, and LH cars were created.

          • 0 avatar
            CoreyDL

            Most of my making fun is sarcasm, and also first-hand and familial experience with Chrysler products made between 1988 – 2009.

          • 0 avatar
            bball40dtw

            Well, let’s be real; a lot of the products were still $hit. Transmissions would explode, engines would sludge, and trim pieces would fall off. I bet I can start any 90s Chrysler product with a butter knife.

            Even now there are quality things I don’t like about FCA vehicles in comparison to GM and Ford.

          • 0 avatar

            But it will start. Even if it was with a butter knife (may not move or the doors might not close but it will start)

    • 0 avatar
      SoCalMikester

      wasnt much of a “merger”. chrysler basically bought the jeep brand. everything else AMC made died after their lifecycle was over.

      at least they used the kenosha plant for a while to build diplomats, and engines.

  • avatar
    kmars2009

    GM ruined and killed Saab…and almost did the same to Suzuki. It’s the main reason Suzuki failed here, thanks to GM/Daewoo cars like the Forenza and Reno. Fortunately, Suzuki was unloaded and able to eventually survive. (no thanks to VW)
    As far as FCA goes, they seem to have improved Chrysler. I don’t think a GM merger is the best thing. After all, GM already downsized once during the recession/bankruptcy. They were too big as a company, and had very poor products as a result. Merging two companies with mediocre quality, is not a good thing. I forsee another bankruptcy if this happens.

    • 0 avatar
      CoreyDL

      Saab was headed downhill before GM got involved. They wouldn’t have made it on their own, if left to their own devices.

      • 0 avatar
        bball40dtw

        Yes. GM basically kept Saab on lift support for two decades. It cost them quite a bit of cash to keep it alive as well. They couldn’t even sell it’s used up parts to anyone.

        By the time GM bought Saab, in 1989, Saab had come up with basically one new model since the 60s. Everything else was a Lancia. Even the 900 was basically a re-engineered 99.

        • 0 avatar
          mechaman

          I’m glad someone corrected the ‘GM ruined Saab’ line. Really? If Saab was doing so great before GM, why did they hook up? GM may not have done the best job with Saab, but the patient was in serious condition before they got it.

          • 0 avatar
            Dave M.

            As a SAAB owner and loyalist, it took me quite a while to arrive at the same conclusion. While I think GM could have been more proactive at nurturing the brand, it wasn’t exactly a cakewalk in GM’s own house. People criticize the Epsilon platform as a forgery for SAAB, yet it moved SAAB forward onto a modern platform.

            GM could have done so much with the bankruptcy; not to shed brands but to create boutique lines within the big house, yet with only one full range brand (Chevrolet) and a number of one-two vehicle boutiques (Cadillac, Pontiac, Buick, Saturn, SAAB and GMC).

            Here’s a great research paper on SAAB’s death…

            http://issuu.com/uoebusiness/docs/who_killed_saab_automobile_final_report_december_2?e=2179111/2705308

  • avatar
    shaker

    One has to look no further to find that erosion of the middle-class and wage stagnation has forced car companies to build to a price point that matches the market, thus supplier consolidation, and mergers to increase the economies of scale.

    Thus, layoffs, automation, pay reductions, fewer middle-class workers.

    Investors stay happy, government supports more people.

    Wash, rinse, repeat.

  • avatar
    dwford

    Ford is the perfect example of why NOT do a merger. Ford added Jaguar, Volvo, Land Rover and Aston Martin to its Ford, Mercury and Lincoln brands. During that time period we got a failed attempt at world cars Contour/X-Type, Lincoln LS/Jaguar S-Type that were designed at huge expense but didn’t end up being very good cars for the time. Meanwhile we got Focus, which was a good car, but then left to rot. We got the Mercury Cougar, which was way worse than the Ford Probe it replaced, etc. Then we started getting Fords based on old Volvo’s.

    Now that Ford has stripped away all the excess, we have pretty great Fords across the board, with (hopefully) great Lincolns about to happen.

    FCA already has too many brands, yet not one complete car company among them. You are expected to cross shop 5 different brands (Jeep, Ram, Dodge, Chrysler, Fiat) just to assemble the models you can find at your local Ford or Chevy store, yet you still won’t find any hybrids or plug-ins, nor a “normal” subcompact car or a normal 7 passenger crossover. The you have 2 different struggling luxury makes (Maserati and Alfa) which FCA is pouring literally ALL it’s development money into, to the detriment of all the other brands. We are about to have a nice Alfa Romeo Guilia and a Maserati Levante crossover, and a bunch of aging designs in the mass market that were barely to class standards when fresh.

    Sergio is crazy.

    In my areas we have a Fiat/Alfa/Maserati/Mitsubishi store. I really question what goes on there, besides monthly salesman suicides.

    • 0 avatar
      28-Cars-Later

      I still contend as much as P.A.G. was a disaster, that Jaguar (around 1988) and later Land Rover (around 2000) were good buys from a corporate standpoint. Take PAG out of the equation you could have sold Jaguars/LRs along with Fords in every major nation and even ditched Lincoln/Mercury.

      • 0 avatar
        CoreyDL

        You know, I wonder what would’ve happened to JLR had it been purchased by Honda or Toyota, in lieu of developing their own lux brand. Though I suspect Honda was a bit busy to consider it at the time, having their own Rover probs.

        Just think, a lovely XJ8 with a Toyota developed 4.0 and built in Blackpool by a cracked-down and revamped Asian-style workforce.

      • 0 avatar
        derekson

        Yeah, I actually agree with this. If Ford had killed off Lincoln and made a big push to spread J/LR franchises in place of L/M stores, they really could’ve built something impressive. Take some of the development funds that went to making the Lincoln LS and put it into making a better S-type, and similar focusing on good premium products instead of versatile rebadging and they probably could’ve built a better modern Ford company than what we actually have now.

      • 0 avatar
        bball40dtw

        Y’all forget the profits Navigators were generating at the time. It was carrying the PAG. In 2000, Lincoln outsold Cadillac and was still doing close to 200K units a year in the US. We can play armchair QB, but no one was going to throw away Lincoln profits back in the early 2000s.

        • 0 avatar
          28-Cars-Later

          I can’t remember if Land Rover had a separate dealer network prior to PAG, but I know Jaguar did. Ford could have kept this in place in the time LM dealers were more successful and as time went on phased out LM as necessary. I get why Mulally did what he did, but he could have folded LM -and the dealer network- when he had the chance in 2008 and replaced it with what became JLR while jettisoning the rest.

          • 0 avatar
            Pch101

            Folding Lincoln would have been too costly. Couldn’t be done.

          • 0 avatar
            bball40dtw

            If they were going to consolidate dealers, they would have had to add JLR to Lincoln stores once Mercury was gone. That still would have cost them money at a time when they needed money.

          • 0 avatar
            CoreyDL

            I think LR (in many places) had their own network with those “Adventure Centre” type dealerships with little fake rocks and stuff.

            Here in Cincinnati the JLR was together, at a too small location. It’s now Montgomery Lincoln, ha.

          • 0 avatar
            NoGoYo

            @CoreyDL: I remember a Land Rover dealership in Willow Grove, PA from when I was a kid that went overboard with the rocks and silly rugged posturing, including Discoverys and Freelanders parked on big rock slopes overlooking the road.

            I just looked them up and they’re still around, but I think all the rocks and stuff are gone. Picture of the dealership on the website looks positively dull.

          • 0 avatar
            Lack Thereof

            I remember a similar land rover dealership in Seattle in that time period. Big fake rocks, Discoverys parked up on them at extreme angles for passersby to gawk at.

            Now there’s a big tall Amazon.com office building where it used to be.

          • 0 avatar
            CoreyDL

            @NoGo

            I looked it up, because I don’t really ever drive by the new one here. But they’re STILL at the fake rocks bit here, and look to have a little offroad course right next to the dealer.

            http://static.cargurus.com/images/site/2014/02/14/14/05/jaguar_land_rover_cincinnati-pic-6380274482486675155-1600×1200.jpeg

            http://s1088.photobucket.com/user/CincyJLR/media/Land%20Rover%20Experience/Cincinnati/Track%20Pics/Track5-14.jpg.html

    • 0 avatar
      bball40dtw

      PAG was a disaster because of how it was managed. It was full of good ideas that were poorly executed. Blame that on Jacques Nasser and his management team. Nasser had the foresight to see industry consolidation coming, but he couldn’t handle those transactions while leading Ford.

    • 0 avatar
      dwford

      That’s the point. All those good things that COULD have happened with PAG didn’t because it was too much to manage, which is why it turned out to be a bad idea. FCA-GM would be another mess.

      • 0 avatar
        bball40dtw

        FCA-GM would be a bigger mess. Ford acquired Jag, Volvo, and LR at different times. They should have been able to digest them properly. The Jag acquisition was done in 1989. When PAG happened, it had been over 10 years! It shouldn’t have been an issue. It was too much to manage for the Ford leadership at the time.

      • 0 avatar
        Pch101

        Tata’s doing fine with it.

        Ford wasn’t capable of doing it. Mulally jettisoned the non-core brands because they were a distraction during a time when Ford needed to focus on avoiding a complete collapse. Had circumstances been different, then JLR may have been worth keeping.

  • avatar
    Ryoku75

    We all know how well Geo, Eagle, and later Saturn worked out!

  • avatar
    seth1065

    Really what does FCA have Jeep and what else, and Jeep while doing great here is a truck and when gas goes up sales will go down, Minivans ? FCA may make a great ones based on its price but it is a segment that is not selling well, FCA cars are mostly crap and Fiat itself is a mess, both in Europe and the US, what little money FCA has is going into the wrong things Alfa and the trident, neither one will move a lot of metal. Ram trucks are on fire now but again see gas prices. Fiat has done very well when they were handed Jeep et al but they do not have the money to keep up with the VW and GM and Toyota’s of the world. he is owning a house that needs big repairs very soon and he is trying to sell before it get worse.

    • 0 avatar
      dal20402

      Yeah, this. The future is not bright for FCA (especially in America), and Marchionne knows it. That’s why he’s trying so hard to sell today, when Jeep, Ram, and lots of flashy Hellcat publicity are making him look good.

      • 0 avatar
        Pch101

        Huh? The US is FCA’s bright spot and carries the business.

        FCA’s primary problem is VAG in Europe. VAG has about 25% market share there and shows no signs of slowing down, while Fiat is concentrated in Europe’s weaker markets.

        His secondary problem is a lack of presence outside of Europe and the Americas. But that pales in comparison to his European problem.

        • 0 avatar
          dal20402

          The US is FCA’s bright spot *today.* That’s exactly why Marchionne is so desperately trying to sell *today*. But all they have are giant thirsty trucks and muscle cars that won’t work in a 52 mpg CAFE environment, and no plan whatsoever to deal with that environment. Their small cars are desperately uncompetitive (thanks FIAT), they have no alternative fuel or propulsion technologies on the market or in the pipeline, and even their big cars are less efficient than those of the competition. Neither the Pentastar nor the Hemi is efficient in class.

          • 0 avatar
            Pch101

            “The US is FCA’s bright spot *today.* That’s exactly why Marchionne is so desperately trying to sell *today*.”

            You’re surprised that a company would try to make money?

            “But all they have are giant thirsty trucks and muscle cars that won’t work in a 52 mpg CAFE environment.”

            Be serious. CAFE MPG does not equal EPA MPG (not by a long shot), and the targets are broad. The specifics will be negotiated as the situation arises, and it won’t be a problem. In the real world, large companies haggle with the feds and get much of what they want;.

            The US is not a problem for FCA at all, not in any way whatsoever. FCA has broader issues that come from being small and uncompetitive on a global level, which is why Marchionne wants to bulk up. Unlike GM, FCA really would benefit from being larger.

          • 0 avatar
            RideHeight

            If GM has something FCA thinks could help its global sales why doesn’t GM just globally sell whatever that might be?

            And if FCA is doing poorly globally what good is co-opting some of GM’s capacity to make an even greater number of uncompetitive cars?

            I don’t know this stuff… just asking.

          • 0 avatar
            dal20402

            Pch, I wouldn’t be so sanguine. You can get away with some negotiation if you are GM, with high-profile Volt and Bolt products (and the accompanying R&D) and pretty good efficiency from your mainstream products, or Ford, with plenty of hybrid products, R&D, and a portfolio of engines that do very well in testing. If you’re FCA US, with inefficient engines, the heaviest platforms in a lot of segments (including trucks), and no R&D effort of any significance, what incentive does the government have to play ball?

            CAFE is a problem for FCA in a way that it isn’t for anyone else except much lower-volume producers.

          • 0 avatar
            Pch101

            Marchionne wants more volume so that he can get more scale, which should lower costs. He also needs to defend Fiat against VAG in Europe.

            I doubt that he has serious expectations for anything coming to pass with GM. But he’s getting publicity for his endeavor.

            CAFE was designed to be renegotiated on a case-by-case basis. And it will be.

          • 0 avatar
            Lack Thereof

            Dal, you misunderstand how the new CAFE requirements work, and how they’re going to impact FCA.

            “52 MPG” is not a hard and fast rule. Simple product line averages aren’t used any more to determine CAFE compliance. There’s now a different standard for every car, depending on the size of the car’s footprint. So it is feasible for a company to be CAFE-friendly while building only large cars & SUV’s.

            The window-sticker MPG target, in 2025:
            Compact Cars – 43 MPG
            Compact Trucks – 37 MPG
            Full Size Cars – 34 MPG
            Full Size Trucks – 23 MPG

            They can keep selling all the huge-ass Chargers they want, so long as they get the v-6 model to hit 34 MPG. Or they could sell nothing but Grand Caravans and Grand Cherokees, so long as they get around 30 MPG out of them (they slot almost exactly in the center of the truck footprint scale).

            The old method of having to sell a bunch of small cars to offset the MPG of your large cars no longer applies. Car companies that sell nothing but small cars no longer get a free pass… their small cars will have to hit the maximum 43MPG target.

            Also, contrary to popular belief, FCA sells more Darts and 200s than they sell Grand Caravans and Grand Cherokees. So even if we were still under the old rules, they’d be just fine.

          • 0 avatar
            RideHeight

            Lack Thereof,

            That’s enlightening but where does the “52” come from when nothing you listed even approaches that?

          • 0 avatar
            Pch101

            The CAFE target is 54.5 mpg. But given the methodology for measuring it, it’s probably closer to an EPA mpg of about 40.

            And that is a vague industry target, not a manufacturer-specific requirement. It’s not as if every OEM will be expected to hit the 54.5 mpg target. Taking some of the weight out and adding features such as cylinder deactivation and start-stop systems should get them there.

          • 0 avatar
            RideHeight

            The updated CAFE standards are seeming more talmudic with each post I read about them.

          • 0 avatar
            dal20402

            Thank you for the education. I think it is going to be a struggle for Rams and big Jeeps in particular even to meet those targets, though. When your half-ton truck weighs nearly three tons and your volume truck engine isn’t very efficient, there’s a challenge ahead.

          • 0 avatar

            Actually the Ram 1500 with the diesel is the only fullsize to meet the target. Ford F150 was rumored to hit it with the small ecoboost but fell short. The penta star comes close but is a little short but an upgraded version with better economy is almost ready. if they can knock a little weight out Ram should be fine.

    • 0 avatar
      Lack Thereof

      “52” is just the number people keep quoting. It’s actually 54.5, and it’s the target 2025 whole-fleet average MPG as measured by the original 1977 EPA test cycle, with it’s notoriously low speeds and lazy accelerations.

      While the window-sticker MPG tests have been updated and adjusted several times over the years to more closely reflect actual use in real-world driving, the CAFE test has remained unchanged for consistency. This means the 2025 Dart will be tested the exact same way that the 1978 Dart was, and automakers don’t have to chase a moving target year-to-year.

      As the window-sticker MPG tests have been reformulated and adjusted over the years, the gap between CAFE mpg ratings and window-sticker ratings has grown dramatically. So the 54.5 MPG CAFE standard will only translate to around 39 MPG on the window sticker.

      Please note that the conversion from the CAFE number to the sticker number is only approximate. They are physically different tests, and the conversion from one to the other varies by a couple MPG from car to car.

      • 0 avatar
        RideHeight

        Well, I can certainly see how it behooves the govt to trumpet the CAFE ratings when proclaiming “Strict New CAFE Standards” to its supporters.

        And ~39 mpg sticker seems a lot less destructive of business-as-usual than does 54.5 mpg.

        Thanks

  • avatar
    stingray65

    Mergers almost always result from weaknesses in one or both of the ‘partners’, which the merger almost never fixes. FCA has no real global brand and way too many regional brands to support, but hasn’t had the guts to kill or sell the weak ones such as Lancia, Chrysler, Dodge and/or Fiat. The Fiat side makes low profit small cars in relatively high cost Italy, and does not seem able to physically move itself from their home location. They have generally low profit margins and therefore don’t have the resources to make competitive investment in the ‘crown jewels’ such as Alfa or Jeep or in new technologies such as hybrids and electrics. Hard to see how a merger with GM, which has many of the same problems would help either party.

  • avatar
    Jeff S

    Mergers are not done for the benefit of the consumer but for the benefit of the CEOs and the stockholders. Acquire a competitor to reduce competition and then trim the number of plants and employees. Most buyers are not as interested having a unique vehicle as they are in having a reliable and predictable vehicle even if it is boring.

  • avatar
    NMGOM

    Aaron – – –

    Before we all start waving our flags at how bad mergers are (and they have often been exactly that), l must note that Sergio is talking about something a bit different: CONSOLIDATION, for the purpose of minimizing capital assets, R&D expenditures, and raw-material resources. Yes, it sounds like “merger”, but other auto execs (head of Volvo, for example) say that he is on to something.

    In fact, the very same idea is behind some current “partnerships”, such as Toyota/BMW with fuel cells and sports cars, as just one example. Is competition being reduced between those two? Sergio is just taking this idea up another notch.

    Before canning this idea, I’d like to see the math, those indisputable numbers that Sergio alleges make this an “open-and-shut” case; the very same that he wants to take to the GM Board potentially to start a “hostile” takeover attempt.

    Is he right? Is he naïve? Is he just bowing to the interests of John Elkan’s financial empire?
    I don’t know. That’s why I want to see his numbers.

    One more thought: if Carlos Ghosn, a French-Lebanese-Brazilian, can make Renault/Nissan work, why can’t Sergio, an Italian-Canadian, make GM work properly?? Maybe that’s what Mary Barra really fears.

    ====================

  • avatar
    kmars2009

    NMGOM….Before you get all green about FCA reducing materials and saving the planet….Marchionne could care less. Why do you think he got rid of all hybrids Chrysler had going at the time of merger? He is somewhat republican in his stance. Just drill for more oil and screw green thinking all together. Or so I have read in various other publications.

    • 0 avatar
      NMGOM

      kmars2009 = = =

      Actually, I was not suggesting that Sergio has any environmental position in all this; just that he has a business intent. The problems is: I don’t know why, and what he is basing this “slam dunk” view upon. So: no implication from me that there is ANY “green” or “saving the planet” motive!

      ===================

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