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FCA+GM more likely now?

by David Zatz on

General Motors has agreed to “sell” Opel/Vauxhall to PSA Group (Peugeot). PSA’s payment for the division is less than GM’s pre-funding of pension obligations, so GM’s sale of the money-losing operation could be said to be a gift.

FCA+GM

GM had been losing money on Opel and Vauxhall for years, largely because of their small market share in Europe. It also increased the cost of engineering and building cars in the US, because every car had to be created to conform with European safety standards (particularly pedestrian impacts, but also lighting).

FCA may be a much more attractive partner for GM now, because the two have even less overlap than before. FCA and GM target few of the same customers, and nearly all of those are in the large-truck space — where a combined company would still have the volume to make two different lines.

GM is popular in some key areas where FCA is fighting for a presence, and vice versa. GM has popular small and compact front wheel drive cars; FCA has more-popular rear wheel drive sedans and SUVs, and minivans on top of those.

We believe most FCA and GM brands would survive such a deal.  GM has no brand like Dodge, Ram is too large and popular to close, GMC is essentially Chevy with more profits, and there is nothing at GM like Jeep.  Fiat would remain the mainstream Eurobrand, while Maserati and Buick both have dedicated markets.

The questions could be Cadillac, Alfa Romeo, and Chrysler. Chrysler’s survival is the least likely. Cadillac and Alfa Romeo are both going through planned recoveries; if one or the other proved highly successful while the other did not, chances are the successful one would win out — or they could be twinned, with the brand on the car dependent on the country of sale.

Yesterday, Sergio Marchionne told reporters that he was still open to the GM deal. GM probably is still not convinced, but might be preparing for a tie-up with a willing FCA — especially after FCA’s balance sheet clears up in 2018, at the same time the auto industry is expected to go through a substantial contraction.

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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