Automotive Business Review September | Page 38

by Frank Beeton auto alert A probing review of significant global motor industry news Is Volkswagen Really Courting FCA? Merger and acquisition activity in the global motor industry is grist to the mill of columns like Auto Alert, but, in recent years, there has been precious little of it to write about. In the fourteen years of our existence, first as a stand-alone e-mail news service to the local automotive sector, and more latterly as an integral part of aBr, we have written a multitude of reports on rumours of impending link-ups, but a lot less on actual consummated relationships. Highlights of the intervening years were undoubtedly the break-up of Ford’s Premier Motor Group, which led to the subsequent sale of Jaguar/Land Rover to Tata, and Volvo to Geely, and the dissolution of DaimlerChrysler, which later enabled the formation of Fiat Chrysler Automobiles, while Daimler opted for an intriguing new, but much looser, working relationship with Renault/Nissan. On the commercial vehicle side, we covered the emergence of Volvo as a major force in the truck industry through its acquisition of Renault, Mack and UD Trucks, but latterly, we have had to make do with more limited product-based co-operative linkups rather than outright purchase or takeover bids. The recent bout between Volkswagen and Suzuki promised more, but has now got itself mired in a lengthy arbitration process, with little prospect of reconciliation. With the foregoing as background, it can be understood why recent media reports suggesting that there had been contact between Volkswagen’s chairman Ferdinand Piech and associates of the Agnelli family to discuss a potential Fiat takeover was such big news. Predictably, the alleged participants immediately denied that there was any truth in these reports, but subsequent share price movements (up for FCA, down for VW) certainly showed that there were some believers out there who think that it was possible, and could work. The story went that Herr Piech wanted Alfa Romeo, and was prepared to buy the whole of FCA to get it. This is somewhat bizarre, given that the brand only sold some 74 000 units in 2013. However, some parties believe that it has potential to revive its glorious history, as FCA plans to increase its going rate to 400 000 units by 2018 with eight new models, all built in Italy, to preserve its heritage. Far beyond any personal obsession with Alfa, however, lies Volkswagen’s oft-stated corporate objective to be the world’s Number One automobile manufacturer. Despite the fact that it seems highly probable that it can get there quite soon solely through organic growth, the addition of Number Seven (i.e FCA) to the already highly diverse VW family would certainly entrench that leadership position for some time to come. The other big attraction would be an immediate grip on a large slice of the North American market, something which VW, on its own, may still take a fair number of years to achieve. Is it doable? The single biggest obstacle would probably be the ego of one Sergio Marchionne, charismatic CEO of the Fiat-Chrysler combine. He has worked extremely hard to achieve, and consolidate, Fiat’s takeover of Chrysler, in order to create, what he believes, is a viable global entity. This process has not been easy, coming on the back of Chrysler’s Chapter 11 bankruptcy, and subsequent rehabilitation in 2009. The final merger only took effect on January 2nd, 2014, when, following lengthy and difficult negotiations, Fiat SpA paid $US 4,35 billion to acquire the remaining shares from the United Automobile Workers union’s Retiree Medical Benefits Tr ust, and seal total ownership of Chrysler. Having come this far, and just completed an immensely detailed plan to take FCA forward, Marchionne is unlikely to step away voluntarily. There is also the question of FCA’s considerable European footprint, in a market that is not doing too well. | words in action 36 Volkswagen would inevitably face tricky European restructuring if it was to suddenly find itself with even more production capacity on that continent, and confronting the same juggling act that Fiat has been obliged to execute to keep its Italian workers and their government comfortable. Brazil, where VW and Fiat are both strong competitors, could also be a problem if any merger were to materialise. Even though there are some obvious synergies, it seems unlikely that any deal could be imminent. The sheer size of Volkswagen and its subsidiary brands Audi, SEAT, Skoda, Lamborghini, and Bentley, not to mention its trucking interests, would possibly become clumsy if Fiat, Chrysler, Jeep and Ram were added to the equation. It would also be a pity if Sergio Marchionne was not given the opportunity to see his hard-won dream play out. But then, the global motor industry has never been a particularly fertile ground for sentiment, so we will keep an open mind on this story for a while, yet. Renegade Bolsters a Growing Segment While on the subject of FCA, we noted the recent announcement that its Jeep Renegade entry-level Cross-over Utility Vehicle, first seen at this year’s Geneva Auto Show, will enter production at Melfi, in Italy, during the fourth quarter of 2014. To recap on our earlier report, it will be built on a suitably reworked version of Fiat’s 500L platform, in both two- and four-wheel drive versions, and powered by several Fiat-designed engines, including MultiAir petrol units, a 1,6-litre E.torQ diesel, or MultiJet diesels, covering the power spectrum from 108 to 168 hp. This is very much a global model, with initial entry into the European market, and will be available in both left- and right-hand-drive versions. september 2014