Fiat Chrysler merger looming? – Detroit Free Press
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Volkswagen Group has opened a tiny crack in the door to a possible merger with rival Fiat Chrysler Automobiles, which, if it ever happened, would set off a potentially seismic shakeup in the global automotive industry.
A deal between the two automakers would instantly give Volkswagen a big presence in the U.S.—- something the German automaker has pursued without success for years.
For Fiat Chrysler, which is not blessed with the financial means that some of its rivals possess, the deal would give the automaker the financial resources necessary to compete in the coming years. The company for years has been behind its competitors when it comes to fuel efficient, hybrid and electric cars. Now, it is behind on the development of self-driving vehicles.
For Fiat Chrysler workers, merger discussions again raise uncertainty about the future of an automaker that has been through three different corporate ownerships over the past 20 years and a Chapter 11 bankruptcy.
The speculation arose after Volkswagen global CEO Matthias Mueller told reporters in Germany on Tuesday that he would not rule out talks with Italian-American automaker Fiat Chrysler, according to Reuters.
His comments, which came after an annual news conference, signal a possible speed-up in consolidation for an industry that’s on the verge of massive upheaval via self-driving vehicles and ride-hailing applications.
“I am not ruling out a conversation,” Mueller told reporters, according to Reuters. He said he had not yet spoken with Fiat Chrysler CEO Sergio Marchionne about the topic but that “it would be very helpful if Mr. Marchionne were to communicate his considerations to me, too, and not just to you.”
Last week in Geneva, Switzerland, Marchionne said the automaker is committed to completing its five-year strategic plan on its own but then acknowledged the automaker’s financial shortcomings and the need for a possible merger.
“We remain as committed as we were in 2014 to the achievement of the 2018 targets and this remains the single largest objective that the FCA management team has in front of it,” he said, according to a transcript of his comments.
But then, he said, “The better way to run this business is by consolidating forces, keeping a multi-brand environment that faces the customer and that effectively shares all the essential elements of design and manufacture of cars on a common basis as much as is possible.”
Marchionne has publicly lobbied for auto industry consolidation for years, having previously proposed a deal with General Motors that GM swiftly rejected.
But urgency is picking up after GM reached a deal to sell its European division to French automaker PSA Groupe, which controls the Peugeot brand, potentially translating into stiffer competition for VW in its home market.
In the U.S., Fiat Chrysler owns the popular and profitable Jeep and Ram brands but is saddled with ailing car-heavy brands Dodge, Chrysler and Fiat.
Some analysts have said Volkswagen would only be interested in Jeep and Ram. Jeep has been growing rapidly around with world, with sales on track to exceed 2 million by 2018 while Ram pickups generate big profits in North America.
Volkswagen, which is under pressure to bolster its profit margins, could be enticed by those two cash cows. It could also envision opportunities for cost cuts, combined purchasing power or engineering collaboration in Europe through a Fiat Chrysler tie-up.
A Fiat Chrysler spokesperson declined to comment.
Volkswagen spokesperson Jeannine Ginivan said in an e-mail that “there are no plans and have been no discussions” between the two companies.
But the timing might not be right for a deal for Volkswagen, Autotrader analyst Michelle Krebs said.
“They have a lot on their plate as it is,” Krebs said. “It’s clear that Volkswagen needs to focus on profitability and getting the most out of their brands and recovering from the crisis it’s been in.”
Volkswagen is still reeling from the fallout from its diesel emissions scandal, which has led to upheaval among its executive ranks along with civil and criminal settlements that now exceed $22 billion.
“In times where most other car companies are improving efficiency and shaping the industry, VW needs to be very mindful not to waste any more time with internal power struggles,” Arndt Ellinghorst, an analyst with Evercore ISI, said in a report. “Volkswagen’s shareholders, employees and customers desperately need a success story.”
Potentially complicating matters is the rivalry between VW and Fiat Chrysler. Marchionne once memorably challenged VW leaders to a showdown at the Paris auto show.
But Marchionne, who rescued Chrysler from liquidation through a U.S. government bailout, bankruptcy and restructuring, is looking to “leave the house in good order” before his planned retirement in early 2019, Krebs said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey. Contact Brent Snavely: 313-222-6512 or email@example.com. Follow him on Twitter @BrentSnavely.