Haven’t we heard this malarkey before? Sergio Marchionne, CEO of Fiat and erstwhile American automaker Chrysler, wants another partnership, this time with someone out east, say Mazda or Suzuki. It’s all part of Marchionne’s theory that only the largest shall survive the impending shakeup about to wreak havoc in the automotive industry. Or so says his crystal ball.
Meanwhile, General Motors is hooking up with PSA/Peugeot-Citroën to cure the travails of its perennial money-losing subsidiary, Opel. Of course, having the French telling the Germans how to improve efficiency is a little like the Italians explaining to Americans how to make more reliable cars. Methinks the saviour brings precious little to the table.
But Marchionne is committed — as GM seems again — to the ideal that, in the automotive world, bigger is always better. The combination of Fiat and Chrysler is still selling about 50% too few cars for its be-sweatered CEO, who sees eight million cars a year as the lower threshold of viability for a major player in the industry (by the way, only GM, Toyota and Volkswagen currently meet that criteria).
The problem is that, while the merge-and-acquire theorem of success may make sense on a corporate ledger and in the heartless synapses of chartered accountants, it hasn’t worked so well in real life.
General Motors, as the name implies, has been a veritable smorgasbord of disparate automakers, some still current (Chevrolet, Buick, Cadillac and GMC), some recently departed (Saab, Saturn, Oldsmobile, Pontiac and Hummer) and still others long forgotten (McLaughlin, Oakland and countless more). But, although the company has recently returned to what I am sure it sees as its rightful place atop the global sales chart, its success is hardly about the bigger-is-better motif. Indeed, quite the opposite; the company didn’t return to the black until its recent forced ditching of underperforming brands. Its recent success has more to do with jettisoning debt, contracts and loads of unloved model lines than any expansion of its portfolio.
Ditto Chrysler. It seems like only yesterday that Daimler was welcoming the Auburn, Mich.-based automaker into its bosom only to have the entire merger of unequals fall apart in internecine jealousies nine years later. Does anyone really think it is Fiat’s superior management that is floating Chrysler’s boat or, as is more likely, the shedding of debt and obligation through bankruptcy that is feeding the company’s recent glorious turnaround?
Meanwhile, Ford, arguably the most successful of Detroit’s once mighty Big Three, became the darling of the automotive media largely because it dumped — voluntarily in this case — all its extraneous brands. Aston Martin, Jaguar, Land Rover and Volvo were all sold/dispensed/thrown-to-the-wolves so that it might concentrate on its core brand (OK, two core brands, but many wish the Blue Oval would also deep-six laggardly Lincoln as well). Even then — and still — profitable Mazda, one of the apples Marchionne reportedly covets, was largely shunted aside.
Even the latest darling of the grandiose, Volkswagen, is finding managing so many disparate interests difficult. Remember three years ago when VW’s takeover of Porsche was imminent? Well, the actual nuptials are still as elusive as a George Clooney “I do” and, indeed, VW’s majordomo, Ferdinand Piech, is in trouble with German law-and-order types because a German court couldn’t figure out whose interests he was serving when the whole mess went down (Piech served on the supervisory board of Porsche at the time of the imbroglio while also being the chairman of VW).
Meanwhile, the other apple of Marchionne’s eye, Suzuki, is in the midst of a separation from Volkswagen as acrimonious as any Kardashian divorce. The German and Japanese automakers penned a stock-swap partnership back in 2009, but that fell apart when Suzuki approached — you guessed it — Fiat for a new diesel engine instead of relying on partner Volkswagen (if this is starting to sound like TMZ Television or an episode of Big Love to you, you’re not the only one).
The more you look at recent automotive history, the more the odds are against the success of mergers/partnerships, so much so that one has to wonder about the true motivation of these recent developments. I suspect General Motors’ announcement of the Peugeot alliance is just GM doing what it has traditionally always done, trying to acquire expertise. And, likewise, I suspect that Marchionne’s true rationale for incessant acquiring/partnering is that he wants to dilute the importance of the troublesome Fiat division as much as possible (since he took over the Italian automaker, he’s been fighting with Fiat’s unions and trying to move as much production as possible out of Italy). Indeed, things seem so desperate Automotive News is reporting that Marchionne tried to broker an alliance between GM and Fiat (cue those Hollywood bed-hopping metaphors again).
GM will not solve Opel’s over-capacity production problem and declining market share by joining hands with similarly challenged Peugeot. And the solution to the problem of managing two disparate car companies with vastly different cultures is not to make it a threesome. Contrary to what actor Bill Paxton and his band of merry Mormons think, the solution to one troubled relationship is not adding yet another spouse to the household.
And, if the drama in the four-wheel world isn’t enough, CAR magazine is reporting that Audi, Volkswagen’s luxury arm, is looking to purchase superbike specialist Ducati, possibly by mid-April.
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