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Marchionne uses VW scandal to push mergers

by Bill Cawthon on

Analysis: Even while he was in New York celebrating Ferrari’s very successful initial public offering, Fiat Chrysler CEO Sergio Marchionne was back on his soapbox, pushing for consolidation.

It may be that Marchionne’s self-professed capital addiction is producing some cognitive difficulties. Bloomberg News reported that Marchionne claimed that the Volkswagen diesel scandal is proof of the need for mergers to conserve capital while complying with ever-more-stringent government relations.

Marchionne-Merger-VWBug-Web

Bloomberg quoted Marchionne when he said the industry would “pay the price” as the cost of compliance rises “exponentially.”

While there is no doubt compliance is expensive, Marchionne’s remarks are a bit off base. Volkswagen’s current woes aren’t due to failing to comply; the company spent years deliberately flouting regulations with rigged software. They also cheated buyers of millions of Volkswagen’s diesel-powered cars and light trucks.

Volkswagen had the technology to build emissions-compliant vehicles, but there was a cost, performance, and fuel economy tradeoff it chose not to make.

The billions it’s likely to cost the company to resolve all the issues are not development or compliance costs; they’re fines, penalties, and litigation costs; and engineering costs to address a past problem, not an investment in future products. The engineering work has already been done to make VW vehicles meet current standards.

Marchionne isn’t trying to merge with Volkswagen. Even with a multi-billion-dollar windfall all but in his pocket, he still has his heart set on General Motors, which apparently can’t tell him “NO!” often enough.

The latest to rebuff Marchionne’s advances was Chuck Stevens, GM’s Chief Financial Officer, who said on Bloomberg Television, “To underwrite an unprecedented level of risk from integration and a cost perspective is not in the best interest of our shareholders.”

Since Stevens has been working with GM’s finances for more than 30 years, he most likely has a fair idea of how they stand.

And he probably doesn’t want a hug.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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