Despite repeated denials from all parties, I’ve yet to give up on the idea that Volkswagen and FCA will eventually come together in an, ahem, Auto Union of sorts. Tim Cain’s chart shows us why there are synergies for both parties.
Yes, a combined VW/FCA would be just behind GM in overall market share for the month of June, and one month does not make the case for a merger. But there are plenty of benefits from a product portfolio standpoints, like a strong SUV, truck and commercial arm for VW, while FCA would finally get the global scale it’s been chasing so desperately, as well as the advanced technology to help its brand portfolios thrive well into the next era of automotive sales and manufacturing. Interestingly enough, Automotive News envisions a scenario where FCA’s hugely successful Latin American operations are sold off, perhaps to the Chinese.
The merger would also solve a huge problem for Volkswagen, namely the lack of traction its had in the American marketplace. America is the one major region where VW has failed to really establish itself, and by adding FCA’s brands, it could essentially buy its way in to further volume and a large dealer network, in addition to what it already has with Volkswagen, Audi, Bentley and Bugatti.
Oh, and Ferdinand Peich would finally get Alfa. But not before a massive web of complex financial, managerial and logistical matters are ironed out. Don’t expect anything to happen for a while – but I’m still pacing my bets on “yes”.
German/Italian tie-up…what could possibly go wrong….
Again.
It’s working fine for Lamborghini and Ducati. It didn’t work so well for Mussolini.
Personally I think the Audi R8 is more interesting than its Gallardo brother, so yes, that particular arrangement is working quite well.
Go Ford ! Damn, I thought good old appliance builder toyoder would be in the second spot. Hyundai/Kia will be in third spot within 10 yearth or less.
Please correct me if I’m wrong, but companies for which their only grow strategy is by acquisition, eventually develop -for lack of a better term- constipation.
VW’s management is so hell bent in becoming the world’s #1 manufacturer, that instead of fixing their intrinsic weaknesses with good products and hard work, they just swallow and swallow other companies.
That is, until indigestion sets in.
@schmitt trigger – “That is, until indigestion sets in.”
Also known as General Motors Syndrome……….
And then divisions get shut down or sold off left and right and VW ends up back to its older smaller self again! Just like how GM sold off a lot of its non-passenger car/light truck divisions throughout the ages.
No, they fixed Skoda and Seat when they took them over, it will be interesting to see what they will do with FCA, if they decide to acquire them
Skoda had come out with the Favorit before VW bought them. VW was terrified that the Favorit was way too similar to the Golf for way less money. They figure it would be easier to just buy Skoda then try to compete, especially with post communist privatization prices.
Pure FUD. VW just want to draw attention away from its abysmal failure to grow market-share in the US. FCA doesn’t need VW. The Agnelli family doesn’t need (or want) VW. Chrysler definitely doesn’t need yet another clueless German ownership plundering its bank account to make their own bottom line look decent.
hardly, freshforged. Daimler dumped Chrysler after the German finance and legal guys realized that the liabilities on the US side of the operations had a very real chance of sinking the whole ship.
Hardly, hreardon. When Daimler acquired Chrysler, Chrysler was on a roll, and generally regarded as the best-managed auto company in the US. They had refreshed their product line, with top-notch vehicles, were gaining market share, and generally moving from strength to strength.
Jurgen Schrempp sought to solidify his position as CEO by driving out the Chrysler management team. Daimler also eviscerated new product development. All of this had predictable results. Daimler killed Chrysler, and then gave the carcass to Cerberus (who only wanted Chrysler Financial).
Yet another European manufacturer to ride the Chrysler rocket. To infinity and beyond!!
You can’t blame them for wanting that rocket ride. The Chrysler subdivision of Fiat is currently enjoying a very profitable period with the current lineup of outstanding vehicles, and especially the Pentastar V6 and the new transmissions.
When things are going good, a company should maximize their sales and profits. When things aren’t going good, they do the GM thing.
And you can’t blame VW for wanting to expand its global presence with an even greater variety of vehicles for all demographics and all applications.
The thing is, VW management is even more clueless than Daimler was.
Lorenzo, True! But VW is not trying to buy FCA to increase the intelligence of VW management.
VW would like to buy FCA to increase its bottom line for the shareholders and owners.
The only thing that matters is that money talks. BS walks.
If VW can get this deal through, and there is doubt, it would go a long way to global profitability for VW.
Most large-scale mergers are actually value-destructive for investors. Often, they’re about getting (opportunistically) bigger for the sake of getting bigger, rather than the fulfillment of a clearly thought-out strategy.
In this case, it’s hard to see how VW could grow FCA’s brands and market position to the extent they’d need to in order to pay back the purchase price.
If they repeat the Daimler experience, and ship in VW managers to bring the VW culture to Chrysler Group, it’ll be “deja vu all over again” for Chrysler.
And it’s hard to see how VW would want to nurture the Fiat brand that already competes with VW, Seat and Skoda.
There are still too many OEMs.
Quite the opposite. We have too few choices. This merger would only exacerbate the issue with cars really looking all alike. Cars are too boring as they are now with everything looking the same, I don’t want to see this happen. So we’d have VW, GM, Ford, Toyota, BMW, Merc, Honda, Hyundai, Subaru, Mazda, Volvo & Jag as our choices for cars; What other product industry has only 12 companies competing against each other? Talk about product dilution.
How about mobile phones, with only iOS and Android as choices? Or if you are feeling generous, include Windows Phone and Blackberry, but it’s still only four real options.
I agree. It’s a problem. They are monopolies and they aren’t doing anything about it. Do you like your two choices?
Not a good example since many different companies build Android phones. Phone carriers would work on the other hand.
I very much agree with you there are too few choices, but this is not because there are too many or too few OEMs. In my view the larger OEMs set the product tone and everybody chooses to follow it for the most part. Sure you have a few models from the small mfgs which stand out such as Miata, C70, C30, XJ, WRX, etc, but by-and-large most models are homogenous despite the OEM.
Part of the problem is that regulation has killed the uniqueness of the car. Also, they partner with each other anyway, so competition to be better is really just a smoke screen. Tesla is the only unique one, and that’s essentially DOA without loans and hype and uses antique technology.
I also agree with these points.
Regulation — and consumer preferences. Not so many want oddball designs, and few consumers know or care about things like RWD.
Platform technologies, and things like MQB architecture, actually enable greater model variety at a lower cost. But customers tend to prefer most of that variation within a fairly narrow spread. Still, MQB enables VW to build cars such as the Audi TT and Skoda Yeti that would likely not be business0justifiable as standalone models.
Most of whats out there looks completely oddball compared to what was out even ten years ago. Whether people want these or not I cannot say, but there is a good subset of buyers who will buy something based on need or merits vs looks.
12 is actually quite generous in most arenas. Besides cell phones and cell phone OS; there are desktop computers (Dell, HP, and maybe a half dozen smaller players?), desktop OS (Windows, MacOS, Unix, plus lots of Linux freeware/shareware versions).
Commercial airliners, you are mostly down to Boeing and Airbus; Airbus is itself a group of formally independent European aerospace firms that could not compete on their own. Shipbuilding is mostly down to a handful of Korean and Japanese companies.
The business world is simply too technical and too complex to allow for a diversity of builders. And I don’t think having more builders will get rid of “boring” cars; it is regulatory issues and aerodynamics that is driving some of that; along with the desire not to be too radical or else loose market share. And for the millionth time, I would argue cars are no more boring now than they were in previous years; what they have become instead is extremely reliable; and that in itself makes for boring cars; though in a good way.
You make my point. The only reason most of the smaller or superfluous brands still exist is because they are owned by major multinationals who can sustain them, with the notable exception of Mazda.
JLR, Volvo Cars, Mitsubishi Cars, Subaru, Kia, and Mini could not exist on their own, at least not it in the globalized economic insanity we find ourselves in. Even boutique brands such as Aston Martin struggle to survive. Bentley only exists as a VAG prestige brand, and I doubt we’d still have Rolls Royce Cars if there was no BMW platform to use.
JLR is actually quite profitable … over $4B last year, and it’s not as if they are relying on core Tata platforms or parts bins.
After Ford invested billions in it, and dumped it in a fire sale. Depending if Tata reinvests the profits or takes them to add to its own bottom line, JLR might be in trouble in a few years. Volvo Cars as well for the same reasons, although Geely seems to have been spending money on product development.
You know I’ve been thinking about Bentley lately – since I saw two Continental GT cabrios this past week.
The British look + engineering from someone else (like a Japan-built Toyota styled by Italdesign) is what people always ask for. British engineering isn’t reliable, so now It’s got the German underneath with a lovely British coachwork over top of it.
Based on this, I think Bentley might be at a pinnacle compared to the past 50 years.*
*Note I do prefer 80s Bentley styling, when they were sporty Rolls versions.
Also, very much agree JLR will be in trouble when it runs out of Ford bits and platforms. They’ll end up buying one from someone else, as certainly no Tata underneath would work.
Actually JLR are already switching away from Ford. They already have a range of engines coming out by year end which they developed. They are also currently developing and funding their own MQB architecture. JLR are making a lot of money and by the end of the decade will be making close to 1 million cars a year. Fords sale to Tata has been great for Tata and it will continue
JLR is investing $2B+ on a new all-aluminium architecture. Does that count?
I wouldn’t put the blame for Ford’s mistakes on the current JLR management.
Mr. Tstag,
Oh make no mistake, I’m interested in seeing what they can do – but having engines “coming out” and “developing a platform” do not equal cars on the road. They have not -produced- anything yet.
th009,
I don’t blame them for Ford’s failures, nor do I blame ford for BMWs failures – it all goes back to BL.
The new JLR engines are all AJ based. They share similar architecture even though they have different displacement and cylinder count.
All the Ingenium engines will have the same 500cc per cylinder displacement and have the same bore and stroke.
So deep down, the new JLR engines are based on the same Ford Duratec they always were.
My points were simply that (1) yes, JLR is profitable as a standalone company (well, subsidiary of Tata) and (2) yes, they are investing in product development (well, unlike some Italian car companies).
I disagree with this assessment. It has more to do with crony capitalism than anything. There are a few private jet companies but comparing million dollar planes to cars is not an apple to oranges comparison. There are plenty of computer brands out there, alienware, compaq, asus, apple and so on. Why is it complex? Why do corporations like these cheer for regulation? I doubt this is the case. If the start up costs weren’t so high, there would be more competition. How Boeing isn’t broken up, is beyond me.
Not only was Boeing not broken up, it was allowed to absorb its only other US regional competitor, MDC in 1996.
Global economy? Scale? Airbus? Regulators in the US ain’t that shortsighted?
Anti-trust would be the name of the game in the MDC acquisition, in my mind at least. However in the article it seems MDC had the last laugh:
“Technically, Boeing bought McDonnell Douglas. But, as Richard Aboulafia, a noted industry analyst with the Teal Group, told me, “McDonnell Douglas in effect acquired Boeing with Boeing’s money.” McDonnell Douglas executives became key players in the new company, and the McDonnell Douglas culture, averse to risk and obsessed with cost-cutting, weakened Boeing’s historical commitment to making big investments in new products. ”
http://www.laobserved.com/biz/2013/01/boeings_troubles_cou.php
Also:
“In 1992, McDonnell Douglas unveiled a study of a double deck jumbo-sized aircraft designated MD-12.[35][61] Despite briefly leaving the market, the study was perceived as merely a public relations exercise *to disguise the fact that MDC was struggling under intense pressure from Boeing and Airbus. It was clear to most in the industry that MDC had neither the resources nor the money to develop such a large aircraft*,[62] and the study quickly sank without a trace.”
http://en.wikipedia.org/wiki/McDonnell_Douglas
There was a time with hundres of OEM. If you want it back consider that meant only the richest could have a car with no safety or worthwhile comfort. You want 7 airbags, VSC, BLUETOOTH, and 200 hp for 20K out of the door – you need to live with just 10 OEM that each produce 5 mio or more cars each year.
If you want more choice, thete still is Ferrari or RR wirh lots of individual options. But I guess you don’t want to pay for the choice……. always easier demand it on the Internet. Like requesting that diesel wagon with MT.
@Herr Yes I like choice. No I don’t want a diesel wagon with a MT. I get making things that people want, but I’m not sure this has much to do with competition. If Tesla, Tucker, Pagani can do it, why not? One doesn’t have to go backwards to go forwards, but creating competition in a stagnant industry where everyone partners with each other is better rather than what we have now. This is why I’m actually excited for chinese cars; they’re going to bring low cost brands into the US and drive prices down and innovation up.
Variety requires higher prices.
You probably wouldn’t want to pay the premium. But even if you did, there wouldn’t be enough others who would in order to make it profitable.
Tesla loses money. It actually helps to illustrate the problem: without scale, automakers usually produce losses.
+1 PCH101
+1 to Pch101. Variety is expensive. Ask any restaurant owner who has a sprawling menu, any service provider who covers multiple products and any auto manufacturer who, well, builds cars.
We provide technical services in our business. When we meet with a prospective new client the line is the same: you can have variety and higher costs, or we can standardize the infrastructure and reduce your price. Take your pick.
Ihatejelops: Put your money where your mouth is and buy one of the 3 brands you mention. If you don’t buy one of those actually individual cars, you are as much to blame for mainstreaming cars as I’m.
I’m not sure getting cheap Chinese knockoff cars is an enrichment, by Hyundai started out like that an turned around quite well. But those will be the opposite of the brands you mention, more likely more generic than a counterfeir Yaris.
@herr + @pch Variety does not mean higher prices, in fact quite the opposite. Secondly, your Hyundai/Kia example proves my point, in that you don’t need expensive cars to grow income or require building 6 million units in one country to be profitable. Subaru and Mazda are also examples of this. If you take away brands/companies that means less competition and higher prices, like what we have today. Production is at it’s leanest, less humans, more machines, yet prices keep going up, not down. You may think Chinese cars would be knock offs, but our trademark laws would negate that. They would start small, like ahem, the brands I listed. You don’t always need mass production to be profitable, this is a myth.
“Variety does not mean higher prices”
It certainly does in the auto industry.
Platforms cost hundreds of millions of dollars.
Designs costs hundreds of millions of dollars.
Then there is tooling and marketing and parts distribution and the rest of it.
Those costs have to be recouped through revenue. If the volumes are low, then there need to be more revenues to make up for the lack of volume. That means higher prices.
If it was as cheap and easy as you believe, then they’d already be doing it.
GM attempted to create variety (or the illusion of variety) through badge engineering in an effort to cut some of these costs. It didn’t work.
Prices are NOT going up when you compare like for like. Take a look at the inflation-adjusted prices — the 1980 Citation would cost $18K in today’s dollars. And that’s before considering all the improvements and additional functions in today’s cars.
I don’t know if I would really want to own another Chrysler product if VW accquires FCA.
The horror stories I’ve read on here have made me rethink owning a VW.
Chrysler as a brand has the lowest reliability rankings on JD Powers and Consumer Reports annual long-term. VW as a brand is mid pack, with Audi in the top ten. if anything, a VW acquisition of FCA would bring improvement, despite the constant anecdotal horror stories repeated by the same posters over and over again here.
I would look at the sample size of those statistics including age and model before a definitive judgement.
&*$%&!
You can either find published reliability scores based on actual data (Consumer Reports, True Delta, JD Power), or you can rely on vocal anecdotes on this website. The two aren’t comparable or interchangeable, though.
Read an interview over the weekend in the local newspaper with John Elkann, Fiat Chairman and Agnelli heir. Based on his perspective, I wouldn’t be so sure about a link-up with VW, not anytime soon anyway.
Let’s not let Mr. Elkann and the Agnelli family’s opinions stand in the way of Derek’s game-changing prediction. It’s kind of like saying Bill Ford would sell to the some Chinese conglomerate if the money was right. Happily, Messrs Elkann and Ford like red convertibles made by their family owned companies. The rest of is just speculation, conjecture, and hoo-hah from a auto journalist.
Oops, I meant family-controlled companies.
I also think that this makes too much sense (mostly) not to happen (eventually).
I can’t see this happening. I believe, FCA’s expectations for a return on their investments are much higher than what they would get from Volkswagen. There are also many regulatory conditions within the regions that govern FCA’s operations that would oppose such a union.
Volkswagen missed the boat called Chrysler back in 2009. No guarantee it would have been as successful as it’s been under FIAT management.
Agnellis apparently believe the real returns are from Ferrari (and maybe Maserati). And that the rest of FCA can be better monetized by selling it off.
Antitrust would come into play mostly in Brazil, that’s why AN is suggesting that either Brazilian operations only, or all of the Fiat brand, might be sold off to the Chinese. With Lancia thrown in as a potential future premium brand.
This is more about acquiring Jeep and Ram than anything else.
Yes Brazil is tough question here, but i still give not more than 1% chance this VW taking over Fiat will happen, but IF it will happen, than Brazil regulators can do what they want, i still think they won´t do anything, i mean how you want sell Brazil operations of FIAT to another automaker? O.k let´s say some chinese automaker buys Fiat brazil with their factories sales network and what about cars? there will be some chinese branded Palio and Strada or what? and no Fiat brand can´t be sold to chinese unless they sell whole FIAT including 500s in NA and Fiat Europe – and no way Fiat in europe will be chinese that will never happen or that Fiat brand will be cancelled i honestly see no option for Brazil operations just that it will stay how it is, after all 40% share is still not 90% share 40% has Maruti in India or Toyota in half of middle east and ASEAn countries
Sergio Marchionne vs. Ferdinand Piech in a no-holds-barred, knock-down, drag-out brawl. There’s no way they co-exist. In a boardroom fight, Ferdie eats Sergio for lunch.
@th009 I don’t remember reading that “Agnellis apparently believe the real returns are from Ferrari (and maybe Maserati).” The story is purely fictional both parties have said there’s no truth in the story.
Funny you should mention Maserati, I may be wrong but I seem to remember you having your doubts about Sergio being able to hit the 50,000 mark. Now most would agree that it’s doable and quite possibly 75,000 by 2018. Seems things change fast in the auto business. I believe Alfa will also meet its goal by 2018. Same thing with Jeep. When Sergio said they were going to sell a million of those things, even Mike Manley himmed and hawed. Now he’s become a believer and they’re talking 1.8 M by 2018. FCA doesn’t need Volkswagen money to accomplish their goals. They’re doing very well.
It’s not Chrysler that’s going to make FCA, it’s FCA that’s making Chrysler.
Yes, things do change. Maybe in 20 yrs when FCA have proven their staying power people in the US will look back and (grudgingly) recognize how much Fiat has given to Chrysler and turned it into a viable concern again. And, lol, I agree, this is a purely fictional story.
Mr. MV Off topic question What is the story with Venezuela? I was there twice in 2005, for 2 weeks then a second time for 6 weeks, both times in Ojeda. When I was there, food, gasoline, etc was available in all the stores and people could afford most things. What changed and is it affecting other countries in SA?
Hey challenger, I’m no expert on Venezuela and there is at least one other commenter on TTAC from there who emigrated because he didn’t see a future. What has happened in Venezuela is a travesty and a tragedy that runs deep and is too complicated to dwell on here. I think in the end what undid them was the boom from the Oil Crisis in the 70s that inundated them with monies and whet appetites that had been dormant. Until then it had been a relatively well run country with a tradition for stability. Over the last 3 decades corruption increased, inequality, relative poverty and a deep separation between the people and the ruling classes. This chasm was exploited by the dead Chávez who launched his revolution that really didn’t respect anything rational in terms of economics and led to the current situation. Though in some ways the Chavista revolution had benefited the poor (or else he and is heirs wouldn’t have the popularity they enjoy), it is incredibly shortsighted doesn’t really do anything to address real economic problems and doesn’t permit them to realize their potential (my estimation, all of the above, many, many would disagree).
Nowadays I think they are too short of money to have any influence anymore, though they did support more radical governments democratically elected in Bolivia and Ecuador. Allegedly, they also gave money to radical groups throughout the region almost causing major problems with Colombia.
Unless they improve economic performance, this sort of government may be out in the next elections. They narrowly lost the elections last time.
@bobman, that’t the reason for the word “apparently”, in the context of the Manager Magazin story. But if you know The One Real Truth, please do educate us poor peons.
P.S. This is not a question of whether FCA needs money or not, FCA would not be selling, Exor would be.
@th000
It was Exor that made the statement that there were no talks with whatever the family is the runs Volkswagen. The story in that magazine wasn’t true. This is along the same lines as the story last year about Audi buying Alfa. It was BS just like this one.
The discussion on this site is mostly ‘whatif’ scenarios. Pretty healthy stuff as long as you don’t take it too seriously and start offending people.
P.S. I have not doubted the Maserati sales targets, only the (repeatedly missed) Alfa Romeo ones. And my position on those is unchanged, until I see some real evidence, not just more talk.
well said Bobman
This is just more childish posturing by VW management.
“Tim Cain’s chart shows us why there are synergies for both parties.”
I wouldn’t assume that market share = synergy. As GM proved, size can produce diseconomies of scale.
About half of M&A deals end up destroying or not creating shareholder value. My opinion is that this would be one of them.
Too many brands, too many different production processes, too many differences in corporate culture, too many logistical problems to hurdle, all combined in a cauldron of inefficiency. A dream for the i-banker that earned the fees for putting the marriage together, a tangled mess for the company that the marriage produced.
You and I both know that if this deal ever came to fruition, the majority of the brands, factories, production processes etc left standing will be from the VW side of things.
That’s exactly the problem. The result is counterproductive, the proverbial square peg in a round hole.
Mergers often fail because the benefits on paper don’t translate into real world results. Forecasting them in a memo isn’t the same as making them happen.
“A dream for the i-banker that earned the fees for putting the marriage together, a tangled mess for the company that the marriage produced.”
And a nightmare for the employees of the combined company.
Layoffs are inevitable, but I feel most sorry for the employees left to work out the logistics, culture, finances, system integrations, etc.
exactly right–far too much overlap between VW and FCA to be beneficial to anyone other than financial profiteers in it for the short term gain.
This topic again… there will be no merger – mergers are when 2 companies merge together with share exchanges and so on, this would be takover – acquisition when VW buys Fiat, but anyway chances are like 0.5% that this will happen, no way this will happen.
About Latin America operations, they can´t just sold it to chinese or anyone else, it´s not like global corporations merged and than they sold out divisions or their operations in certain countries both VW and Fiat brands are No.1 and No.2 in Brazil, have factories and sales networks, now what do you think Fiat will be sold to someone who will produce in their factories the same cars under other brand? sci-fi…
Buying FCA seems like an awfully expensive way of getting a hold of some usable truck platforms, and unexceptional car platforms that VW doesn’t need.
If it happens, it’s not to get platforms, but to acquire brands, market share and distribution networks.
Bingo.
Yup! To acquire brands, market share and distribution networks. Exactly.
OTOH, this deal may not go through, as it did not on the past either.
You know they want them Mitsu parts and the Sebring. Don’t kid yourself!
The news report was that Volkswagen wanted CHRYSLER, not FCA. Sergio is making a hash of the Chrysler and Dodge car model lineup anyway, so he might actually consider selling the husk of Chrysler and keeping Ram and Jeep to keep Fiat alive. He’s going to need the money VW could pay, and if VW actually got Chrysler, I’d expect to see Dodges and Chryslers that look suspiciously like Jettas and Passats, and maybe the Phaeton with an Imperial nameplate on it.
I don’t see that happening, the whole point would be to buy real FCA assets in the US, and the Chrysler/Dodge nameplates would not be one of them.
The news item I read said they wanted to buy Fiat. Plus is there a Chrysler that exists outside of Fiat?
@Lorenzo ‘ma che cazzo’ why do you hate Sergio so much? Seems the poor guy can’t do anything right in your eyes.
I don’t “hate” Sergio. I think he’s a brilliant finance guy, an extraordinary deal maker. But in over a decade with Fiat, he’s let platforms wither on the vine with minimal or no updates, and then dropped them with no replacement ready. He’s doing the same with Dodge/Chrysler, because he doesn’t know how to run a car company.
What I find galling, as a retired engineer, is his arrogance in portraying himself as knowledgeable. His claim “There are always teething issues with every transmission I’ve ever built, and I mean that literally” is not only ludicrous (he has no engineering experience and has never had anything to do with designing or building transmissions), he doesn’t even know what ‘literally’ means.
If Sergio delegated the actual running of Fiat and Chrysler to people who knew what they’re doing and basked in their success, that would be one thing, but to make claims like that while actually messing up indicates not only an incredible ego, but a fair amount of self delusion as well.
Funny, but I don’t see it that way. Sergio is a leader, his job is to inspire and challenge his team to achieve great things. If you look at the management team he’s surrounded himself with many would say they’re top performers and would be welcomed at any competitor. I doubt that anyone would expect him to build a transmission or an engine.
Anyway, that’s my own opinion, I certainly wouldn’t share your views. To each their own I guess.
I guess you misread what I wrote in the comment. That transmission quote was from Sergio himself – it was HE who said “…every transmission I’ve ever built…”, inferring he had a hand, at least, in building and/or designing transmissions. There’s a Yiddish word for that, chutzpah.
You haven’t been following his management style, reading “40 reports” and announcing new model timelines and their projected sales totals.
There’s no chain of command. The organization chart is an inverted pyramid, with Sergio at the bottom, holding it all up. He’s made himself the indispensable man, without whom the management structure collapses. Delegating tasks without the authority to make decisions is how NOT to manage.
He’s promised new models on ridiculously short time lines and included unattainable sales goals, forcing constant corrections and delays. It’s like he doesn’t know how long it takes to bring a new model to market, or what it takes to build them in large numbers, which he doesn’t.
The guy is a great money man, and may be a terrific motivator/leader, but he has no engineering experience and no manufacturing experience, two key components of managing a car company. If five different five year plans in five years hasn’t clued you in that he doesn’t know how to run a manufacturing enterprise, I don’t know what else I can say.
Like I said, to each their own. I don’t see it your way. He is responsible for the success Chrysler has had. He has built a management team that is the envy of the industry. The numbers coming from Jeep, Ram, Maserati, and soon from Alfa are happening because of the high expectations set by senior management.
Most experts will agree that he has accomplished a lot.
The primary jobs of a CEO are to craft a strategy and to sell that strategy to the stakeholders.
Auto companies need some engineering talent. The way to get that is to hire some engineers. They certainly don’t need to be the CEO.
Fiat was in deep s**t, coming very close to failure. Marchionne has kept it from failing, and did so on a shoestring budget, which is impressive.
His short (read: unrealistic) time frames have probably been a matter of survival, more than anything else; the company literally cannot afford to do things slowly, which necessitates that he push things to the limit. Not everything that he has done has been a success, but he has more wins than losses, which is what counts.
On paper, there are a lot of great reasons to do this, and they aren’t limited to North America.
In practice, I would expect the results to be far less than great. I suspect that VAG would make a mess of the North American business and alienate the talent that it would need from FCA to gain the benefit of Fiat’s talents with city cars and the like. VW actually has a pretty good track record of succeeding with acquisitions, but I suspect that FCA would be a bridge too far.
(Then again, I happen to think that both sides are telling the truth when they deny the reports.)
VW doesn`t have to be strong in the US to be a major auto company. Just like Toyota is weak in Europe (4% market share) and yet is the largest auto company and very profitable.
What is an “FCA”? I can’t see that on the chart or anything that could represent those letters expanded into a complete word. So why when I look at the chart am I told I can see why the merger has synergies?
YES, I can guess, but why do I have to? Somewhere in every journalistic piece should be a clear definition of the subject!
FCA = Fiat Chrysler Automobiles. https://www.thetruthaboutcars.com/2014/05/analysis-the-definitive-guide-to-the-fiat-chrysler-5-year-plan/
also http://en.wikipedia.org/wiki/Fiat_Chrysler_Automobiles
In a news report, you spell it out. In a car blog with readers described as the B&B (best and brightest), it’s not necessary.
I note the silence of one Denver based member of the B&B. Come on ax man, just a little gossip for us without the ears of gold?
Quick, does Big Truck have an opinion?
If this does happen, it will happen to the company actually bringing some variety to the marketplace. You may not like FCA, but they really do have a variety of different kinds of products. From RWD or AWD coupe/sedan offerings, near roadsters, trucks, minivans, true SUVs, CUVs, FWD or AWD sedans, and minicars, FCA has something for you. GM/Ford and Toyonda, not so much. FCA under VAG ownership will quickly jettison this unique variety and give you 50 shades of MQB.
Yep. Too many colors, blended into a gross beige CUV.
I think it is all about “reach”. VW wants to reach as many buyers as they can in as many localities as they can. Nothing wrong with that! And VWs reach would be widely expanded if they can acquire all or part of FCA.
But as Marcello has pointed out, it does not make sense from his market’s perspective. So it will be interesting to see what the final outcome will be after all is said and done.
If the outcome is like the previous outcomes, it will be the “status quo ante”, or “the more VW pushes for change, the more things will stay the same.”
Again? No way. Like bobman ans romismak have pointed out, there are so many definite short term prospects for FCA and the Agnellis it doesn’t make sense. Pch also pinted out many of the reasons, from a business perspective, why this would be a nightmare.
Selling off Fiat in Brazil…why? You guys always like to think that Ram and Jeep are the only thing profitable in FCA. Well Fiat Brazil is a veritable gold mine. The factory here is the second largest in production in the world today. It’s one of the cheapest in terms of workforce in the Brazilian market. New plants under construction. Regulatory nightmares and aobstacles. This country is and has been, since Fiat got established here, the golden pot of honey that oils the whole Fiat machine.
Back when Wagoner was president of GM Brazil, he said 5% of GM’s gloobal sales were in this country. But GM took 20% of its profit from here. Yes, things change, but the more they change…Now the American market is growing and profitable again . This one has been steadily profitable for Fiat for decades.
Naw, this deal makes sense, if it does, from the very narrow perspective of the American market.
I’ve noticed from all your posts over time how popular Fiat is there – so makes no sense they would get rid of it when Brazil is such a huge (and still establishing) market, not yet even it its prime.
Why is it so? i read somewhere that cars in Brazil are 30% if not higher than in Europe for example, i mean you have cheaper labor force than Europe, energies are maybe higher o.k but still, taxes are so high? like VAT on cars or something – but it are not counting taxes for automakers like Fiat and GM Brazil is very profitable, haven´t seen VW numbers for Brazil must check their annual report
Why so profitable? Over time the market has been used to paying high prices and nowadays people think cars are cheaper than ever. Credit has always been scarce here, so when facories sell their cars in 60 months at 1% interest a month people think it’s cheap. VW and Fiat set prices, the rest dance. The Siena is the go-to sedan. It is so expensive now and offers less content than a Logan, but outsells the Logan 3 to 1. Over time I have read various pieces of news. Nissan’s highest margins in the world are supposed to be here. Many years ago I saw the cost of building an Uno…Compared to the price, just wow.
A Honda City, built in Brazil sells for about 55k reais. In Argentina, the same car is sold for 42-48. Chile around 36k. Mexico under 30k. Taxes? Part of it. But only half the explanation.
From what I hear, taxes here are comparable to France. Compare price and content of cars sold there and here. More expensive here. With lower costs. So taxes? No, no way. Margins. It’s been discussed before, Brazil is a difficult country to do business. If you establish yourself though, due to less competition and traditionally high prices, the money does roll in. That’s why we have so many factories from so many different makes here. Te margins are honey.
Thanks for info Marcelo
Well taxes are not important if we are talking about how proffitable are global automakers producing and selling those cars in brazil than taxes don´t matter, because they are making big proffits with low costs and high prices, but i don´t get it – yes i am not Brazilian, but if cars in Brazil are so high and automakers are enjoying fat proffits, why the hell is some government body responsible for auto segment not pushing to lower prices – are they just corrupt that VW,Fiat, GM and others pay them to let this status quo clearly favouring automakers? Also some of those cars selling in MExico or Chile how you said are exported from Brazil, don´t know how it is with Argentina with Fiat, VW, GM everyone also producing there but probably just 2-3models.
Also have you pls any information how it is now this year both Fiat and VW are loosing share faster than market is falling so are others just eating their shares? like Hyundai and Toyota – always checking Anfavea each month and Hyundai and Toyota are doing fine in declining market
I think romismak, there is not government pressure because there is no societal pressure. Society has been convinced it’s taxes and whenever reports come out showing how taxes are partly to blame for high prices, the status quo is kept. The market is stabilizing this year and nect year there could be or not another contraction, but the government is reaping in record taxes, so they too have a vested interest in keeping prices high. This and the previous governments were the first to experiment with lowering taxes that I can remember and the experiment worked, but the government is back to evenng out the bdget problems. Taxes should not be lowered in the next couple of years.
When you think Brazil-Argentina we should think of it as one market. Fiat produces some models there, some models here. Others likewise. As a general rule the smaller cars are produced here and Argentina gets some cars we don’t for some reason (Quobo for example). There are spats and those are usually resolved quickly but for the most part there are no tariffs between the two markets. I pointed out the Honda example just to show that in spite of this they sell the car cheaper in Argentina. Yes taxes on cars are not as high there but the difference is not big. With the transportation costs and all that, the City should be sold for the same price as here. Yet, it isn’t.
Both Fiat and VW have revamped their lines and as a consequence they are suffering. Fiat eliminated the old Uno while VW terminated the Gol G4. Both were their cheapest models and they don’t have direct rplacements yet. Fiat is slowly but surely lowering the price of the (old) Palio Fire and New Uno while VW has just introduced the up and upped the price by a margin. As VW pumps up production of the up, look for it to increase its share and help VW regain lost market. Both Uno and Gol G4 were favorites of fleet buyers and some of these have migrated to GM (Celta and Classic), this also accounts for lost sales. Finally, at least Fiat is still running close to full capacity. If something happened tomorrow and the market jumped 30%, Fiat at the moment simply doesn’t have the capacity to sell more because they can’t produce more. The real test for Fiat will come when they add another 250,000 capacity over 2015 as the new factory in Pernambuco starts churning out cars. Then we will see Fiat’s real size in Brazil. This is a planning year for them. VW’s position I’m not so familiar with, but I think as the up and soon the CUV from up is produced, they stand to grow.
Hyundai and Toyota growth is explained by the launch of their own “low cost” cars. The Toyota is slowly making a name for itself as a good, honest car, though ugly as sin. It’s also a bit pricey. Until the re design, I don’t think it’ll grow much more. The HB20 meanwhile is more controversial. As it becomes more common place on the streets I know sales increase. It’s an attractive car, but has faced some problems and slowly the realization is setting in that it is not superior to the traditional offerings from the Big 4 or Renault in any way. The price is also very high. Unless they lower it, I believe they have more or less plateaued with this model, and will need more models to increase sales of the family. Yes, both have eaten some market, but from the perspective of the “oldcomers” the newcomers’ threat has been contained for now.
Over the next couple of years I think the situation will remain the same. In a top tier Fiat, VW and GM. Under that Ford, Renault and Hyundai battling it out, possibly with Toyota jumping into that fray.
I also believe that if one of these majors decided to lower prices, they’ll make a killing. But price, specially nowadays is not all. Just ask the Chinese makers.
I reply here i don´t have Reply option under your last long post
Thanks for info, am glad that i have opinion of Brazilian person who has far more knowledge about this market i like Brazil market it´s one of most important and i always await each month release to see how top players evolve.
Yes Braz-ARG are basically one market like EU-EFTA countries you can produce in 1 and sell in another both countries being in Mercosul the same should go for Uruguay, Paraguay, Venezuela – but there are other differences and market is in horrible conditions.
What is interresting that basically all long established players are dominating BRAZ-ARG – European and American biggest automakers being here decades, while rest of South America – is different with GM,Japanese and Korean dominating and VW-Fiat being minor players in other South American countries. I am surprised Hyundai is not producing other models than Hb20 in Brazil, is their plant running at full capacity ?
You’re welcome. Please remember though, this is my opinion/analysis. Talk to another guy he may have a different opinion.
As to the other SOuth American countries, this can be attributed to them not having a local manufacturing base. Therefore, the cheapest imports win, and with Asian economies so set up for exports, I guess they fight harder for the market. Colombia is a good example. Like Brasil-Argentina, the local makes win, in their case GM and Renault.
Another possible explanation is that the European companies and American too, used to use Brazil and Argentina as an export hub to other Latin American countries. Being that in the last few years they were almost all producing to maximum capacity in Mercosul and that they command higher prices here (and margins) than in other South American markets, they’re appetite for those markets lessened and they had to import cars from other, more expensive producers (rendering them more uncompetitive to the Asian makes).
As to Hyundai here, the plant was built with a capacity for 150,000 cars and a possible expansion to 300,000 was built into the original plans. I don’t think they sold anywhere near the top limits of the factory. They also produce the old Tucson here, but that is done by a Brazilian group, in another factory, in another state under license. I think they also produce some light commercial vehicles in that plant (Kia Bongo and its Hyundai equivalent).
No local manufacturing base … and no punitive (protectionist) duties, so imports are actually able to compete.
In Brazil there is little incentive to lower domestic car prices since they are working to capacity and cannot import any more. Consumers won’t see lower prices until the duties are reduced, or at least the “free trade” with Mexico is restored.
th009, true but that is the other side of the same coin. I mean the Asians can compete on lower pricing because they have lower costs to begin with (Toyota and Honda not included in this, as they usually don’t offer lower pricing). And also true that being more protected in Mercosul the local makes don’t have the incentive to reduce prices. However, that does not explain (that I know) Colombia. There, Renault and GM produce locally and there are less protections than Mercosul. Nevertheless, the ‘locals’ are bigger than others.
The market seems to have plateaued, even slipping a little. All makers have or are expanding. This will lead to a situation in the next couple of years where prices should fall, even without outside competition. Right now, as the market slows,is probably the worst time to try to lower prices by stimulating imports. If that had been the strategy, it would’ve been smarter to implement it earlier. As is, we are gaining capacity and when demand picks up it will be met locally. In my eyes, win win for us. Yes, jobs and all that. In our currecnt state of development, to let in everything is economic suicide. Good in the short term for the consumer, wrong in the mid to long term as opportunities dwindle and our local populations finds itself jobless and badly educated. Not a good atrategy.
One day Brazil will open up more. The time is not now. We are not ready. Luckily we are 200 million people here with more money than ever before, with pent up demand for a plethora of things. This should keep us afloat for a while yet. (as we hopefully prepare for the next phase)
“Volkswagen, Audi, Bentley and Bugatti”
Don’t we have to add Porsche in here? And Lamborghini?
Finally, we’ll be able to buy Routans again.
My only take-away from the pie chart is that 15+% American market share appears to be some sort of threshhold for the car companies. Honda, Nissan, and H-K are going to have to grow and/or buy up to that. Maybe they buy some of the VW-FCA reject brands to grow upmarket? Or Nissan-Renault decide to eat some of the smaller Japanese manufacturers they partner with like Mitsu? Maybe Honda stops building ugly Acura’s with a shield theme and instantly double market share?
Honda is the last automaker that would seriously consider a large acquisition or merger. Independence is in their DNA.
You could make the case for Nissan-Renault and FCA, but who would run the combined entity?
Second to last, Toyota being first. Honda has a $62.97 billion dollar global market cap, they have no need for a merger or to be acquired.
http://www.forbes.com/companies/honda-motor/
I agree Honda is too stubborn to think they could possibly need another car company. Nissan-Renault and H-K not so much. Ghosn i see buying someone just to grow market share. I remember he was trying real hard to buy the (Mexican) truck and (Canadian) minivan plants during the Chrysler bankruptcy, but balked at buying into the Chrysler Corp. American assets.
Ghosn actually understands the car business. He turned around two struggling car companies — in highly regulated countries — without the help of a bankruptcy, or any handouts from governments or competitors.
http://blogs.wsj.com/speakeasy/2014/07/21/weird-al-yankovic-wraps-8-days-of-videos-with-mission-statement-exclusive/
The only retort that I can think of to this crazy idea is a video filled with business buzz words.
I think it only makes sense from an North- American perspective. Everywhere else VW is better than FCA. Ram is not important outside America. Fiat may be big in Brazil, but is being eaten alive in Europe.
With MQB VW doesn’t need any of the crap FCA platforms. And the reputation of FCA isn’t something they need to purchase. RAM and JEEP and maybe the Van are the only valuable things. But buy all the other ballast for that?
I’m sure not a VW fan. But VW has more to lose than to gain.
Of course, Piech wanted the Phaeton and W8 Passat despite it not making sense. So he may waste 20 Bio just to once own a Lancia….