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        home > news > Automobiles > Marchionne: Opel Deal Could Accelerate Industry Push for Consolidation

        Marchionne: Opel Deal Could Accelerate Industry Push for Consolidation

        “A step in the right direction,” FCA CEO still looking for his own alliance.

        Paul A. Eisenstein
        Paul A. Eisenstein , Publisher & Editor-in-Chief
        March 07, 2017
        FCA CEO Sergio Marchionne believes the GM/PSA deal for Opel portends a deal for Fiat Chrysler in the future.

        The sale of Opel to French automaker PSA reverberated through the PALExpo convention center on the opening day of the Geneva Motor Show, a number of industry leaders saying they expect GM’s move to dump its long-troubled European brand will lead to a wave of new mergers and acquisitions.

        That includes Sergio Marchionne, CEO of Fiat Chrysler Automobiles, who has spent a number of years trying to line up a deal for his own company. General Motors’ decision to dump Opel, Marchionne said during a Geneva media roundtable, could improve the odds of FCA now finding a partner.

        Financial News!

        “What we witnessed is a step in the right direction,” Marchionne told a crowd of reporters. Responding to a question about the impact the Opel sale will have on the industry, the FCA chief offered a question of his own. “Will it lead to other deals? The answer is yes, especially if (the takeover) is successful.”

        Marchionne went on to say he’d be pleased if he could find the right deal for FCA, widely considered the weakest of the Detroit automakers. He has been shopping around for a partner almost since Italy’s Fiat took control of Chrysler after it emerged from bankruptcy in 2010.

        “Nothing needs to happen before I step down,” said the 64-year-old Marchionne, who has signaled he will step down in 2018. But he said he expected whomever follows will likely have to line something up. “The merger is required, and it will happen, whether it is on my watch or somebody else’s.”

        FCA's Marchionne believes his company will partner with another, even if he's not around to make the deal.

        At a time when many of the world’s leading automakers are reporting record or near-record earnings, Marchionne might seem a bit out of step, but he is firmly convinced that the auto industry is facing trouble in the years ahead, especially in Europe. That’s because the sharp cutbacks in capacity made by Detroit’s Big Three were never copied on the Continent. And while European sales have rebounded, Marchionne believes that even a modest downturn will against result in huge losses.

        (PSA purchasing Opel for $2.5 billion. Click Here for the story.)

        “I believed then, and I believe now, there has to be a rationalization of operating capacity,” he asserted.

        Under their agreement, PSA will pay GM about $2.5 billion, but the U.S. maker will remain on the hook for nearly $4.5 billion in underfunded pension liabilities. PSA, the parent of Peugeot and Citroen, also will take over GM’s European financial services operations.

        Like many observers the FCA chief executive says he will be watching to see what PSA does as it takes control of Opel. But just how aggressively the new owner will act is uncertain. Government and union officials in Germany and other European countries have indicated they won assurances from PSA that it won’t close plants and cut jobs.

        For his part, Marchionne said it remains to be seen if PSA will be able to make the deal work, especially considering that under GM, Opel hasn’t turned a profit since 1999. But Marchionne also offered strong praise for Carlos Tavares, his counterpart at Peugeot, who has been credited with turning things around at the long-troubled French automaker since being recruited to run the company nearly four years ago.

        (PSA eyes big savings in potential Opel deal. Click Here for the story.)

        Marchionne praised President Donald Trump while in Geneva, saying he believe he had America's best interests at heart.

         

        “I’m absolutely confident that the targets Tavares set out for 2026 will be achieved, and much faster than he’s announced,” said Marchionne, offering rare praise for a competitor.

        In his presentation, the Canadian-born executive also offered positive thoughts about President Donald Trump, saying he thought the controversial Commander-in-Chief “has the best interests of the country at heart.”

        Marchionne has to hope the Trump Administration has positive thoughts about FCA. The automaker is currently facing an investigation into EPA allegations that it, like Volkswagen, rigged its diesel engines to illegally pass U.S. emissions tests.

        Marchionne said he has not discussed that issue with the president, but he was on hand for an industry meeting with Trump in January during which the issue of strict federal mileage rules came up. Marchionne said Tuesday he co-signed a letter with industry counterparts asking for a rollback of the Corporate Average Fuel Economy standards set to raise mileage to 54.5 mpg by 2025.

        (To see more about FCA’s diesel-rigging allegations, Click Here.)

        “I think every (automaker) that produces SUVs and pickups will benefit from the rollback,” said Marchionne.

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