Marchionne reshapes Fiat Chrysler for merger or sale – Detroit Free Press
Fiat Chrysler CEO Sergio Marchionne’s latest reimagining of the company he created could be the highlight of his brilliant career.
Just last month, Fiat Chrysler Automotive had a spotty product line, an uncertain future and few prospects of attracting a strong partner. Today, it’s a candidate for merger or acquisition by a number of automakers. If Marchionne plays his cards right — and when has he not? — the bidding could get intense.
Before Sergio reshaped and refocused FCA’s product plan Jan. 27, the company consisted of a few strong products sitting atop a steaming heap of unprofitable brands and car lines.
That changed when Marchionne announced he would stop building compact and midsize cars — things FCA does not do well — and focus on Chrysler’s strengths and Fiat’s potential assets. Bye-bye Chrysler 200 and Dodge Dart. Hello Ram Power Wagon, Jeep Grand Wagoneer and more.
The plan transformed FCA from a potential money pit into a plum many automakers could covet as a money maker and door to the U.S. market.
Marchionne’s changes to FCA do not assure a deal, or the company’s long-term success.
“It’ll take more than dropping a couple of lackluster cars to attract a first-rate partner,” Autotrader senior analyst Michelle Krebs said. “Fiat Chrysler also needs to address productivity, plant efficiency, quality and profit margins.”
Marchionne has long said FCA needs grow by merging or working with another automaker. FCA’s latest strategic recalibration is a road map from here to there.
His overtures to other car companies could determine the fate of thousands of jobs in the U.S. and around the world.
The potential impact on U.S. communities is immense. Striking a favorable deal with a compatible automaker could preserve and even add jobs at FCA assembly plants, engineering centers, dealerships and more. Choosing the wrong partner might devastate FCA and lead to job losses and plant closures.
Jobs, families and tax bases from Auburn Hills to Mexico depend on Marchionne’s next moves. This must be the crowning achievement in the career of one of the auto industry’s great dealmakers.
Candidates to buy or merge with FCA include any company that:
Those criteria open the door to many potential bidders.
Best of all from an American point of view, most candidates would want Chrysler’s resources in North America. They would need Chrysler engineers, designers, assembly workers and dealers. Communities from Detroit, Toledo and Windsor to Saltillo, Mexico, could continue building Jeeps, Ram trucks, Pacifica minivans and 300, Charger and Challenger performance cars for a stronger and more stable company.
No company has publicly expressed interest in FCA, but potential buyers or partners include:
- PSA Peugeot Citroen: FCA’s parts fit beautifully with France’s largest and Europe’s second largest automaker. PSA has no presence in North America. It builds competitive cars, but no full-size pickups, no rugged and upscale SUVs like Jeeps. It lacks global luxury brands like Alfa Romeo and Maserati. Drawbacks: Overlap with the Fiat brand in Europe and South America. PSA management is still getting their own house in order.
- Hyundai-Kia: The Korean giant has heaps of money and boundless self-confidence. Hyundai also needs more assembly capacity worldwide. Drawbacks: Already has dealer networks in the U.S., Canada and Europe. Hyundai has no history of acquiring or merging with other companies. Management would be a challenge.
- Honda: Honda builds great cars, but no large pickups, off-roading SUVs or rear-wheel-drive sport sedans. It has high quality and fuel economy, two of FCA’s weaknesses. Drawbacks: Risk-averse management. No history of acquisition or merger. Major overlap in the U.S.
- Mahindra: The Indian conglomerate wants to be a global automaker. Fellow Indian company Tata has been a terrific steward of the Jaguar and Land Rover brands. Drawbacks: Mahindra has shown no ability to build cars and trucks that meet Western expectations for quality, technology and luxury. It’s a wild card.
- Mazda: Mazda builds fine small and midsize cars, FCA’s weaknesses. Drawbacks: No history of acquisition or merger. The combined Mazda-Fiat-Chrysler would still be a relatively small player with limited resources. Overlapping dealerships in North America.
- Any number of Chinese companies: Geely Automotive’s ownership of Volvo shows working with a Chinese partner can be a recipe for growth and success. Drawbacks: The potential bidders are complete unknowns. Would an owner nourish FCA or raid the company’s assets and move production to China?
- Volkswagen or Renault Nissan: Longshots, but not out of the question. Both giants have apparently limitless managerial ego and a shark-like need to keep moving and growing. Both would love Ram and Jeep. VW publicly coveted Alfa Romeo in the past. Drawbacks: VW is reeling from the repercussions of cheating on emissions tests, and probably will be for years. Renault-Nissan already has a huge sales and manufacturing footprint in the U.S.
Despite the potential for those deals, all mergers and acquisitions are fraught with peril. Consider the smoking ruins of the promise and hope that were once DaimlerChrysler.
“A partnership needs to be collaborative and mutually beneficial,” IHS Automotive senior analyst Stephanie Brinley said. “That’s about attitude as much as product.
“Geely and Tata let the companies they acquired continue to do what they did well. That’s the exception, not the rule. Just because the products don’t overlap doesn’t mean the companies fit. You can draw the lines on paper, but you can’t draw the cultures, and you can’t draw collaboration.”
If the right company buys Fiat Chrysler and implements the right plan, the company’s future could be bright, building more of the vehicles it does well, adding new strengths and global scale. The wrong partner or strategy would be devastating.
Whatever the final result, Marchionne’s latest moves herald more change at Fiat Chrysler.
Contact Mark Phelan: firstname.lastname@example.org or 313-222-6731. Follow him on Twitter @mark_phelan.
Fiat Chrysler’s strengths
Ram: A strong and growing brand in the lucrative US markets for pickups and commercial vehicles
Jeep: One of the most desirable automotive brands on Earth, profitable and growing
Pacifica minivan: A leader in a profitable market that remains important to American families
Chrysler 300, Dodge Charger and Challenger: Profitable, iconic cars with loyal owners. Their rear-drive architecture would add volume to a global automaker’s performance or luxury car programs.
Alfa Romeo and Maserati: Sporty luxury brands with established names and reputations
Fiat 500: An iconic small car
Dealers: Large, established sales networks in North America, South America and Europe.
Potential partners or buyers
PSA Peugeot Citroen