By now it should be undeniable that Fiat Chrysler Automobiles NV is for sale.
Not in a desperate do-a-deal-now kind of way. But in a persistent, strategically logical way that understands the capital requirements demanded by both the traditional car and truck business and the emerging mobility space — and FCA’s limited capacity to meet them.
The problem is that would-be buyers in the global auto industry — from General Motors Co.’s Mary Barra to Renault-Nissan’s Carlos Ghosn — are not inclined to cooperate. To that august list can now be added Volkswagen AG CEO Matthias Mueller.
“I never said that a liaison with any other partner is ruled out once and for all,” Mueller was quoted as saying, according to Evercore ISI. “I only said that there is no contact at the moment between myself” and FCA CEO Sergio Marchionne.
Mueller’s off-handed “I am not ruling out a conversation” line, delivered at the German automaker’s annual general meeting this week in Wolfsburg, follows his earlier brush-off at the Geneva International Motor Show. All of it is sparking fresh (if redundant) talk about potential consolidation.
Enter Marchionne and his trademark candor:
“If you were the No. 1 automaker in Europe and somebody combines with another to become the second and gets very close to your position,” he said Wednesday, referring to PSA Groupe SA’s pending acquisition of GM’s European brands, “your very first reaction is to try to distance the second again. We are the only natural combination partner for somebody who wants to do that.”
“If he wants to call me, he knows where I live,” Marchionne said of Mueller during President Donald Trump’s visit to the American Center for Mobility in Ypsilanti Township. “I didn’t go chasing him. But if I’m right on consolidation, and the fact that you need to build scale to deal with these businesses, we’re the natural place to go.
“If you were playing a chess board game, that’s what you would do. If it happens, God bless him. I have zero interest of pursuing it other than the fact of my objective now is to meet the ’18 plan.”
Zero interest? Yet Marchionne’s talking up the prospect, again, because the media are asking about it, again. And because industry analysts are paid to imagine the unimaginable — the tie-up of two brand-heavy automakers with roots primarily in three countries on two continents in the new age of nationalism.
Should be a snap, right?
“We don’t infer from Mueller’s comments that FCA is something VW is looking at or even considering at any point in the coming years,” Evercore ISI, an industry analyst, wrote from London. “We believe Mueller is simply saying ‘never say never’ rather than giving any indication of interest.”
VW, the thinking goes, has far more critical issues in the wake of the global diesel scandal that delivered record fines in the United States and a serial tarnishing of its brands and corporate credibility. Those include improving the profitability of its VW brand, rationalizing its components and trucks businesses, and paying the bills for its diesel sins.
It also contemplates an effort to liberalize VW’s hide-bound culture, to repair its damaged integrity with customers, dealers and government officials, and to focus on developing solutions for mobility and self-driving cars. Layering a transatlantic merger on top of all this likely would prove more liability than asset.
“All of these challenges are likely to take several years to resolve,” Evercore said. “We don’t see VW entertaining any serious” mergers or acquisitions “until this has been concluded.”
Still, a VW-FCA tie-up conjures its own kind of industrial logic. Bringing FCA’s Fiat, Lancia and Alfa-Romeo brands into the German fold would bolster VW’s position as Europe’s No. 1 automaker; it would widen its narrowed lead over the new would-be No. 2, the PSA combination with GM’s Opel and Vauxhall brands.
And the addition of the Jeep and Ram truck brands in North America would provide stellar SUV and pickup heft the VW and Audi brands arguably cannot replicate on their own. In theory, VW could claim wider distribution through the respective Jeep and Ram dealer networks and the profitability to match.
For FCA, combining with VW would give its European brands greater scale to compete in the tough European market; a gateway to China and other Asian markets, where VW is an industry leader; and theoretically lower product development costs spread across greater volume.
It also would gain access to an engineering-savvy culture arguably better equipped to develop self-driving car technologies and leverage their usage across VW’s broader global network of distribution and business relationships.
Executing the theory of the deal is far harder than conceiving it, as old Chrysler hands can attest. They lived the mendaciously named Daimler-Chrysler “merger of equals,” its peddling to the New York sharpies from Cerberus Capital Management LP, the collapse into bankruptcy and its rescue by the feds and Marchionne.
Creating and holding value has proven more difficult than architects of those deals probably ever imagined — lessons not lost in the c-suites occupied by the likes of Barra and Ghosn, Mueller and Ford Motor Co. CEO Mark Fields.
If you’re looking for reasons the industry brass isn’t keen to buy what Marchionne keeps trying to sell, the past 20 years of Chrysler history would be a decent place to start.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.