Blips of information have popped up since March, when Fiat-Chrysler CEO Sergio Marchionne proposed an all-out merger with another OEM. Citing cost savings, and reduced redundancies in engineering, Marchionne has had his eye on General Motors in specific.
While GM CEO Mary Barra has ultimately rebuffed the idea completely, Marchionne has been busy courting investors to put pressure on GM. Automotive News reports why the chatter has died down as of recent, despite the hard “no” from GM.
Most of the talk is fueled by past talks of a Chrysler-GM tie-up, according to past GM Vice-Chairman, Bob Lutz. Lutz says 2007 almost had the two merging for good as $7 billion is cost savings impressed executives on both sides. Marchionne says roughly $5 billion could be saved in a new merger, according to a presentation he gave in April. But, GM felt it to be a risky move to take over Chrysler, a cash-strapped company then, and somewhat now. If FCA initiated a hostile move in merging with GM, it would have to be completely equity based, as the company does not have the cash reserves for such a move.
And GM wants nothing to do with FCA’s lack of exposure in China, not to mention jeopardizing its SAIC partnership it has held. GM also has its own European problems to contend with, as the company finally begins a turnaround at Opel and Vauxhall. The Fiat brands would only complicate things, not to mention create immense cultural clashes.
Max Warburton, an analyst for Bernstein Research, says FCA’s best shot is to continue courting GM investors on increased profitability in the long run. It seems the idea is far from dead, as much as General Motors wants it to be with Warburton adding the mechanics of a merger “look wild, but not impossible.”