Fiat and GM Merger?

[Fratzog]

Who would have dreamed this possible 10 years ago. Times are a changing...

http://business.financialpost.com/n...in-the-entire-auto-industry-sergio-marchionne

 

[live4theking]

yuck...

 

[saforwardlook]

I have been watching this issue in the automotive and other press lately. I believe Chrysler's long term future depends on a merger such as GM/Chrysler or some others, but both companies are building world class cars now, and Ford with all their recalls is trailing of late and their sales are lackluster. Car prices are going up continuously and loan terms are extending into 7 years - this won't sustain the industry in the long run. Duplicating all the engineering for essentially the same parts is wasteful and other businesses would not allow such losses and poor profitability. Eventually, the auto industry will evolve into probably 3 major companies, and the rest will be gone. Just can't say how long it will take. As stated in the first post, "times are a changing..........."

 

[65 500]

I think Marchionne has lost his mind. :gah:

 

[saforwardlook]

I think Marchionne has lost his mind. :gah:

Not at all. You can't keep plowing nearly all your profits back into product development and get a meager return on investment over the long run. And meeting the future fuel economy regulations will take a lot of investment, more than now. Stock holders will go elsewhere to get the returns they want - such as Apple or Toyota. Then capital will be even harder to come by.................

They either merge or go under eventually. There is no way around it in this competitive world. He is doing his job to sound the alarm now.

 

[patrick66]

Apple has plummeted in the past three weeks - might be a good opportunity there.

 

[65 500]

A "merger" with G.M. would be the end of Chrysler. The only thing that might survive would be Jeep, and G.M. would ruin them.

 

[70bigblockdodge]

A "merger" with G.M. would be the end of Chrysler. The only thing that might survive would be Jeep, and G.M. would ruin them.

Yep better buy now, when gm takes over it won't look like anything except dry toast.

 

[Fratzog]

Building a strong multi-national may be a good long term strategy. A global entity with 3 divisions Bowtie, Pentastar and Pizza.

 

[saforwardlook]

In the long term, there are two choices: a merged Chrysler with another company or no Chrysler. How a merger is done is important.

Take Hyundai/Kia - basically the same company with the same parts bin/engineers for both lines of cars, but different sales groups. Yet they sell different brand names of vehicles that almost completely overlap? Why do they keep doing this if there wasn't a way to profit from such an arrangement? If Chrysler were to somehow merge with GM, it doesn't necessarily mean that they would get lost in the deal. Sergio may have lost his mind, but most in the industry agree that he isn't stupid either.

 

[300rag]

...
Take Hyundai/Kia - basically the same company with the same parts bin/engineers for both lines of cars, but different sales groups. Yet they sell different brand names of vehicles that almost completely overlap? Why do they keep doing this if there wasn't a way to profit from such an arrangement?...

This is an arrangement whereby the public (with a few exceptions, like us, who follow these things) who do not know any better, will go and car shop, thinking they have more choices than they really do. By doing this, the company now has the customer considering their car twice instead of only once, doubling their chances of getting the sale. The other thing is, while they share technology, they are still two separate entities, unlike the way Plymouth/Dodge, or Chev/Pontiac twins were.

 

[saforwardlook]

This is an arrangement whereby the public (with a few exceptions, like us, who follow these things) who do not know any better, will go and car shop, thinking they have more choices than they really do. By doing this, the company now has the customer considering their car twice instead of only once, doubling their chances of getting the sale. The other thing is, while they share technology, they are still two separate entities, unlike the way Plymouth/Dodge, or Chev/Pontiac twins were.

Like I said, it depends on how you do the merger. If GM stayed GM and FCA stayed FCA with their lineups, they could share powertrains to a large degree and maybe even platforms, but remain separate entities otherwise to the shopper in terms of various unique models and styling, etc. The savings would still be huge. How many people really care what 4 cylinder turbo engine is under the hood or what transmission is in it either? Like Hyundai/Kia.

 

[65 500]

G.M. is dumping divisions(Pontiac, Oldsmobile, Saturn, Hummer), why would they want to buy more just to split up market share ? If G.M. merged with FCA the only thing that would be left is Jeep, and maybe Fiat and some of the Italian companies they own, the rest of Chrysler(Dodge, Ram, and Chrysler) would be gone in short order. FCA would be better off with the South Koreans than with G.M.

 

[saforwardlook]

G.M. is dumping divisions(Pontiac, Oldsmobile, Saturn, Hummer), why would they want to buy more just to split up market share ? If G.M. merged with FCA the only thing that would be left is Jeep, and maybe Fiat and some of the Italian companies they own, the rest of Chrysler(Dodge, Ram, and Chrysler) would be gone in short order. FCA would be better off with the South Koreans than with G.M.

I never said anything about GM buying Chrysler. I am saying they should consider merging engineering where it makes sense. For example, GM & Ford are jointly developing a 10 speed automatic transmission that they will use commonly. I personally believe the three so-called "U.S." automakers should merge some component,platform or other developments jointly to better compete against the rest of the world. Each company makes money on its own now, but each company could make even more money if they had more common components jointly rather than each one reinventing the same parts every year on their own. And that is essentially what Sergio is saying at least with FCA and GM - I am just saying why not extend it to Ford too? Why, even Donald Trump could get behind that!

 

[polara71]

So one would never out last another. With separate engineering departments wouldn't you get better competition? Less restriction / more freedom? Variety of design? We need more variety, not less

 

[saforwardlook]

So one would never out last another. With separate engineering departments wouldn't you get better competition? Less restriction / more freedom? Variety of design? We need more variety, not less

In my view, there is plenty of competition from the rest of the world to spur innovative design and engineering solutions to more efficient powertrains. The big hitters are Toyota, VW and GM, and anyone else trying to compete in the world of escalating fuel economy standards is going to face an increasingly tough time. New technologies are being explored from electric vehicles, hybrid electric vehicles and fuel cells and are becoming more of a necessity for some part of a manufacturer's fleet. There just isn't enough capital for other companies than the big three to explore all of them to remain competitive. The consumption of capital needed to run a company today is voracious, and can't be sustained for medium and smaller companies. So it is a matter of survival that the medium size companies link up with one of the bigger ones or face increasingly difficult time making enough profit to sustain their businesses. The links can be smart ones where development and capital expenditures can be in areas where buyers do not care about who designs the technology as long as it works (like the automatic transmissions, smart electronics for self driving cars, who builds the fuel cells or batteries, or even the electric motors, etc). GM is third behind Toyota and VW, and they need to keep their eye on costs to stay in that league. Having spent the last 32 years of my career working with the industry worldwide, I can say that the engineers at GM, Chrysler, and Ford are among the worlds best and brightest, but it is management that determines who succeeds. Combining mostly U.S. company resources makes sense and minimizing capital waste is necessary to remain competitive and in the big league.

Just like Home Depot has taken over the home improvement industry here in the U.S., and Walmart the mass market consumer goods industry, there will be a similar fallout in the automobile industry, where only the largest, most efficient and smartest will survive. And with Google and Apple among others wanting to make cars that self-drive themselves, the future will only get tougher. All those factors are what Sergio is worried about. With good reason from what I am seeing unfold and looking at the 2025 fuel economy standards that get increasingly tough to meet as the years go forward.