Fiat Chrysler Automobiles CEO Sergio Marchionne has been hoping to sell the company to the right kind of buyer for a while now. But, with no serious contenders, FCA has been forced to trudge onward into the future without a bonafide suitor.
That’s rumored to have changed, as numerous sources are claiming Chinese automakers have taken an interest in the Italian-American company. However, whether these are potential one-night stands or a serious courtship remains unknown. Marchionne has previously specified he only wants to see FCA enter into the warm embrace of an established automaker and, while China has them, some would be better partners than others.
As to which foreign automakers, Automotive News claims numerous sources identifying executives from Dongfeng Motor Corp., Great Wall Motor Co., Zhejiang Geely Holding Group, and FCA’s current joint venture partner in China, Guangzhou Automobile Group, as all taking an active interest.
While some of you prepare your typing digits to express outrage that quintessentially — almost hyperbolically — American brands like Jeep or Dodge could never be owned by a Chinese entity, don’t forget that Chrysler used to be in bed with Germany’s Daimler and is currently an Italian-controlled multinational corporation incorporated within the Netherlands. FCA could definitely end up married-off to a Chinese company if the two companies hit it off. But how serious any of the involved automakers are — including FCA — is subject to questioning.
Chinese companies, whether automakers or not, are all under government pressure to expand outside China through the acquisition of foreign companies. There are also plenty of American brands purchased by Chinese interests in recent years you probably weren’t aware of: AMC Theaters, Motorola, Legendary Entertainment and General Electric’s appliances unit.
In the automotive realm, this drive to expand outside China’s borders prompted Geely’s purchase of Volvo in 2010 and Lotus in 2017. Last week, Bloomberg reported Chinese companies aim to spend around $1.5 trillion purchasing overseas interests over the next decade.
“Right now, Chinese automakers enjoy the full support of the leadership in Beijing to go and make it happen,” Michael Dunne, president of Hong Kong investment advisory company Dunne Automotive, explained to Automotive News. “That’s something brand new, and it’s really picked up since 2015.”
FCA is trying to make itself as appetizing as possible for a buyout by streamlining production. A source claims FCA executives previously traveled to China to meet with Great Wall Motors, while Chinese delegates were spotted at FCA’s headquarters in Auburn Hills, Michigan, as recently as last week. Fiat Chrysler also hosted Cui Tiankai, China’s ambassador to the United States, Zhang Fangyou, chairman of Guangzhou Automobile Group and numerous members of the country’s Communist Party in 2016.
So, what would a hypothetical Chinese partnership with FCA look like? That depends largely on who is doing the buying. While automakers like Geely have taken a decidedly hands-off approach after purchasing automakers, others could be less apt to do so. However, since acquiring Fiat Chrysler serves predominantly as a doorway to Western markets for Chinese companies, it’s unlikely the initial changes made would be drastic.
Still, it’s likely to be less of a partnership and more of a takeover. When Marchionne publicly began his quest to find a suitor for FCA in 2015, he admitted he didn’t believe Asia was interested in partnerships. “I don’t think Asia is partnerable,” he said. “No, you can be acquired by the Asians. I think China will buy you.”
[Images: Fiat Chrysler Automobiles]
Careful Sergio.
Powerful Chinese suitors always have mistresses.
and you’ll find yourself out on the street, with a pounding headache, all your intellectual property strangely missing from your wallet. Your jacket is gone, and there are a few hard to identify stains on your clothes.
On the plus side, a new jeep will be $9,500….quality probably won’t change.
Reminds me of that old Mickey Gilley song “The Girls All Get Prettier at Closing Time”
If I could rate ’em on a scale from 1 to 10,
I’m lookin’ for a 9 but 8 would slip right in
A few more drinks and I might slip to a 5 or even a 4
But when tomorrow morning comes,
And I wake up with a number 1
I swear I’ll never do it anymore.
It’s almost closing time, last call already made, so whomever ponies up the cash gets the prize regardless of strategic fit or ownership. Long term, any viable cash deal is better than no deal and I wouldn’t expect Agnelli family continued involvement in the passenger car business.
Remember that Sergio was talking about giving “an aggressive hug” – then he wonders why there are so few names on his dance card.
It’ll be a headache tomorrow…or a heartache tonight…
I prefer one of his slightly lesser known songs: “That’s the power of positive drinking…”
If he can sell FCA for a decent price so the Agnelli family can finally be rid of the auto biz, Sergio will end up with a nice retirement nest egg. The holdup will be the wallet filled with IOUs ($40 billion bonded debt) and no intellectual property to speak of, outside the last V8 engines designed by the now-retired old Chrysler engineers.
That’s been Sergio’s problem all along: “there’s no there there” in terms of tech, and though Jeep alone is worth $10 billion, there’s those 4x bonds to pay off. Otherwise Toyota would have bought FCA for Jeep alone and shut down the rest.
He won’t care; he’ll get a huge golden parachute and move onto greener pastures.
Isn’t that the plan? Serg finds a suitor for the Agnelli family and he skips off to the next company, retires or pulls the gilded cord.
I think the Italians may have tired of pouring money into the endless money pit of Chrysler, just like every other owner has. The problems of the 9 speed auto in the Cherokee – where workers were bashing on the tailgate control cable with the crimp tool – may have been the last straw.
Sergio needs to go.
A return to the CJ moniker? (Chinese Jeep?)
JK. (Just Kidding.)
If Fiat Chrysler has any kind of Chinese ownership the Chrysler/Dodge/Jeep name plates will be dead to me, will never again be considered for purchase (and I currently own Dodge and Jeep vehicles).
Same here, the last three vehicles we bough were Dodge, Ram, Ram. If this does happen, I guess I have to reconsider GMs.
Then again with the V8s potentially being phased out of non-HDs and the stupid dial gear selector, it’s not like I was gonna buy another 1/2 ton ram anyway.
The United States should only allow 100% direct foreign investment by concerns based in countries that allow 100% direct foreign investment.
Allowing 100% direct foreign investment has long been a strength of the American economy, but Americans and American companies are at a disadvantage to their Chinese competitors if they want to invest in China, and with the oversize role that China plays in manufacturing today that’s simply not a fair situation. China forces you to have a Chinese partner if you want to do business there.
Good idea, but then how could Apple and the Pharm companies invert ownership to save US Taxes ?
Seconded. China has a 35% import tariff on American-made cars, and requires foreign automakers to partner with Chinese domestic firms at no more than 50% ownership in order to produce cars in China. This is how they’re now capable of producing good cars so quickly. In turn, we have a 2.5% tariff on Chinese made cars, and allow 100% foreign investment/ownership.
I am all for free trade, but not when it is so one-sided. We need to reciprocate tariff for tariff with them in strategically important industries. And yes, automobile manufacturing is strategic, due to it’s large employment and industrial capacity should it ever be needed for extraordinary means.
I am no fan of Donald Trump, but this is a card he should play.
All that said, I do think if a Chinese takeover of FCA happened, it would be good in the short term. Jeep is a success everywhere, and would explode further in China. As a precedent, one can look at what Geely has done for Volvo in Sweden. Poured money in to develop new products and bring Volvo back from the brink, yet largely kept them independent to their Swedish-ness (all the while learning from them for certain to suit their Chinese car making). However, beware the long game…similar to the takeover of Hong Kong, the Chinese style is to slowly remove autonomy so as to not ruffle too many feathers. There are Chinese made Volvos for sale here in the US now, after all. The writing is on the wall.
I would agree with this approach that you recommend. The time it takes for China to change its tariff to benefit 1 Chinese company (in acquiring FCA) while hurting its 10 other companies will be long enough for FCA to go out of business (with no savior) and improve the auto landscape. I’m all for it. Send your suggestion to Donald Trump and Wilbur Ross.
This is what I was thinking but much better explained. Fiat-Chrysler could benefit from the cash and platform sharing of a bigger automaker, but I fear for the jobs of USA, Canada, and Mexican auto workers. Cars made in these countries are some of the highest quality in the world, second only to Japan. I don’t America and our close partners to lose that.
I agree.
In this case, a Chinese company would be buying a Dutch-Italian company, so there isn’t much the US government could do anyway.
Not true. All Trump would have to do is propose making the import tariff on Chinese made cars reciprocal (35%). The Chinese can go ahead and buy FCA, the publicity alone of the Chinese buying Jeep would be enough to put this in the normal American’s mindset to support the revision in the import tariff (and probably stop the “Envision” of Chinese car imports, or get their tariff lower to support the US made BMW’s, Benz’s, and Teslas we export). And then regardless of the ownership of FCA, we level the playing field a bit
Geely, the new owner of Volvo, is not a state owned enterprise.
SAIC, the new owner of MG Rover, is a state owned enterprise, like Dongfeng, Guangzhou Auto, Beijing Auto, Chang’an Auto, and FAW .
The outcome of these two recent acquisitions is like night and day.
The only FCA parts that are worth anything are Jeep and Ram, but the rest (Fiat, Alfa, Chrysler, Dodge) are probably worth negative dollars. Maximum cash value would be had by spinning off Jeep and Ram, which are probably worth far more than the Chinese are willing to pay, and making a symbolic $1 sale for the rest.
I expect the family ownership of Fiat (and Italian authorities) are probably against letting Sergio sell off the family jewel for $1.
Fiat does brisk business in developing countries and certainly has a decent niche in Europe.
Brisk business is not the same as profitable business. Selling small cars in low income countries is not a recipe for profits, but even here I think Fiat is outsold by Suzuki, Hyundai, and probably VW and Ford depending on what you define as developing countries. Similarly, Fiat is a very niche player in Europe, and not a premium priced one so profits are small at best.
“Fiat is a very niche player in Europe”
Very niche? Fiat outsells Audi, BMW, Skoda, Citroën and ALL of the Asian brands.
http://carsalesbase.com/european-car-sales-analysis-june-2017-brands/
You are insane if you think the Charger, Challenger, and Durango are worth negative dollars
…they aren’t worth buying the company for, either.
Quite the opposite, actually.
I didn’t say they were. But those cars on an already amortized platform is a license to print money.
The money press will run a lot slower as sales of these models dwindle…they’re aging.
Yeah, Jeep is so massively valuable that Fiat is desperately trying to offload it….
If the Chinese can do the FCA what they’ve done to Volvo, just sign the papers now.
No.
It seems the latest news has Chrysler souring on the deal. Besides in the current political climate this won’t happen.
Chrysler sours on deal – read below.
https://seekingalpha.com/news/3288833-fiat-chrysler-soars-chinese-interest
Doesn’t matter what the political climate here is from the standpoint of a potential merger – FCA isn’t an American-owned company.
Now, what that could do FCA sales in this country is open to question. Personally, given that Chrysler/Dodge/Jeep have been owned by “furriners” for the better part of about 20 years now, I don’t think they’ll care much.
It’s the Chinese government that is encourging their expansion outside of their borders. It’s only a matter of time for Sergio.
Funny thing is Fiat got chased out of India because of quality issues and have struggled in China as well.
Ironically the picture has image of Cherokee KL which came under Sergio watch and pretty much a pos in terms of reliability. Rather than work to address reliability and lack of vehicles in Chrysler Brand he is busy using the profits trying to make Maserati and Alfa as viable brands.
? Fiat India is going fine.
Presumably you mean the Premier, a Fiat 124 made carelessly by a local company to “compete” with a Morris Oxford ? They stopped making them like 25 years ago or something.
Irony #1: Jeep owned by the Italians.
Potential irony #2: Jeep owned by the Communists.
Future irony #3: Jeep owned by ISIS & Friends.
“You wouldn’t understand; it’s a Jeep thing.”
Well…calling China “communist” these days is a stretch…but, yes ironic indeed.
I prefer to think of the Chinese as “managed capitalism”. ;-)
I don’t think anyone has an actual term for what they’re doing. That’s a good one.
Currently, the PRC is more of a fascist nation than anything else.
The state closely intertwined with big business, state control of the media, military expansion, use of uber-nationalism to incite the masses, etc.
Hence, the use of the term “Chinazi.”
Personally I think FCA may yet get sold to TATA Motors. TATAs investment in JLR has paid off beautifully but TATAs domestic business is doing badly. FCA could help TATA at home and could take them into the volume market. In many respects it’s the next logical move for them.
Plus, TATA sounds naughty.
Well, I guess lets be as objective as possible here. Chrysler, Dodge, Jeep, Ram, though primarily made in America, designed in America, are not American if you look at their corporate parentage. Nor were they when Daimler owned them. In that respect, having the Chinese own these companies will be no different provided they keep the manufacturing and engineering base where it presently is. (and I suppose provided you have no bias as to the color of the person’s skin managing the company) To say that Chinese ownership would somehow dilute these “American Brands” which havent been American in quite some time, doesn’t make much sense.
I think the fact is, if you are interested in these brands and their continued existence, they need a corporate master from ANYWHERE, that has deep pockets, money to invest or Chrysler and its brands, simply may not make it through the next economic downturn. Three strikes and your out so to speak. To sell to anybody else would probably mean that your next Jeep or pickup will simply be a Nissan/Toyo/Chevy/Hyundai, etc. Those companies don’t need Chrysler’s facilities, engineers, sales outlets. Just the brand names and goodwill. THIS, may represent Chrysler’s only chance at long term survival.
Germany and Italy are part of Western civilization. China is not. That makes a real difference.
It matters more. People were upset and left the brand after the Germans and Italians. It would be far worse with a Chinese owner. Until recently I drove a Volvo I got several comments among blue color types in the past few years basically saying nice car but I won’t buy a car from a Chinese company. (I then had to explain mine dated back to the dark days of Ford ownership). These were not huge car guys either so I suspect it would be a killer for the ram and jeep brands.
The difference btwn Chrysler/Dodge/Jeep being owned by the Germans or the Italians instead of the Chinese is that the former are democratic nations and allies and the latter is an autocratic state (and an increasingly hard-line one under Xi) which is intent on over-taking the US as the world’s premier power.
The PRC has not only been increasingly aggressive in Asia, but they have been buying “friends” and influence in South/Central America, Africa, the Middle East and surrounds via the use of “soft power.”
Saw this when big business pushed for “free trade” with China (with Walmart at the forefront).
The PRC has foreign exchange reserves of over $3 Trillion – one of the beneficiaries of the transfer of wealth from the American middle class.
And growing…to the tune of $300+ billion each year. And for that, we get to give up our technical know-how, get in bed with a forced JV with a Chinese company (or face massive tariffs if we dare to sell products made in America to the Chinese)…and if none of that works, just simply have your intellectual property stolen. Yep. Sounds like a great plan.
Maybe Penske will buy FCA (after the next financial debacle)he tried to buy Saturn.
Maybe Penske will buy FCA (after the next financial debacle)he tried to buy Saturn (after the last financial debacle)
Selling FCA to China would be a bad move. The Italian brands are next to worthless, and buyers of the traditional Chrysler brands (Dodge, Jeep, Ram) tend to be American cultural conservatives who will take a very dim view of buying a Chinese automobile.
Don’t worry, they’re keeping the Italian brands, its the “massively valuable” US operations they’re flogging off.