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
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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