ANALYSIS: Sergio Marchionne Is Calling, But Few Are Answering

DETROIT (Detroit Free Press/TNS) -

Fiat Chrysler CEO Sergio Marchionne recently pleaded with the global automotive industry to explore mergers and partnerships to deal with the rapidly rising cost of building cars and trucks globally.

But the central question the maverick CEO left unanswered is: Who, if anyone, is listening or willing to entertain any kind of merger, acquisition or alliance with Fiat Chrysler Automobiles?

Already, top-level executives at Ford, GM, Toyota and other companies have said they have no interest in a merger with FCA or any other automaker right now. That fact alone left industry observers puzzled and asking what, exactly, Marchionne was attempting to achieve when he presented Wall Street with a 25-page treatise entitled “Confessions of a Capital Junkie.”

For his part, Marchionne, known for his prowess as a consummate deal-maker, insisted he was not putting a “For Sale” sign on FCA. After all, it is now the seventh-largest automaker. He also said he’s not trying to cap off his career with a final mega deal.

“Most of that stuff is absolute hogwash,” Marchionne said. “The purpose of this … was to pitch the problem.”

But analysts have their doubts.

“If Marchionne wants a deal, he has no need to advertise it publicly. There are only a few people he needs to call directly. … We assume he’s already called them,” Sanford Bernstein analyst Max Warburton said in a report. “Then why is he now involving us and the media in the debate?”

Still, the automotive industry is known for changing rapidly just when it looks like nothing will change at all.

And, Morgan Stanley analyst Adam Jonas, in a recently issued report, said, “We believe both Ford and GM (along with FCA) would stand to gain immensely” from cost savings on the development of new cars and trucks and the elimination of products that overlap.

So, let’s play matchmaker. Is there anybody out there that could be a partner for FCA?

Apple/Google: No, they are not automakers. But both Apple and Google are generating huge profits and are eyeing the automotive industry.

Apple has been exploring the development of its own electric car and production could begin as early as 2020, according to Bloomberg News. Google, meanwhile, is aggressively developing and testing autonomous cars — an area that all automakers are also exploring.

When asked about unconventional mergers in the automotive industry, Marchionne said: “I’ve always been intrigued by the notion of having technology disrupters show up in the marketplace and change the paradigm … If they show up and they are truly successful, with their cash piles and know-how, they could fundamentally hurt this industry.”

But both Apple and Google are just getting started in the automotive industry, and their shareholders would likely question an outright acquisition of an automaker.

General Motors: FCA has valuable brands, such as Jeep and Ram, that GM may want. And, during the depths of the Great Recession, the two companies considered a merger.

But GM is healthier now and Chrysler is a part of FCA — a much larger entity. And, GM executives may be wary of doing a deal with Marchionne. In the early 2000s, GM bought 20 percent of Fiat in a partnership to develop powertrain and purchasing operations. But GM then decided it wanted out of the deal and had to pay $2 billion to do so.

“We have a well-articulated plan, and we are not going to entertain anything that would distract us from achieving that plan,” GM CEO Mary Barra said last month when asked about industry consolidation.

Ford: A tie-up with Ford would present most of the advantages and disadvantages as one with GM. On Thursday, Ford CEO Mark Fields said the Dearborn automaker is not looking at a consolidation move with another company.

“For us, we’re just focusing on Ford,” Fields said. “I don’t think we are going to get distracted at this point wondering about what’s going to happen with consolidation.”

Honda: Honda has historically avoided mergers and acquisitions of automakers.

Mazda: FCA and Mazda have already joined forces to develop a new small-car platform. Mazda will use the platform to produce the 2015 MX-5 Miata. FCA will produce a new Fiat 124 Spider sports car. And Mazda’s SkyActiv engines could be a fit for a number of Fiats and Alfa Romeos.

Mazda, unlike other Japanese automakers, also has a history of American partnerships. Ford once owned as much as 33 percent of Mazda, in 2010.

But in an email to the Detroit Free Press, Mazda said: “We have no plans to seek deeper financial ties with any company at this time. We are still interested in technical partnerships however, where and when they make sense for both companies.”

Maruti Suzuki: Suzuki has pulled out of the U.S. But in India, the automaker controls about 50 percent of the car market through its Maruti Suzuki subsidiary.

FCA has only a small presence in India, and is working to launch its Jeep brand there. A partnership with Maruti-Suzuki would instantly give the automaker a major Asian foothold. Maruti-Suzuki did not respond to an email from the Detroit Free Press.

PSA/Peugeot-Citroen: Last month, research firm MainFirst published a report that concluded there would be benefits to both PSA/Peugeot-Citroen and FCA if FCA acquired the struggling French automaker.

However, PSA/Peugeot-Citroen CEO Carlos Tavares has said that the French automaker would only be ready for a possible merger after it has completed its recovery plan.

“Sergio Marchionne is welcome every time he wants to speak to us; but for us, it’s a little bit early now,” Tavares said in an interview published by Italy’s Corriere della Sera last month. “We need to finish our cure and recover our good health.”

Renault-Nissan: The alliance between the French and Japanese automakers was perhaps the best example of successfully fusing two automakers from different cultures before Marchionne pulled off the combination of Fiat and Chrysler.

An alliance or partnership of some kind between Renault-Nissan and FCA would at least be a pairing of companies that are accustomed to such deals.

However, French President Francois Hollande’s government has enacted a law that tightens France’s control of Renault, and France is unlikely to favorably view any deal that would further dilute its influence.

Toyota: Toyota, cognizant of many of the same product-development costs Marchionne is talking about, recently unveiled a plan to completely revamp its global manufacturing processes.

But Toyota’s corporate culture and Japanese culture is very averse to mergers and acquisitions.

“What happens with all of the global manufactures is difficult to say. I just know we have the scale to do it on our own,” Jim Lentz, CEO of Toyota Motor North America, told the Detroit Free Press.

Volkswagen: Volkswagen, the world’s second-largest automaker, in some ways has a strategy similar to FCA’s strategy.

VW launched a strategy in 2007 to make more cars off the same platform even though it manages a portfolio of 12 brands ranging from Audi and Bentley to Porsche and VW. And Volkswagen executives have often expressed an interest in Alfa Romeo.

Marchionne also has a deep belief in developing and preserving distinctive automotive brands, and manages a portfolio of 16 brands ranging from Alfa Romeo and Ferrari to Ram and Jeep.

However, Marchionne has often clashed publicly with top Volkswagen executives, including legendary chairman Ferdinand Piëch. Piech was ousted last month as chairman, but remains a large VW shareholder. And it’s hard to imagine FCA’s Italian-American culture meshing with VW’s German culture.