Skip to main content
EVENT TRACKER
Keep track of rescheduled, canceled industry events with our COVID-affected event tracker - Powered by Snap Finance
Close
Sister Publication Links
  • Rubber & Plastics News
  • European Rubber Journal
tb-logo
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • OPINION
    • CORONAVIRUS
    • AUTO INDUSTRY
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • FACTORY FIXES
    • GOVERNMENT & LAW
    • INTERNATIONAL
    • MOTOR SPORTS
    • NEW PRODUCTS
    • RETAIL TIRES
    • SERVICE ZONE
    • SEMA/AAPEX
    • SMALL BUSINESS
    • TIRE MAKERS
    • SPONSORED CONTENT
    • New round of Paycheck Protection Program funding opens
      Vaccine may usher sense of normalcy
      Cover-up: More retailers requiring face masks to curb COVID
      USW alleges COVID-19 violations at Kumho plant
    • Johnson named president, managing partner of Arnold Motor Supply
      Conti starts production of ‘HL' load index tires for select OE customers
      GM banking on 'BrightDrop' EV to build commercial van business
      Stengel promoted to president of NAPA parent Genuine Parts Co.
    • ITC votes to keep duties in place on China P/LT tire imports
      NLRB certifies USW as bargaining unit for Kumho plant in Georgia
      Air France renews tire supply deal with Michelin
      Hwa Fong joins Taiwan tire makers' bid for alternative to import duties
    • Love's plans to add over 30 stores in 2021 with Truck Care/Speedco services
      Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Evolving delivery trends good for CV tire sector — Cooper exec
      Conti adding light-duty products to General Tire OTR tire lineup
    • ITC votes to keep duties in place on China P/LT tire imports
      Hwa Fong joins Taiwan tire makers' bid for alternative to import duties
      New stimulus package fixes PPP loan confusion
      USW opposes Taiwan tire makers' dumping counterproposal
    • ITC votes to keep duties in place on China P/LT tire imports
      Air France renews tire supply deal with Michelin
      Russia's Kama Tyres expanding truck, ag tire capacities
      OK Tire adds Cooper, GT Radial passenger tires, Michelin, BFGoodrich commercial tires
    • New NASCAR, F1 tire designs delayed due to COVID
      U.K. race series extends contract with Goodyear through 2026
      Goodyear Racing staying on track
      General Tire Canada renews sponsorship deal with Raceline Network
    • Hunter adds ‘FastBlast' bead-seating for LT/SUV tire changing
      Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Hankook doubles size range of Ventus V2 all-season UHP line
      Conti adding light-duty products to General Tire OTR tire lineup
    • Updated ALI lifting points guide covers vehicle model years 2000-2021
      VIP Tires opens 20th store in New Hampshire, in Keene
      Hunter adds ‘FastBlast' bead-seating for LT/SUV tire changing
      Manley: Tire dealers look to future
    • Updated ALI lifting points guide covers vehicle model years 2000-2021
      Hunter adds ‘FastBlast' bead-seating for LT/SUV tire changing
      Johnson named president, managing partner of Arnold Motor Supply
      AMRA to host 5 educational webinars in Feb., March
    • WTC hosting webinar Jan. 20 on load-capacity standards
      Denver's Brian Sump named AAPEX Shop Owner of the Year
      DUB, TIS Wheels founder Myles Kovacs is SEMA Person of the Year
      AAPEX: Using social media to promote your business
    • New stimulus package fixes PPP loan confusion
      Vaccine may usher sense of normalcy
      2020 Review: PPP loans give boost to small businesses
      Latest COVID relief bill includes $325B in small-business support
    • ITC votes to keep duties in place on China P/LT tire imports
      Nokian Tyres to add up to 150 jobs at U.S. factory
      Hwa Fong joins Taiwan tire makers' bid for alternative to import duties
      New NASCAR, F1 tire designs delayed due to COVID
    • Sponsored By Yokohama Tire Company
      7 questions to ask consumers when they need tires for a crossover SUV
      Sponsored By Yokohama Tire Company
      Stocking Tires for Crossover SUVs
  • SHOP FLOOR
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Video: Balancing Tire
      Choosing the right balancing equipment
      Safety tips for wheel balancing
      An introduction to wheel balancing
    • Video: Demounting
      Demounting Equipment
      Making rims ready for a tight seal
      Tire changer types, tips and trends
    • Video: Safety
      Making friends with OSHA
      Ergonomics on the shop floor
      Customers
    • Video: Tire Repair
      Tire repair: Shining a light on visual inspections
      Staying safe when repairing a tire
      Essential tools, materials and equipment for tire repair
    • Video: TMPS Service
      Decoding sensor data for TPMS diagnosis
      Replacement TPMS sensor overview
      The life-saving work of TPMS
    • Video: Training
      Advantages of apprentice program partnerships
      Options and resources for CE tech training
      Internship ideas to attract tech talent
    • Video:Vehicle Lifting
      All types of lifts for all types of work
      Tips and recommendations for lifting safety
      The gravity of proper lift points
    • Video: Wheel Torque
      Using torque sticks to speed service times
      The danger of too much, too little torque
      The importance of torque specifications
  • Multimedia
    • VIDEOS
    • PHOTOS
    • PODCASTS
  • Events
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
  • Data
    • DATA STORE
  • Resources
    • DIRECTORY
    • CLASSIFIEDS
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
September 01, 2015 02:00 AM

Fiat Chrysler chief wants to hook up with GM

Crain News Service
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    (Crain News Service illustration)
    Fiat Chrysler Automobiles CEO Sergio Marchionne has his eye on merging with GM.

    By Larry P. Vellequette. Crain News Service

    DETROIT (Sept. 1, 2015) — General Motors Co. has flatly rejected the advances of its crosstown rival, but Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne is not going away — not by a long shot.

    Mr. Marchionne said he has sweated the details and done the math and discovered there's far too much upside in a merger of FCA and GM to let a deal go undone, or at least unexplored.

    In a blunt, two-hour interview with Automotive News in his downtown Detroit office, Mr. Marchionne said the numbers come out so good that his board of directors has no choice but to put pressure on GM to begin discussions now.

    “It would be unconscionable not to force a partner,” he said.

    That sounds like a hostile takeover bid is in the works.

    “Not hostile,” said the FCA chief. “There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you.

    “Everything starts with physical contact. Then it can degrade, but it starts with physical contact.”

    GM insiders, speaking on background, question Mr. Marchionne's assertions about synergies and suggest a merger with FCA is a bad idea all around.

    “Why,” asked a high-ranking GM executive, “should [GM] bail out FCA?”

    But Mr. Marchionne said the logic of the deal is “irrefutable.”

    “We're not talking about marginal improvement in margins,” he said, “we're talking about cataclysmic changes in performance, just huge.”

    Mr. Marchionne then added: “I've gone through product by product, plant by plant, area by area, and I've analyzed them all.

    “I've obviously made some arbitrary assumptions about which architectures survive, which engines survive, and the only deal that offers them the same benefits as we potentially get...is us.”

    The potential profits, he said, are exponentially larger than the current combined global earnings of GM and FCA.

    Yet, Mr. Marchionne said GM isn't taking his phone calls. “I've offered to sit down with them and take them through the numbers,” said the Italian-Canadian CEO as he sipped an espresso and swiped through documents on his tablet, giving his visitors a cursory look at various charts and graphs he claims make his case.

    “They won't listen. And that kind of abject refusal to engage,...the capital markets won't understand why you are rejecting the discussion.”

    “You may reject the deal but you can't reject the discussion. If you're refusing to talk to me, and you have seen nothing, you either think you're above it all, or you think the capital markets are full of schmucks that owe you something.”

    ‘A better deal'

    Mr. Marchionne said he doesn't lack for potential partners and he could sell or merge FCA as it stands today. “There have been responses of people who have shown interest in discussing,” he said. “Are they the people I wanted to get the response from? The answer is probably not.

    “There are people who are interested in doing deals. I'm not interested in doing deals with them...because there's a better deal.”

    Without specifying how he arrived at the figures, Mr. Marchionne cited a staggering combined EBITDA (earnings before interest, taxes, depreciation and amortization) figure that he said would result from the merger of FCA and GM.

    “Look, the combined entity can make $30 billion a year in cash. Thirty. Just think about that [expletive] number,” he said. “In steady-state environments, it'll make me $28 billion to $30 billion,” at a seasonally adjusted annual selling rate of 17 million.

    Arndt Ellinghorst, head of global automotive research at Evercore ISI, said the target is realistic.

    “A combined GM-FCA will generate almost $25 billion in EBITDA this year,” Mr. Ellinghorst wrote in an email. “If you assume some synergies and peak U.S. cycle market conditions then, yes, they could get to 30 billion in EBITDA.”

    On background, a GM official said company executives have not seen Mr. Marchionne's analysis of what a combined company would look like. But he expressed doubts about how Mr. Marchionne could hit his profit projection while keeping a promise made to dealers last week in Las Vegas not to impact retailers or cut manufacturing jobs.

    Asked directly, a GM spokesman wouldn't call Mr. Marchionne's analysis wrong but said GM officials believe the company and its shareholders are better off on their own.

    (Crain News Service photo)
    GM said CEO Mary Barra "wants to return to Congress and update the House Energy & Commerce Committee Members on the actions GM is taking in response to the ignition switch recall."

    Mr. Marchionne said he has never met General Motors CEO Mary Barra. “I'm not trying to date Mary, for the record, but I tried to get to see her.”

    A GM spokesman said: “We've responded appropriately to any outreaches that he's had.”

    And if there is resistance to sitting down with FCA because of Mr. Marchionne's reputation as a crafty and cagey deal-maker, Mr. Marchionne has an answer for that, too.

    “Look, I'm a tough negotiator and people know it, right? I am who I am, but so what?” he said. “Send somebody else in. Send the shark. I'd come off the table.”

    Mr. Marchionne insisted there is too much to be gained. He said he is “not the guy at the corner who's selling pencils. I tell you that you can make X billion more by being together, I guarantee you that I can carry half the market.”

    A hard slog

    In a note to investors in June, Max Warburton, an analyst at Sanford C. Bernstein, wrote: “Putting together FCA and GM looks like an operational and management nightmare — but frankly, if anyone can smash through the issues and make it function, it would be Marchionne.”

    The FCA chief himself said: “An attack on GM, properly structured, properly financed, it cannot be refused. You can play hardball to a point.... It's too big to ignore, which is the issue that our board is facing.”

    Ms. Barra, who publicly swept aside Mr. Marchionne's advance, said in June, “We have scale,” adding that GM is busy “merging with ourselves.”

    Mr. Marchionne admits joining with GM would be a hard slog, but he stands by his claims.

    “When you get to these type of analyses and this type of very thorough introspection about your business and the other guys',...you walk away with a conviction that barring implosions...driven by cultural differences, that it's worth taking the risk. The benefits are so high that I don't think you can stop the machine.

    “This is not a question of telling me to screw off. I understand [GM's] desire to be alone and execute [its] plan. I've listened to the comments...‘we're still merging with ourselves,' which I do not buy for a company that is 107 years old. You can't merge with yourself.”

    Reporter Luca Ciferri contributed to this story, which appeared in Automotive News, a Detroit-based sister publication of Tire Business. For more from Automotive News' six-part series, “Industry on Trial,” click here.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    tb-logo
    Reader Services
    • Contact Us
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber & Plastics News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Plastics News China
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • List Rental
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • OPINION
      • CORONAVIRUS
      • AUTO INDUSTRY
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • FACTORY FIXES
      • GOVERNMENT & LAW
      • INTERNATIONAL
      • MOTOR SPORTS
      • NEW PRODUCTS
      • RETAIL TIRES
      • SERVICE ZONE
      • SEMA/AAPEX
      • SMALL BUSINESS
      • TIRE MAKERS
      • SPONSORED CONTENT
    • SHOP FLOOR
      • BALANCING
      • DEMOUNTING
      • SAFETY
      • TIRE REPAIR
      • TPMS
      • TRAINING
      • VEHICLE LIFTING
      • WHEEL TORQUE
    • Multimedia
      • VIDEOS
      • PHOTOS
      • PODCASTS
    • Events
      • ASK THE EXPERT
      • LIVESTREAMS
      • WEBINARS
      • SEMA LIVESTREAMS
    • Data
      • DATA STORE
    • Resources
      • DIRECTORY
      • CLASSIFIEDS
    • ADVERTISE
    • DIGITAL EDITION