Rumors of FCA Seeking Asian Partner Reignite - This Time With Hyundai
Snubbed by both the Germans and the Chinese, Fiat Chrysler Automobiles is continuing its journey to find the automaker that will sweep it off its feet and say, “Let’s build a factory together.” However, if CEO Sergio Marchionne maintains that FCA will be bought by an established automaker, he’s running out of options. The automotive dating pool isn’t particularly deep.
While there was some stirrings of vague Korean interest when news broke of talks between FCA and Chinese automakers, those rumors dissipated quickly. But reports of a possible business deal between Hyundai and the Italian-American company surfaced recently after Great Wall Motors shrugged off its proposed bid for Jeep. FCA later said it had not received any offer from the Chinese manufacturer.
Presumably, Great Wall would have used FCA to supplement its sport utility sales and begin making moves on North America. Another brand that might be interested in bolstering its supply of SUVs is Hyundai — something the South Korean press has been buzzing about all week.
According to The Korean Herald, industry rumors of a possible merger between the two have been happening for a while. Lee Jae-il, an analyst with Eugene Investment & Securities, said in a recent report that Hyundai Motor would seriously benefit from the acquisition due to an expanded portfolio (SUVs and trucks) and higher consumer awareness of FCA brands in the United States and Europe.
Lee estimates a South Korean acquisition of FCA would cost roughly 11.2 trillion won (or $9.83 billion) if you included Maserati and high-tech parts unit Magneti Marelli, but only about 5.6 trillion won without them. That might be a good deal, especially since Hyundai is having problems with China right now and could use a stronger global footprint.
However, even though the American half of Fiat Chrysler would flesh out the brand’s portfolio extensively, the Italian portion wouldn’t add much, as South Korea is already pretty good at producing small cars.
At present, FCA is denying any and all rumors of a possible merger in Asia. We’ll see what comes of these rumors and continue musing about what Hyundai Fiat Chrysler Motormobiles might look like in the meantime.
[Imgae: Hyundai]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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This wouldn't be a merger at all. Look at the potential cost listed, $9.83 billion. FCA market cap is $28 billion, so that just represents the controlling interest of Exor, the Agnelli family holding company. In essence Hyundai would become the new manager of FCA, but not the full owner of the company. They'd just be allowing Sergio's bosses to finally bail out of the high capital, low margin auto business, by taking on all FCA's problems and debt. That's a great deal for Exor, The Agnellis and Sergio, but an expensive headache for Hyundai. If FCA's cash hoard, unspendable since it reduces the debt to a reasonable "net" figure, is raided as part of the deal, it would be a disaster for Hyundai.
Breaking news - A source close to JLR/ Tata has leaked that JLR have a war chest to go out and acquire more premium brands. Allegedly Alfa, Mazerati and possibly Jeep are interesting them.