Fiat Chrysler Automobiles CEO Sergio Marchionne isn’t one to readily take “no” for an answer, especially when it’s coming from General Motors as a rejection to his proposed partnership.
GM CEO Mary Barra and other officials have repeatedly said the Detroit giant has no interest in merging with FCA, a move Marchionne suggested would help both companies cope in an increasingly crowded and competitive global car market. But Marchionne is warning he may press ahead with an alliance whose logic, he said, is “irrefutable.”
Saying his board is looking for ways to get a more positive response from GM, Marchionne said what he had in mind is “not hostile,” but sounded a lot like it, the FCA chief telling Automotive News, “There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you.
“Everything starts with physical contact,” he continued, “Then it can degrade, but it starts with physical contact.”
For the moment, it seems, whatever relationship there was between the two companies clearly has degraded. Marchionne said GM officials won’t even take his calls.
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The Italian-born, Canadian-educated executive has long been warning about the problems the industry is facing, calling for a cutback in excess European capacity, for example, and more recently insisting that there are simply too many different carmakers vying for a piece of the global pie. That formula, he said, doesn’t allow manufacturers to get the financial returns to justify all the capital they are investing.
But like the Cassandra of Greek myth, Marchionne’s warnings have largely fallen on deaf ears. While industry insiders suggest the FCA CEO has tried to interest a number of competitors in a partnership, none has so far shown interest – most notably General Motors.
“Why should (GM) bail out FCA?” a top General Motors executive told Automotive News. Officials have discounted such a deal in conversations with TheDetroitBureau.com, as well.
That apparently hasn’t dissuaded Marchionne or the Fiat Chrysler board.
“I’ve offered to sit down with them and take them through the numbers,” he said, adding that GM “may reject the deal but (they) can’t reject the discussion. If you’re refusing to talk to me, and you have seen nothing, you either think you’re above it all, or you think the capital markets are full of schmucks that owe you something.”
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This isn’t the first time a proposed alliance between General Motors and what was then Chrysler Corp. has come up. Prior to the bankruptcies of those two makers in 2009, former GM CEO Rick Wagoner had proposed buying his cross-town rival. It was widely believed that the bigger maker would then shut down most of Chrysler, perhaps keeping only a few key assets, such as Jeep, going.
Few observers saw much of an upside, however, and with GM rapidly running out of cash, the proposal was scrapped. As the two automakers filed for Chapter 11, the Obama Administration quickly came up with cash to rescue General Motors. But the president hesitated about bailing out Chrysler until Italy’s Fiat came along, assuming control.
Marchionne has since said that trans-Atlantic alliance isn’t efficient enough, and has gone looking for another partner. While no one has yet been named, he insists he has several options, but appears fixated on a deal with GM.
Analyst Max Warburton, of Sanford C. Bernstein, issued an investors note in June warning that such a partnership could become “an operational and management nightmare,” but he also suggested that, “frankly if anyone can smash through the issues and make it function, it would be Marchionne.”
For his part, Marchionne admits such a merger would be difficult, but contends that when you look at the numbers, “An attack on GM, properly structured, properly financed, it cannot be refused. You can play hardball to a point. … It’s too big to ignore, which is the issue that our board is facing.”
What happens next remains to be seen, but considering GM isn’t even taking Marchionne’s calls, he just may have to squeeze harder.
(UAW workers asked to authorize strikes at both GM and Chrysler. Click Here for the story.)
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