Discussion in 'Fiat Global News' started by ghodlur, May 26, 2015.
combining vw and fiat will make it the biggest car manufacturer in the planet.
However, its not a good idea with VW getting into scandals all over. Marchionne is a match winner and he picks the best. Hopefully.
Not at all likely or indeed possible, given VW's part-government and part-union-owned 'German' nature. But VW's startling financial vulnerability, as well as that of all the other firms so-easily affected by a contagion-effect.....only reinforces Marchionne's point about merge-or-else. Or at least cooperate and collaborate on a large scale by sharing platforms, modules and esp powertrains.
We will see Marchionne and Elkann make some deal or deals within a year. It will be fascinating indeed to observe, especially in the VW-caused crisis condition for European manufacturers in Europe. GM/Opel seems still to be the likeliest candidate, else he wouldn't have been quite so explicit in his public overtures to GM.
At the FCA shareholders' meeting in which 98% votes were in favour of spinning-off ferrari into a seperate with a total benefit of upto 3.5 billion $ to FCA's balance sheet, money it is using to reduce debt, retire high-cost legacy debt, and fund the HUGE investment and growth program ($50+ billion they are STILL saying to financial analysts and investors), marchionne said he would not do a hostile bid for GM.
Which could very well mean that he will do precisely that! ;-) He's known to 'play poker', since he's reputed to be rather good at the game, with his testimonies to the business and automotive press.
He says there are other, less 'obvious' possible merger-or-whatever-other-type-of-deal mates. Could that include Suzuki or Tata+/-JLR in some way and form?
In ANY case FCA is now, after the successful but somewhat attritional success of the merger (Fiat saving ChryslerDodgeJeepRam, in turn being saved by them, meanwhile Maserati and now Alfa re-launching, and all brands set to finally get their fair share of missing/delayed new models), moving into a high investment-high growth phase.
Prospects are good of very decent counter-cyclical growth even if china, usa etc slowdowns, and are afai can judge excellent if US+Europe stay buoyant as they are currently, even with China tepid, etc.
However profit margins are increasingly tight for various reasons across all non-luxe firms (from Ford and Renault Nissan to even Hyundai-Kia, let alone Honda, PSA and Opel, Tata Motors-JLR too), barring
Maruti Suzuki, which does make it a very very attractive (if expensive) 'partner' or 'mate' of some sort, if old Mr. Suzuki is willing to 'play'.
Marchionne, the poker-playing ceo, will play a last merger etc hand before retiring in 2018/2019?
Check this video out for his utterly unque for any-corporate leader or indeed public figure from govt or indeed politics style of thought and speech. From the detroit auto show 2016, a few days ago.
Marchionne and Elkann are still talking-up a "BIG merger", rather than one or two smaller deals (with the likes of Peugeot-Citroen, for eg, who are quite interested from all reports, including by its ceo Mr. Tavares, or say a tiny but very-profitable firm like Suzuki.)
More than likely, imo, this is poker-player talk, and the REAL merger/takeover/some-such target remains GM (which has no dominant, family or PE promoter owner/controlling shareholder) and/or a Silicon Valley IT firm such as Apple or Tesla or even the likes of Uber?
Although with the VW group in a mounting financial-stress situation longterm, with restive trade unions etc too, and given Toyota's weaknesses in Europe, in diesel and turbo-petrol and transmission tech, relative weakness in china, and no premium-luxury-sports brand-power (barring Lexus a bit, only in the usa) such a big-deal could make sense too.
I suspect they're waiting for the economic slowdown in China and the also (starting later this year) the usa to kick-in properly and for the VW+regulatory+Tesla-EV challenge/crises to further-affect already-discounted auto company share prices, for them to take a further bad-knock...and then see who'll see the wisdom of pooling risk and costs with FCA, the world's 6/7th largest and fastest-growing-over-the-last-2-years bunch-of-large-strong-brands.
2018 is when Marchionne says he'll 'retire'. We'll know by then, his bet is on FCA being on the up financially and sales- and brand-equity-wise till then while one or three of his potential partners will likely be on-the-downswing, stagnant or worse (GM, Ford, VW, Tata-JLR, Honda, PSA, Mazda.) My sense is that he's on course as far as FCA goes, indeed ahead-of-plan as far as achieving zero-net-debt status by 2018, while say VW will be in the major financial wars, Tata-JLR are very heavily indebted, GM is seeing a big slowdown in China performance, etc.
Most of the betting is on Marchionne doing some such deal(s) before he retires, which even if not 2018, will be by 2020. Marchionne is also the ceo or chairman of Case New Holland-Iveco, Ferrari, Magneti Marelli etc etc, and of the Agnelli family holding company EXOR too, which has many other firms too esp in media (e.g., The Economist magazine) and in re-insurance.
A very well written piece based on an interview with marchionne from just a few days ago, by a well-reputed veteran journalist. Full of VERY intriguing stuff, including....
the revelation that FCA/Marchionne was well into discussions with the VW group (upto board-level) for a 'big deal' or 'merger' of some description, based on the VW group's usa-market-weakness, cost- and risk-sharing potential etc until......'dieselgate'!
Predictably the VW board's very and notoriously potent labour-representatives were against the 'deal' of whatever description.
At the rate at which VW group's financial position has detriorated already (with more financial pain still to come, lots more, and even in europe and china let alone the usa), this story, these 'discussions' might, likely-WILL pickup again, at some point before Marchionne's retirement in 2018/19?!
There was a rumour that caught fire yesterday about FCA's chinese JV partner, GAC, one of China's largest autofirms that also makes and sells JV cars with toyota, mitsubishi etc as well as a big own-brand car firm there, being on the verge of buying a MAJORITY stake in fca. That rumour is still hot, albeit that the story has been denied by GAC china.
That there is a further extension of the China jv deal that makes and retails the Jeep Cherokee, Renegade and upcoming new c-suv+Fiat Viaggio/Ottimo+.... is very likely however, at a minimum. Perhaps extending upto a MINORITY financial investment in FCA as a whole?
Why? Because (a) GAC's boss said recently that they want to enter the usa market and expect FCA to 'help' them even as they've helped FCA in china (rocketing JEEP sales, locally-made). They've also announced participation in the next Detroit Auto Show. (b) Marchionne has stated emphatically that FCA will more or less 'outsource' lower-cost usa market sedans (i.e., the Dart and the Chrysler 200) since to make them in n america is to lose money. Well, the Dart already is made in China (as the Fiat Viaggio), and the Chrysler 200 'd-sedan' is due for launch there by the JV in 2017, after the c-suv at the end of 2016 or thereabouts. (c) Marchionne stated again the obvious, which is that FCA is big and strong and somewhat-profitable in ALL world market regions, barring as yet of course the biggest market of all: China, and that this was a major risk for the firm as the usa market plateaus, slows down or enters a recession, even as europe is growing well and outperforming for fca, but latam is slow and low in profitability (while FCA is very tiny foreseeably in India.)
The 'issue' is, as much as anything, a political-culture/xenophobia one inthe usa market, what with the horrible turn that polity is taking in a further-rightwing/xenophobic direction (Trump-ification). Of course, Italy and the EU has many xenophobic strong-tendencies as well, so (though not PM Renzi of italy, a close associate of Marchionne+J Elkann, far from it.)
If anything, THAT imo makes Marchionne more rather than less likely to pursue such a minority- or majority-without-management-control deal, since it will be that much more financially rewarding for fca (pound of flesh extraction from GAC), given that he is retiring and surely is rather pessimistic about the auto industry's ability to remain profitable-enough in the face of the coming multiple tidal waves (american recession, regulatory and technological soaring-costs, risks of global financial crises again, etc)
That is likely why he's been so voluble about mergers, consolidation, capital-wastage, cost-rationalisation, portfolio of models rationalisation, technology and r&d+platform+powertrain sharing etc etc. He is preparing the 'cultural politics' ground in the usa (italy/europe is far less of a problem, if any at all.)
Separate names with a comma.