LONDON/MILAN: Fiat Chrysler boss Sergio Marchionne is hoping for a big deal, possibly in the United States, to plug the carmaker’s weaknesses and cement his legacy before stepping down in early 2019, sources familiar with the situation said.
However, the world’s seventh-largest carmaker, which has one of the highest debt piles in the industry, barely breaks even in Europe and is expected to burn cash for years to revamp its neglected Alfa Romeo brand, may struggle to find a partner.
Marchionne and Fiat’s founding Agnelli family are showing particular interest in General Motors, several sources say, as the US market has been core to FCA for years, GM is strong in Asia where FCA is weak and the US carmaker is keen to expand in Europe after its move to tie up with PSA failed.
But a GM spokesman said the company was focused on executing its own strategy while one person at a US bank close to the matter said GM is “really not interested”.
“Marchionne has clearly planted the ‘for sale’ banner,” a banker close to PSA Peugeot Citroen and General Motors said. “He’s been sending out feelers everywhere in an attempt to create optionalities, but so far no one is biting.”
Marchionne, who has dropped increasingly blunt hints that he wants an alliance to jumpstart consolidation in the industry to share capital costs and fund development of cleaner cars and features such as self-driving, said last month a tie-up with GM and Ford would be “technically feasible”.
The 62-year-old said nothing was on the table now, however.
An FCA spokesman declined to comment but a source outside the company who is familiar with its strategy said: “The US is where FCA is focusing now. Marchionne is doing a lot of work on his last deal and something will happen before 2018.”
Some industry executives said Marchionne’s recent comments may have been an attempt to create a bidding war by suggesting greater interest than exists.
“Sergio is a great poker player: all the noise he is making aims at hiding the fact that in reality FCA’s golden years are nearing an end,” another banker close to the industry said.
FCA needs an alliance to address challenges including a gap in Asia, an ambitious turnaround plan and an over-reliance on a North American market that is nearing its peak. Its portfolio is also weak on electrification and connectivity services.
It also plans to spend 48 billion euros ($52 billion) to build new Jeeps and Maseratis and revamp Alfa Romeo. Most industry analysts doubt that Marchionne will reach the steep 60 percent sales ramp-up to 7 million cars he envisions by 2018.
FCA sold 4.6 million vehicles last year, up 6 percent on 2013.
Still, FCA has some attractive assets: its Jeep brand has global allure and the RAM brand offers a strong foothold in the US pickup market. Alfa Romeo, once developed, could become a strong competitor to Volkswagen’s Audi, although the German firm will not be keen on a full takeover, one of the people said.
Last year separate media reports, both denied, suggested FCA was talking to Volkswagen and PSA about a tie-up.
PSA chief Carlos Tavares said last month it was too early to talk about a merger, wanting to focus on his own recovery first.
Marchionne said in March he could buy or sell, adding he was talking to many companies. While Volkswagen was not his preferred target, he said he could imagine collaborating with the German carmaker. Volkswagen declined to comment.
Keyword: Fiat Chrysler CEO seeks mega deal before stepping down