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Smoke, Mirrors, and FCA’s Real Goal

by David Zatz on

Analysis. Sergio Marchionne’s talk of mergers seems to have backfired; a speech about the costs of companies engineering nearly identical components, along with his email to General Motors, have wrought gloom among some enthusiasts, while turning off some buyers and alienating some potential employees.

Sergio Marchionne small 2011

That’s puzzling, because, Sergio Marchionne is a sharp CEO; he’s  turned around both Fiat and Chrysler, and has “fixed” numerous brands. It hasn’t been a one man show, but neither was the creation of Chrysler Corporation.

Perhaps we are being prepared for a surprise deal.

Ford, Tata, and BMW are highly unlikely, due to the control of the founding families. General Motors has been ruled out. As for Suzuki and such, since Mr. Marchionne switched from “we need an Asian partner” to de-duplication, he’s probably talking about a European automaker.

Volkswagen would probably love to have FCA, which would vault them to the worldwide #1 position, and wake up their United States sales, while providing credible off-road vehicles and full-size pickups.  De-duplication would come with shared diesels, transmissions, telematics, future tech, and such. Volkswagen competes mainly with Fiat, but in the US, Volkswagen and Chrysler are largely complementary, outside of crossovers, where there is virtually no cross-shopping.

Former VW CEO Ferdinand Piech would have stood in the way, but he’s gone now — perhaps that is the reason for the Volkswagen-Audi Group’s (VAG) sudden decision to oust their longtime CEO.

Culturally, though, a VAG/FCA merger would never work, and VAG would all too clearly dominate. As jet-setting as the Fiat founding family is, we doubt they’d be willing to see Fiat trampled under a heavy Wolfsburg foot.

We could go on, but that would dilute the main point — which is that perhaps Sergio Marchionne is, once again, doing things that are smarter than people think.

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