Fiat eyes suzuki or mazda partnership

This post belongs in this long-dormant thread, or does it? Not? ;-)

The Arbitration court adjudicating the dispute between Suzuki and VW (Suzuki wants to buy back VW's 19.9% stake in it, claiming lack of trust and reciprocity) has come to a decision. The award will be announced shortly, says Suzuki.

Now, FCA is in a not-so-distant way involved since a major point of dispute is Szuzuki's refusal to part with the use of Fiats diesels which is what VW was apparently insisting on. Since then, as we know, Suzuki has launched and will launch several more models both in Europe and now/soon in India with those very Fiat diesels. Also, they've expanded cooperation with FCA for amt gearbozes: Magneti Marelli and Maruti Suzuki have a new JV plant for amt-manufacture in Manesar, gurgaon, near the Maruti Manesar giant plant.

Marchionne has recently been insisting on 'consolidation'/mergers/cooperation.

Suzuki is weak(ish) or absent everywhere but i India, where by contrast it is utterly and risingly dominant, with humungous profits at luxury-car profit margins (of 12% and rising) with incredible and increasing economies of scale in supplies, manufacture, retailing, marketing and service/spares.

FCA has premium brands, has lots of engine and platform and production-technology (COMAU), components (Magneti Marelli), 4X4 and now hybrid/electric tech that Suzuki could use. FCA is also vastly bigger and vastly more diversified geographically. They could also work together in China, where they're both small yet profitable and growing (esp FCA). Suzuki is moving into the budget crossover and suv spaces, which is complementary to jeep's and fiat's higher-priced, more capable crossovers and suvs.

They could also use each other to expand into low cost/price markets like Africa, Central Asia, iran etc.

Let's see what the award is by the court. If VW wins, FCA will be lucky to just have the engine etc supply deal to Suzuki in 5 years' time (current new model life-cycle)?

But if Suzuki wins.......enter Marchionne and the Deal Makers for FCA/Fiat!?

I do wish.....for Fiat/Jeep's sake in India and the rest of Asia, where FCA, barring Jeep, is very very weak/practically absent.



PS: any deal with Suzuki will be very expensive, since Suzuki thanks exclusively to Maruti, has a very booming share price/market capitalization, and is family-owned....and that too 'Japanese' or is that 'Indian'?

 

@ramjn

Yes of course, but Suzuki corp. is majority owned (subject to Japan-specific legal, institutional and accounting etc definitions) and emphatically controlled by the Osamu suzuki family, whose next-gen has just taken over from the great, visionary (or is that Sanjay Gandhi and co?) old man as coo.

Of course in that sense even FCA, BMW, VW, Ford etc are family-businesses. But with FAR looser control and domination over their respective firms, brands, boards, workers etc than the likes of Suzuki or indeed Hyundai-Kia and Toyota.

It seems that as much or more than anything the issue of a cultural trust mis-match between Mr. Suzuki and VW under Mr. Piech (controlling member of the VW majority owning porsche family) caused the rift and rancour.

FCA, however, thanks to the extremely cosmopolitan Marchionne and Agnelli scion John Elkann too, are famous for being proven champions at inter-cultural mergers and operations and 'integration' thanks to what they've achieved at Fiat Spa+CDJeepRam+Case Industrial+New Holland, to add to Fiat's long successful record in LatAm/Brazil and also, for many years in India (including Tata JV) and Turkey too.

It is that very personal qualification of marchionne+elkann's that makes him speak so openly of mergers/consolidation etc: he knows he'll get taken more seriously than anyone else in the industry.

If there is to be such a 'merger' or strategic share-swapping etc, it will be mostly because of Marchionne's (as well as John Elkann and EXOR's) multi-industrial, inter-national and inter-cultural/cosmopolitan credentials.

In that sense they very much resemble tata sons (e.g., Ratan tata + Ralph speth, etc for other tata companies) as shown by the latter's totally unpredictable and truly amazing successes with the take-over from Ford of Jaguar and land Rover. In fact, Mr. tata was a member of the Fiat Spa. board until relatively recently, i think?

 

Maruti on its own (i.e., without counting Suzuki Japan) has a total marketcap that is already HIGHER than all-of FCA's even though it sells a mere 6odd% of the total number of cars, ALL deeply low-tech, many dependent on Fiat's mjd.

Such is Maruti's dominance, and uniqueness in the whole automotive world: it has as of last quarter profit margins of 12% + and rising fast on its Indian econo- and econo-engineered cars. Such a margin spread across huge sales, makes it much more profitable than several big global LUXURY car makers like, for eg Audi!

Post-VW fracas, Suzuki seems in no mood or need for a deep tie-up with anyone/FCA.

But EPIC though their profits are they're totally India-dependent, so a strategic tie-up with say FCA would still be a good thing for them in the long, risk-mitigated run. BUT: if so, the price they will demand and command for such a tie-up (vauations of a share-swap, for eg) would most-likely deter (for eg) FCA, given their soaring marketcap and marketshare in india?

 

@prabhjot FCA for it's own sake should not merge with Suzuki and that is my 2 cents. Globally FCA is moving away from budget to the mid-range and above segments while Suzuki is a humongous player in India and based primarily on budget vehicles. It would altogether dilute and destroy the Fiat brand if they go for a tie-up with Maruti.

On a longer scale, I do not understand the engine sharing deal also. Imagine if Fiat stops sharing diesel engines with Maruti, Tata and the 10 other manufacturers that use the same. People would be forced to look into diesel alternatives and Fiat could step in to fill the gap. If Fiat were to sell all it's technology to more known brands then there is no reason for people to buy Fiat over Tata or Maruti.

 

@prabhjot, what apart from the price demand factor could FCA themselved bring to Suzuki. IMO, there are some areas where lean(er) technology could be taken from Suzuki, the simplistic reliable stuff that Maruti is known to give, without so much complex debugging and difficult to diagnose stuff that most other brands, esp. european are infamous for. The advantage is aftermarket support for Suzuki-Maruti. Can Fiat make that happen. The kind of propogation, fix it and move on, no fuss maintenance and peace that Maruti offers.
Its part of this USP that Maruti Suzuki has always managed to keep alive. OTC sales depots now in Mumbai I am told, where you get just about every part to buy and keep your Maruti in fit condition. The unique advantage is that solo mechanics keep learning and are able to deliver and a faster turnaround for customer, mechanic and quick buck instead of the lengthy uppity ways of appointment, drop and pickup and countless issues related to customer service people have with ASCs, moreso with someone like Fiat.
Trust issues are so big now even in Mumbai, and customers are again getting fleeced and many cases we hear about how wrongful and malific practices are happening. So again, why would Suzuki want to align with Fiat. The best reason IMO is to make premium SUVS, and MUVs etc. for customers via a strategic partnership and develop more products on the line of SX4 (sedici) albeit much better for the premium customer who would like a more peaceful, predictive, 'risk free' technological experience. They have that cool plant there are Ranjangaon afterall with all that spare capacity. If bottomline intention for Fiat is money, might at well allow Maruti to exploit it and make better use of that Plant.

 

Suzuki does have a big problem, which is that apart from Maruti all their other businesses have been more or less (depending on the yen's level of depreciation) lossmaking for years (structurally?), from 2-wheelers to boat-engines et al, on a global basis and given the soaring costs of new product development including for regulatory reasons in all these many business lines as well as wherever else (apart from India) they operate: they need partners. If nothing else: just as risk mitigation and diversification away-from-excessive dependence on India and Maruti.

But they can afford to wait and be pricey as much as they want currently, given maruti's soaring profits and market-cap, low commodity and fuel prices, near-zero interest rates in japan and given the severely depreciated yen.

Interestingly, EVEN in Europe FCA is offering to Suzuki the ddct on the 1.6 mjd diesel S Cross well-before any FIAT vehicle has recieved a ddct-on-a-diesel:

http://www.autocar.co.uk/car-review...i-sx4-s-cross-16-ddis-tcss-allgrip-sz5-review

At a minimum, then, Suzuki+Maruti will continue to deepen this tech-dependency on Fiat (indian-fiat-made-1.5 mjd and Magneti marelli (amt, ddct), who knows possibly even a version of the india-made t-jet, both in India and in europe.

And FCA under the chairman-ship/control of fellow famously-family-business-espousing and rather genial John Elkann/EXOR would still seem the by-far likeliest strategic, possibly-equity partner for Mr.Suzuki&Son+Maruti.

We might be hearing more on this soon after the ferrari spin-off completes early 2016, alongwith or instead-of other 'deals-in-the-trying-to-be-made-by-marchionne' between FCA and GM-Opel/PSA/Tata-JLR?