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Fiat approached General Motors for an European alliance but rebuffed.

Discussion in 'Fiat Global News' started by ghodlur, May 26, 2015.

  1. ghodlur

    ghodlur Esperto

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    Fiat Chrysler CEO Sergio Marchionne approached another troubled car maker the General Motors CEO Ms Barra for an alliance of their European operations in an attempt to consolidate their operations and cut operating costs to save money. However the suggestions was put down by the GM CEO as the proposal did not interest them and that they had their own plan for the product development

    Fiat Chrysler has one of the highest debt levels in the industry and barely breaks even in Europe. Analysts say it is expected to burn cash for years to revamp its neglected Alfa Romeo brand, and may struggle to find a partner.

    Is Fiat desperate to find its foothold in the already competitive European market. An Alliance with GM would have meant accessing the American market which so far has eluded Fiat.

    News links.

    http://www.reuters.com/article/2015/05/24/us-gm-fiat-chrysler-idUSKBN0O900D20150524

    http://abcnews.go.com/Business/story?id=7493776
    dadasaheb likes this.
  2. asimpleson

    asimpleson Esperto

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  3. ghodlur

    ghodlur Esperto

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    Somehow this is painting a picture that "I am not profiting, hence lets all pool our profits". Why would any competitor do that unless he is less profiting than Fiat.

    What Sergio should be aiming is to increase the market presence by new launches. He is now looking towards Google and Apple for technological advancement when he should be banking on the engines which is the trump card.
  4. asimpleson

    asimpleson Esperto

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    I think he has given call to the industry to wake up to this waste that is happening. If it looks as weakness is a matter of perception and the fact that most of them are spending ridiculous amount on parallel technology just rebranding similar technologies, with nothing ground-breaking to achieve makes sense from the economics point of view. However, his notion that industry would respond positively seems to be far-fetched atleast from the present scenario.

    Its a long term game and affecting the balance sheets of all automotive companies. Just that he is more vocal about it.
  5. prabhjot

    prabhjot Esperto

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    He is still far likelier to be able to team-up in some, major way with Suzuki and/or Tata Motors+JLR and/or Mitsubishi than with the giant firms. Also, with the silicon valley tech firms (Google or Apple and/or Tesla)

    The VW brand makes profit margins of less than 2%. Renault-Dacia are even worse, and therefore reliant on Nissan's weak-yen fuelled margins (overall Renault-Nissan's margins are a mere 5-6%). And like GM and Ford they have a huge, gaping problem: they do not have any strong-globally premium/luxury brands that do anything other than lose lots of money year after year.

    Marchionne's an outspoken intellectual among ceo-s. He's been espousing 'consolidation' and capital efficiency in the automotive industry for over 10 years, from well before the merger with Chrysler, Jeep etc.

    What he's saying is: the global economy is from now on in a permanent dodgy-to-crisis mode, vehicle development and regulatory compliance costs are soaring, and so Do a Deal, Now!.....if you don't want to have your hand forced in the next, inevitable melt-down. If only GM had the sense to see the great value of what Marchionne's proposal, but it is a famously bureaucratic and reactive firm, so......

    He will move to tie-up with other smaller players, instead, more than one likely, but he won't be able to achieve the financial immunity from a global (car) market recession by doing so. For that he has stated several times: it will take a mega-merger, nothing less.
  6. prabhjot

    prabhjot Esperto

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    http://www.bloomberg.com/news/artic...merger-confession-called-spot-on-by-investors

    The strange thing is that everyone agrees with Marchionne but no body wants or seems able to do the sort of thing he's advocating for everyone, not just himself.

    FCA's stock is up FAR more than that of any other car company. Why? Because the hard work has been done, and the growth potential (already happening in China with imported Jeeps, for eg) outside of the US is immense, higher for FCA than for any other firm.

    Global growth is happening where? In crossovers and SUVs, especially in China. That's Jeep territory, Jeep global sales are already at over 1 million a year, NOT counting the Renegade and upcoming new C-SUV that replaces the Compass, and the China plant that'll make the Cherokee in China at localized prices....

    Also, in premium and luxury cars, with good profit margins. FCA has, alongwith Jeep: Ferrari, Maserati (which has already grown immensely over the last year or two) and....Alfa Romeo.

    Also while the lowcost/small car brand 'Fiat' is currently weak in Brazil/LatAm because of the recession there, and missing for the most part in Asia, the LatAm/Brazil position is temporary, Fiat is structurally strong there. And the lowcost base will see evermore exports, including to the US and to Europe?, of components and cars including small Jeeps from there.

    But more importantly the 'Fiat' brand is one the few profitable car brands in Europe, despite the very few models it offers currently. Since almost all the cars it sells in Western Europe are the 'premium-yet-mass' 500 line-up, and since it has a strong position in utility and family vans, has just launched the terrific 500X into a booming segment where it was missing, with the Fiat Aegea Linea-replacement sedan and Bravo-replacement hatch coming soon, off a low-cost production base in Turkey....The European market's rebounding now strongly, and 'Fiat' and 'Jeep' are doing better than most.

    If there's a big global recession: FCA will suffer greatly, more than many/most. BUT, otherwise: Marchionne will be having the last laugh at the end of his 5-year plan (2018).

    Got to love Marchionne and the FCA brands, historic, charismatic ones all: for this very financial precariousness (all of them have been dead and are now reborn, strong, from 5 years ago) or vulnerability to a big economic slowdown (esp in the US)...but also for the exceptional growth they've been showing, with the best (Jeep's further globalization and the new Alfa Romeo brand relaunch with all new models and hightech, new Fiats like the 500X etc) possibly still ahead!

    Those not willing to do a merger deal with FCA today may regret passing up that chance, since FCA could easily be in a far far stronger and bigger position in 3 years time, the year 2018 that Marchionne retires, apparently. The brandpower in the FCA basket is that stupendous, and that rare, historically but especially in potential, some of which is already getting realized (eg., Maserati and Jeep sales in China).
  7. asimpleson

    asimpleson Esperto

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    It is also important to note that Marchionne would be as popular in US general public for getting Chrysler for 'free' or 'peanuts' which is also utterly false. Shows in their comments/sentiments. Likewise the Finnish too should hate Microsoft to the core for aquiring their iconic major for 'peanuts' for sure. And that too allegedly by corporate espionage..a trojan of sorts..allegedly! :wtf:
  8. bibin

    bibin Regolare

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    kochi
  9. prabhjot

    prabhjot Esperto

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    http://www.wsj.com/articles/chrysler-boss-recruits-activists-to-prod-gm-into-a-merger-1433806966

    Further evidence that Marchionne, who sees the global economic crisis 'permanent' trouble coming, is VERY, deadly serious about further big mergers.

    One does hope, and realistically it's the lileliest, though that a merger/strategic tie-up with Suzuki and/or Tata Motors including JLR or a firm like Mahindra and/or a big Chinese firm is the outcome.
    --- Double Post Merged, Jun 9, 2015 ---
    http://www.thestreet.com/story/1317...ted-in-sergio-marchionnes-grand-strategy.html

    Morgan Stanley have an outperform rating on the FCA stock: precisely because of Marchionne's paranoid capital/cost efficiency, his longterm investment commitments to certain models from certain brands, and his 'dystopian' view of the future of the car industry given soaring costs and abysmal return-on-investment.
    Last edited: Jun 9, 2015
  10. prabhjot

    prabhjot Esperto

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    The latest rumour being fuelled by Max Warburton a famously anti-FCA and anti-Marchionne analyst with Bernstein Inc. (and who has been so from the beginning of the merger, and therefore has been dead wrong about both for 5-6 years now), and who very testily challenged Marchionne at FCA's financial presentation where Marchionne openly chided his own firm and the entire industry for being a giant waster of capital is:

    that Marchionne/FCA/Agnelli-Elkann family will, in combination with activist hedge fund(s), mount a 'hostile takeover attempt' on GM, a firm nearly twice its size. !!!

    GM is, especially post-bankruptcy and bailout in 2008, a promoter-less firm, while most of the other large and small car firms anywhere in the world are, more-or-less, family-owned and controlled.

    That does leave it vulnerable to some such maneouvers, as was proven recently by a bunch of activist investors who got GM to buyback 4 billion USD worth of common shares, just a few months ago.

    FCA with or without Exor (the Agnelli-Elkann holding company, and a very profitable one at that, even without any dividends till 2018 from its FCA controlling stake) can offer their shares (which are up 50% odd over the last 6-8 months), and will need cash from hedge-fund allies, that's for sure, if such a move is to be attempted.

    Even failed attempts, of course, can be beneficial financially in the short run depending on the way the action is conducted and the way share prices move as the stock market processes, 'speculatively' of course, the respective future costs, benefits and risks to each firm.

    Marchionne and FCA are simply the most interesting+intriguing firm+bouquet of brands around, of that there cannot be the least doubt!
    asimpleson likes this.

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