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A different big picture?

by David Zatz on

Pundits have been talking about FCA’s “big picture” and taking CEO Sergio Marchionne at his word when he talks about the need to grow and to include an Asian automaker in the group. But what happens if we look at things that have not been well publicized by pundits and analysts? Namely…

FCA has been buying up suppliers, including VM (diesel engine makers), Magneti Marelli, and Teksid; and has been bolstering its own internal parts capabilities. For example, Chrysler has been making more engine blocks, camshafts, and crankshafts, re-insourcing this work from Mexican and Chinese suppliers.

sergio marchionne

Some of these acquisitions were made even though Fiat (and then FCA) had extensive, expensive loans and was trying to conserve capital. Why buy the half of VM it didn’t already own, while delaying development of key Fiat cars? Why invest in building engine blocks in the US, while desperately negotiating with banks?

Perhaps FCA is trying to gain an advantage through vertical integration, while still keeping the parts divisions on their toes by having them continue to sell globally and big against outside parts makers for internal contracts (Chrysler was not automatically given the engine block business for Ferrari’s V6 engines, used in Maserati cars). As a side bonus, FCA can get some key technologies early, and with more help from their creators.

ferrari-station

Yes, FCA may need an Asian name/distribution network, but in the meantime they are building up their own presence globally — the same method Chrysler Corporation was using before the disastrous giveaway to Daimler-Benz.

FCA started building up Chrysler’s parts manufacturing almost from the first day they took over. It’s something to ponder.

Maybe, just maybe, all the analysts who say that Mr. Elkann and Mr. Marchionne are simply trying to puff up FCA so they can sell it off are dead wrong. Maybe they are trying to build a business for the ages — to make sure Fiat and Chrysler enjoy a second hundred years (counting Chrysler’s birth back to Maxwell Motors for its century), or at least so they have a stable foundation for the future.

sergio-marchionne

Sergio Marchionne said that FCA would be net-debt-free in 2018, and so far, just about all his financial targets have been hit. I wouldn’t bet against him.

When I look at FCA, I don’t see a company polishing its ledgers for a quick sale; I see a company investing heavily in its future. I haven’t seen layoffs of engineers; I’ve seen hiring binges. I haven’t see sales of “underperforming” assets, I’ve seen billions of dollars invested in  making them perform.

Mack-Marchionne-Nov-Web

Maybe morale is lousy in Auburn Hills, I’ll believe that; maybe the constant plan-changing is costing the company big bucks and demoralizing people; maybe there have been a lot of mis-steps and decisions which, in hindsight, were foolish (like totally redesigning the 200 or pre-announcing the death of the Dart and 200). But then, Steve Jobs’ Apple screwed up a lot of the time, too — remember the Cube? The round iMac mouse? I could go on for a long, long time.  But, if we leave out fear and memories of Daimler, the evidence points to FCA leaders being in it for the long run, with a plan that doesn’t fit easily into a one-sentence talking point.

David Zatz founded Allpar in 1998 (based on a site he had begun in 1993-94), after years of writing reviews for retail trades. He has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. Before making Allpar a full-time career, he was a consultant in organizational psychology. You can reach him by using our contact form (much preferred) or by calling (313) 766-2304

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