MILAN (Bloomberg) — Fiat Chrysler Automobiles Chairman John Elkann sees the need for more combinations in the auto industry and expects consolidation to continue.
“Hopefully this will be driven by reason and common sense rather than by crisis,” Elkann, 39, chairman of Exor SpA, said in his annual letter to the investment company’s shareholders.
Controlled by the Agnelli family, Exor owns 29.2 percent of Fiat Chrysler and 44.3 percent of its voting rights. Elkann said industry mergers should take into account the importance of identity and culture, “avoiding the all too typical divisive trappings of a takeover.”
Sergio Marchionne, the architect of the 2014 merger that combined Italian car producer Fiat and U.S. counterpart Chrysler, has been a vocal proponent of consolidation in the auto industry. High costs for developing cleaner vehicles and demand for self-driving features have put pressure on traditional auto producers, which also face new competition from the likes of technology companies Apple Inc. and Google Inc.
Fiat Chrysler is open to a combination with General Motors Co. or Ford Motor Co., and a deal with one of its larger U.S. competitors would be “technically feasible,” Marchionne, the London-based carmaker’s CEO, said in an interview last month. Fiat Chrysler wouldn’t impose any conditions beyond that a transaction save “the highest amount of capital” to channel into developing new vehicles, he said.
Since Marchionne said last year that there’s potential to form a new No. 1 in the auto industry, analysts and investors have been considering which rivals would make a suitable match.
While Marchionne and Elkann said in a joint Sept. 30 interview that Fiat Chrysler is strong enough on its own and doesn’t need another deal, any future merger partner should be a global manufacturer that’s not too exposed to the European market while being culturally compatible with the Italian-American company.
“A new bout of combinations may be around the corner, and FCA’s top management has clearly stated that the company is ready to take part in the consolidation,” Gabriele Gambarova, an analyst at Banca Akros, wrote in a note to clients Monday. “We understood that FCA is considering a full merger with another carmaker,” and either Volkswagen AG or GM would make the most likely candidate.
A GM spokesman said in March the company was focused on its own strategy.
Last month, Marchionne sounded less enthusiastic about the potential of tying up with PSA Peugeot Citroen, doubting that the French manufacturer would solve Fiat Chrysler’s problems. He also said he never had talks with Volkswagen executives about a combination.