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Fiat Chrysler chairman resurrects merger aspirations

Michael Wayland
The Detroit News

The Fiat Chrysler Automobiles NV Board of Directors will gather in Amsterdam on Friday for the company’s annual shareholders meeting with merger aspirations once again at the forefront.

Fiat Chrysler Automobiles NV chairman John Elkann on Thursday resurrected sentiments that the automaker wants to merge with a larger automaker. In a shareholders letter for Exor SpA,an influential investment company through which his family holds 44 percent voting interest of Fiat Chrysler, Elkann reiterated that the automaker could save $10 billion a year by “doing something with the ‘Big Guys.’ ”

“If you value that in perpetuity it starts to become very interesting,” he wrote in the 16-page letter prior to the automaker’s annual meeting in Amsterdam. “But you need two to tango and most of our competitors are busy with the great opportunities that technological disruption has to offer.”

The comments are the first in some time about mergers from Elkann or from Fiat Chrysler CEO Sergio Marchionne, who originally pitched industry consolidation through a presentation with financial analysts and news media in April 2015 called “Confessions of a Capital Junkie.”

Following Marchionne’s presentation, the automaker courted General Motors Co. as a partner but was rebuffed several times, which reportedly led to plans to possibly launch a hostile takeover. That did not occur.

Eight months after the consolidation pitch, Marchionne told reporters at the Detroit auto show in January that he “abandoned,” for now, his efforts for industry consolidation to focus on achieving the automaker’s ambitious 2018 goals.

“We’ve had expressions of interest from more than one party over the fact that they were interested in pursuing the discussions,” he said. “We had to make a choice as to whether they offered us enough of an upside to engage.”

Marchionne said the company was not going to enter into anything “as long as there are better alternatives out there than the ones we were being offered that we should not be considering what I consider to be sub-optimal choices for the industry going forward.”

Elkann, in the letter, goes on to say “there’s no doubt” that there will be “massive changes” from alternative powertrains, including electrification, however “if you look at the total cost/environment equation” of those technologies versus an internal combustion engine, “it’s unclear who wins.”

He then shares a recent “Automotive 2030 report” from global consulting firm McKinsey & Co. on the amount of money it will cost for “connectivity, autonomous, driving and diverse mobility,” which he calls “the really sexy stuff.”

At least 85 percent of cars in 2030 will need drivers rather than operating autonomously, according to the report. And even in a “high-disruption scenario,” industry revenue from new car sales will increase to $4 trillion in 2030 from $2.75 trillion in 2015.

"Boring old carmakers need to figure out how to make this profitable and guard against falling into the 1990 trap of ignoring that business while chasing profits in other parts of the value chain," said Elkann, who also serves as CEO of Exor.

Elkann is a great-great-grandson of Giovanni Agnelli, founder of former Italian automaker Fiat SpA that took a control stake in Chrysler Group LLC to eventually form Fiat Chrysler in 2014. Exor owns about 44 percent of Fiat Chrysler’s voting rights. It also controls Ferrari NV, which spun-off from Fiat Chrysler in January, and CNH Industrial NV, a large truck and tractor producer that was separated in 2011.

Fiat Chrysler, CNH and Ferrari all have their annual shareholder meetings scheduled on Friday in Amsterdam.

Ferrari NV CEO Amedeo Felisa will reportedly announce plans to retire during the meeting, reports Bloomberg News — and Marchionne, who is Ferrari chairman, is expected to take over as CEO of Italian sports car manufacturer on an interim basis.

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