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FCA Has Chinese Suitors

Discussion in 'Mopar / FCA News' started by 1969 300, Aug 14, 2017.

  1. hmk123

    Level III Supporter

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    Why is it so hard to understand for people that (as far as I can tell) SM has (just) been trying to point out the obvious: that there is a lot of broken in the current state of the auto industry. That he has been thought provoking and pointing out the obvious: that the industry has no chance of surviving in the long run if it cannot produce sustainable profit margins that are decent ROI. This is how I have interpreted his merger talks with GM. But of course everyone is entitled to their own opinion. By the way, usually nothing gets eaten as hot as when it is cooked...
     
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  2. Erik Latranyi

    Erik Latranyi Allpar Legacy

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    There is no confirmation that Exor is interested in a deal that involves selling one or all of its auto brands to a Chinese or to a Martian company.
    But we have confirmation that Exor is interested in a "deal", otherwise, Marchionne would not be talking to GM, VAG or entertaining the Chinese.

    There is no confirmation of any detail, therefore, everything is possible.

    Some here want to claim that certain brands are too profitable or valuable or whatever, to be sold. That is no more true than someone saying that the entire company is up for sale.

    But, we absolutely know that Exor wants a "deal" of some sort. They tried GM, they opened the door to talk to VAG. Clearly, they listen to Chinese (seriously or not). So far, they have not been able to create the "deal" that they want.

    Now, let's define "deal" so we can have clarity here. A "deal" does not have to be a merger, acquisition, sale or hybrid. A "deal" can be an objective and could be as simple as "we want a company that provides a greater than 12% return on invested assets every year with an asset base of X billion USD.

    But to write anything off as sacred is not valid. To say anything is worthless is not valid.

    The only thing that is valid is obtaining the "deal"......and that means the "deal" trumps all things sacred or not.
     
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  3. Erik Latranyi

    Erik Latranyi Allpar Legacy

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    Totally agree that Marchionne seems to believe this.

    However, the auto industry will dramatically change in the next 10-50 years. Autonomous vehicles, electric vehicles, Uber, Lyft, subscription ownerships, etc. will all re-shape this industry in ways that nobody can predict......because those are the things we know about NOW and even more will happen soon.

    If the auto industry goes the way of the mobile phone, we will have two systems for the entire world and licensed manufacturing under that.

    Opinion: If I do not want to play in this futuristic "what if" auto market, I would take something like Ferrari and maybe Maserati and run away. The wealthy will always want toys.
     
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  4. Erik Latranyi

    Erik Latranyi Allpar Legacy

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    Having read those reports, it is interesting to note that after being rebuffed by GM and others to create this "industry consolidation" that is so necessary to slow the consumption of capital, could Exor be resigned to saying that consolidation will have to happen through collapse?

    If you cannot create voluntary consolidation, then you either leave the game or wait until consolidation is forced by market events.

    I do not see Exor waiting for the market to collapse another company. I do not think anyone is on the brink of collapse in the next year or so. Nobody is doing that badly.

    So, could Exor have decided to just stop playing the game?

    It is a possibility, not a fact. But, from your first report, we know what Exor wants.....Low capital investment with high returns.
     
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  5. Mike V.

    Mike V. Mopar-nac The Moderator

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    Erik, you are still making assumptions based on rumors that have been publicly denied by all parties involved...
    1. FCA publicly stated they were no longer looking for a merger partner.
    2. FCA has publicly denied that Great Wall has approached them regarding an acquisition.
    3. Great Wall has publicly stated they have not contacted FCA about an aquisition.
    4. Guangzhou has publicly stated they are not interested in the acquisition of FCA.
    5. Geely has publicly stated they are not interested in the acquisition of FCA.
    6. Dongfeng has publicly stated they are not interested in the acquisition of FCA.
    My comment is still 100% valid, there has been no confirmation that Exor is interested in deal that involves selling its all or any of the FCA auto brands individually to a Chinese company.

    Please provide a source to back up your commentary about a “deal” and I will agree to change my statement... otherwise it is not worth bickering about.

    Mike
     
    #505 Mike V., Aug 22, 2017
    Last edited: Aug 22, 2017
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  6. MJAB

    MJAB Well-Known Member

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    Maybe some sentences of what was said in the last conference call for Q2 results could give an idea of what FCA is thinking to do.

    Since Seeking Alpha rules I can copy only few sentences, to understand better is necessary to read some of the questions/answers.
    Fiat Chrysler Automobiles NV (FCAU) Q2 2017 Results - Earnings Call Transcript | Seeking Alpha (at https://seekingalpha.com/article/4091677-fiat-chrysler-automobiles-nv-fcau-q2-2017-results-earnings-call-transcript?part=single )

    Answer by Sergio Marcionne
    "...
    And so my real problem in answering your question is given the legal and political environment that we're now living through, the likelihood of us finding a group of other OEMs that will be able to aggregate into this cost sharing agreement is relatively small. And the best conduit to that ideal world is still the supplier base. It is easier for us to get the suppliers and get them to act as the conduit and to have direct relationships with other OEMs to try and bring down the cost of execution.

    Brian A. Johnson - Barclays Capital, Inc.

    Is there a way to push more of the powertrain investment out to the supplier base or create new powertrain companies that work across OEMs?

    Sergio Marchionne - Fiat Chrysler Automobiles NV

    Yes. And that is exactly one of the reasons why – if I go back to what I said originally about the 2018 plan, the 2018 to 2022, when I look at my structure underneath this and I say what doesn't belong here? What doesn't belong to FCA? Anything which has got value beyond the OEM, so all of our Components business, everybody who supplies to that base needs to stay away from me because I'm almost radioactive, right. So they have a much better chance of being able to act as the conduit to higher margins and better capital utilization than I can.
    ..."

    Than Sergio Marchionne says that first half 2018 there will a more clear outlook of things. There will be the new industrial plan.

    So one could image the Magneti Marelli, Automotive Lighting (100% owned by Magneti Marelli), Comau and Teksid could be demerged.
    Maybe part of activities of Mopar too.
    And could also that powertrains, that are engines and transmissions, will be demerged, maybe with "components" with FCA owning a % or with Exor in control like Ferrari and CNH Industrial.

    To note that FCA already supplies other manufacturers with engines, directly or production under license, and are Suzuki (diesel/gearboxes for Europe), Maruti-Suzuki (diesel engines + AMT transmission), Tata (diesel engines, transmissions ?) and GAC (transmmission) through a joint venture in China.

    This new company/companies, that will be a supplier of OEMs, than could aggregate with others suppliers.
     
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  7. hmk123

    Level III Supporter

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    While I agree with you about where the auto industry might end up don't we have to distinguish between metropolitan areas and rural areas? SUVs and trucks will probably live there for quite a bit longer. FCA could concentrate on that. After all, they already have a tractor business, too. :)
     
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  8. MJAB

    MJAB Well-Known Member

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    Addendum

    Also big suppliers are separating powertrains from the other parts of companies.

    For example Delphi announced that will split internal combustion powertrains technologies and quote it in stock market. The other company will be for mobility and electrical vehicles technologies.

    Bosch will spinoff all its powertrain technologies from the other business: gasoline, diesel and electro-mobility will go under the same roof.
     
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  9. JavelinAMX

    JavelinAMX Well-Known Member

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    .

    ... And I just wish people would see the "Easy Come; Easy Go" element in obtaining an important asset for no cash outlay. None - no skin in the game.

    Next shoe to drop? Brand Jeep. Then count to ten for the sale or sales to begin. Could it be the Administrative ducks are already in a row? Only needing to enter the proper dates in the right fields, notarize the lot and file the papers ... faster than a speeding Legal Brief.

    .
     
  10. 77 Monaco Brougham

    77 Monaco Brougham Well-Known Member

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    I wonder if FCA / EXOR eventually sees itself slowly paring down its brand lineup to just Ferrari, Maserati, Alfa-Romeo, and Jeep, and instead concentrate on growing its efforts as an OEM supplier to the rest of the industry. They already have a great start with the companies they already own.

    In which case....the perfect potential "partner" would be Magna.

    As for the remaining brands......I'll leave it up to you guys to speculate on how they would get dished out.

    Ahhhhhh! Speculation......soon to become North America's favorite indoor game!;):D
     
  11. AlfaCuda

    AlfaCuda Well-Known Member

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    +1

    It looks like some people here know what SM and other decision makers inside FCA don't know or know a lot more than.... despite that it's obvious to be near impossible.
    A few pieces of information and data outside the company seems to be greater than and correct compared to what the hundreds of managers inside the company could ever have. This despite the company in question that has been performing exceptionally well in terms of global sales and profits and meeting targets.

    I can only say that I am glad that none of these people are involved in the company at any significant management level.

    I'm in no doubt that a merger of some sorts can be very beneficial owing to scale, geographic spread and effects of cost base. The trick I guess is in finding the right and willing partner.
     
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  12. humdrum

    humdrum Well-Known Member

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    I don't believe a traditional merger is in the cards. A consolidation and reorganization of support operations and companies reflecting ever emerging, new exigencies are more likely. Electric drive and powertrains can be sourced from singular companies that feed GM, FCA, Ford, VAG and even Tesla (and others). It doesn't mean the each company will build their own version of an electric motor or batteries, for example. Clearly, that's what I see Sergio alluding to.
     
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  13. MJAB

    MJAB Well-Known Member

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    Sergio Marchionne has done in the past, before arriving in Fiat group, similar reorganizations / consolidation.

    He was CEO of Alusuisse Lonza Group (Algroup) when it was merger with Alcan (a bigger company).
    The initial deal was for a merger at three also with french company Pechiney, but operation was under anti.trust review (later in 2004 Pechiney joined Alcan too).

    Lonza Group, chemical industry, was demerged from Algroup before the deal.

    The motivations of the merger were almost the same as he repeats in last years.

    Alcan sweetens deal to buy Algroup - Jun. 1, 2000 (at http://money.cnn.com/2000/06/01/deals/alcan/ )
    Customers feared marketing power of European aluminum giant (at https://www.theglobeandmail.com/report-on-business/customers-feared-marketing-power-of-european-aluminum-giant/article25459902/ )

    note: Alusuisse was one of the companies that worked with Audi for their aluminium spaceframe cars.
    In particular Alusuisse made developments on joints and hydroforming.
     
  14. Ernesto

    Ernesto Active Member

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    I mention 2 FCA brands on this thread that has had about 28,000 mentions and I'm off topic. Wow! Okay I get it. Thanks for the enlightenment.
     
  15. Citation84

    Citation84 Well-Known Member

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    There it is, Jersey Joe. Exactly. The new business model across all industries these days, it appears. Then they trot out the PR boilerplate claiming their "associates are our most important asset".
     
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  16. valiant67

    valiant67 ...

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    Interesting comment here, no idea how privy to any actual knowledge this investment bank is though (emphasis added):
    "Investment bank Jefferies said FCA’s owners, the Exor family, were looking to leave the mass car market and agreed that the Chinese action might ignite interest from western rivals."
    from:
    Great Wall Interest In FCA Cools, But A Takeover Action Is Still In The Cards (at https://www.forbes.com/sites/neilwinton/2017/08/23/great-wall-interest-in-fca-cools-but-take-over-action-still-on-the-cards/?utm_source=yahoo&utm_medium=partner&utm_campaign=yahootix&partner=yahootix&yptr=yahoo#15194f4666ea )
     
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  17. Dave Z

    Dave Z It's me, Dave
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    And we believe him why? Does he have a good record?

    Investment bankers say all sorts of crazy things.
     
  18. valiant67

    valiant67 ...

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    Note that I basically said that in my post. We don't know if this bank has any inside info or not.
     
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  19. aldo90731

    Staff Member Level III Supporter

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    There's nothing wrong with pointing out that there's a lot of broken in the current state of the auto industry. But he still has a business to run, employees to lead, and customers, dealers and investors to be accountable to.

    In my mind, it is not that other auto CEOs ignore SM; it is that they are more concerned with competing in the market and keeping their business viable than fixing the entire industry. At least that's how I interpret his endless utterings about industry over-capacity and his decision to vacate the car business in N.A.

    While his diagnosis may be correct, his business decisions are not. By extricating himself from a good 40% of the market, he is jumping the gun on a shift that is still undergoing and has an uncertain ending, meanwhile leaving FCA in a vulnerable position in the market.

    Being an industry visionary means little if he cannot back it up with savvy ongoing business decisions.
     
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  20. Dave Z

    Dave Z It's me, Dave
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    ... like buying Chrysler, expanding Jeep, putting cash into Dodge, reviving Alfa Romeo (okay, we don't know if that one will work), reviving Maserati (which DID work), pushing Chrysler as the comeback kid “Imported from Detroit,” hiring tens of thousands of Americans instead of moving the whole kit-and-caboodle to Mexico or Brazil, partnering with Serbian and Turkish companies, doing a front wheel drive full size van, ... that sort of thing?

    I will absolutely credit SM for leading Fiat’s and Chrysler’s resurgence. I will criticize his lack of attention to quality and dealerships, yes, but he should get credit where it's due.
     
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