Fiat chief Sergio Marchionne has outlined plans to merge Fiat, Chrysler and General Motors Europe into a new automotive group generating annual revenues of around EUR80bn and making 6-7m cars a year.
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Fiat’s board has given Marchionne the green light to assess the viability of a merger of the activities of the three automakers.
“As part of this process, the group would evaluate several corporate structures, including the potential spin off of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe,” the board said in a statement.
“The objective of these transactions is to ensure the most favourable conditions for the strategic development of the automotive sector.”
News agency AFP said Marchionne on Monday met German ministers to tout what he called a “marriage made in heaven”.
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By GlobalDataThe new firm, which Marchionne wants to see quoted on the stock exchange, would be second only to Toyota, bigger than General Motors and Ford and around the same size as Volkswagen.
Under one roof would be Fiat, GM’s Opel, Vauxhall and Saab units, and Chrysler, in which Fiat agreed last week to take an initial 20% stake, which would rise to 51% if Chrysler paid back massive state loans, AFP said.
AFP said Opel forms the core of GM’s European operations, and Marchionne needs the approval of German chancellor Angela Merkel’s government in Berlin for any deal to go through – something that he wants in 30 days.
GM has been trying for some time to offload a majority stake in Opel and the German government might be prepared to sweeten any deal by offering state-backed guarantees on its loans, the report suggested.
Some ministers might take some convincing, though.
“Anyone interested in Opel has to present a long-term vision. We are not going to tolerate any financial adventures with taxpayers’ money,” economy minister Karl-Theodorzu Guttenberg warned in the Bild am Sonntag newspaper at the weekend.
IG Metall chief Armin Schild told the Tagesspiegel newspaper that he opposed a deal with Fiat.
Opel “would not be strengthened but weakened and the domination over Opel would not end, it would be moved from Detroit to Turin,” Schild said, preferring a tie-up with auto parts maker Magna.
“You are always taking a big gamble when you do something completely new,” Marchionne told the Financial Times, which estimated that up to 9,000 jobs could be cut in the merger.
Professor Garel Rhys, of Cardiff Business School, Britain’s leading motor industry strategist, told Britain’s Daily Telegraph newspaper he feared the Fiat chief was in danger of over-reaching himself and repeating the mistakes that have resulted in earlier spectacular motor industry merger failures.
He has vivid memories of the “organised chaos” that characterised the British Leyland merger almost 40 years ago. He also recalled the failure of Daimler to provide a fresh lease of life for Chrysler and that it took Peugeot more than a decade to digest Citroën. He questioned whether Fiat had the depth of management to integrate two other struggling motor industry businesses, the paper reported.
“Marchionne has done a remarkable job at Fiat but he will need to retain the Chrysler management to handle the US market where Fiat haven’t had a presence for more than 20 years,” Rhys told the Telegraph.
Marchionne reportedly sees savings of EUR1bn (GBP890m) a year from rationalising Fiat and Opel car platforms in Europe and is looking to both the British and German governments to provide loan guarantees for the new group.
Rhys told the Telegaph he thought Marchionne was making a pre-emptive move to ensure the survival of Fiat while attempting to create the new group “on the cheap”.
He pointed to the irony of the GM role in the planned new line-up. An earlier deal meant the one-time world’s biggest carmaker could have ended up controlling Fiat but Marchionne persuaded GM to unscramble and fork out $2bn to walk away.
GM told the Daily Telegraph it was in talks with “several possible investors” and said it expected Opel-Vauxhall to become a much more independent part of a strong global GM product network.
Lord Mandelson’s Business Department told the paper it was talking to Fiat on a “range of issues” but the report noted that the British government and Vauxhall were effectively bystanders in the current negotiations.
Union leaders in Britain have said they are hostile to the Fiat initiative and want the government to go it alone to support Vauxhall though it is unlikely the long-standing British brand, founded in 1903 and taken over by GM in the 1920s, could survive on its own.
Analysts told the Daily Telegraph Marchionne was unlikely to face competition problems from EU authorities because of the potential boost to the stalled motor industry but unions were worried about job losses among the 90,000 Fiat-GM workforce despite promises to protect plants.
