Marchionne abandons FCA consolidation efforts
Fiat Chrysler Automobiles NV CEO Sergio Marchionne said Monday that the automaker has “abandoned,” for now, its efforts for industry consolidation and a potential merger with General Motors Co.
Marchionne, speaking with auto industry journalists at the opening press day of the 2016 Detroit auto show, said his company has ceased its efforts not because the ideas in his “Confessions of a Capital Junkie” consolidation presentation from April were wrong, but because there were no willing, suitable partners.
“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.”
Fiat Chrysler, he said, will lay out a “renewed commitment” this month to its five-year plan that was outlined in 2014. The update will include its future North American manufacturing footprint and confirms the company’s financial objectives of being debt-free and increasing operating profit to $9 billion euros by 2018, he said.
“What you will see is a renewed commitment to the 2018 plan with a very clear objective of confirming our desire to be debt-free less than three years from now,” Marchionne said. “That is not pie in the sky.”
Marchionne said the global market has “significantly shifted,” making the company change how it will achieve its goals. He said following the completion of the plan, the company could be more prepared to reopen consolidation discussions.
“The achievement of the plan in ’18 will create a car company that is fundamentally different than the one we are looking at today, and it will put it in position to have a different type of dialogue with people who may have been otherwise not interested,” he said. “It will give us the credibility, I think, which is highly important, in being able to reopen the discussions.”
Marchionne said he believes consolidation remains “unavoidable.” However, he will not be leading those discussions or the company’s post-2018 plan. He said he has committed “to the achievement of the 2018 plan” but “come ’19 and later, the discussion will have to be handled by my successor.”
Marchionne declined to comment on potential successors. Speculative candidates have included Asia-Pacific Chief Operating Officer Mike Manley, also head of global Jeep and Ram brands; Reid Bigland, head of sales, fleet and Alfa Romeo in North America; Alfredo Altavilla, head of business development and COO for Europe; and Chief Technology Officer Harald Wester, also head of Alfa Romeo and Maserati.
For more than a year, Marchionne has been touting the need for the industry to consolidate to save billions on research and development of new vehicles and powertrain technologies. Most infamously, in his consolidation manifesto, “Confessions of a Capital Junkie.”
Marchionne said the April presentation was “not intended as a substitute for the plan or as an excuse for not achieving” its five-year plan.
Shortly after the consolidation pitch, it was reported that Marchionne had approached GM CEO Mary Barra about a merger. Barra confirmed the reports, and said the carmaker’s board vetted and rejected his proposal. But Marchionne reportedly continued to pursue the deal. There were even talks of Marchionne vying for a hostile takeover of GM.
Most recently, it was reported Marchionne said he had met with Barra in Washington, D.C. and the meeting did not go well.
“I met Mary Barra less than a month ago in Washington,” Marchionne said in Milan this month, according to Bloomberg News. “I don’t think I will have another coffee with her. It won’t happen again in the future.”
Marchionne clarified those comments Monday, saying he shook Barra’s hand at a meeting lead by the National Highway Traffic Safety Administration and U.S. Department of Transportation, but did not have a cup of coffee with her.
Barra, asked about the meeting Sunday night, confirmed she was with him at the event: “I was at a meeting where all the executives from the industry were with NHTSA, I believe that is what he was referring to,” she said. “It was a meeting totally focused on the agenda of the Department of Transportation and NHTSA.”