FCA Would Knock on GM’s Door Again, But Merger is Less Attractive Now

Sergio Marchionne, who was slighted by General Motors when he wanted a hookup, sees GM as less attractive now that it has sold Opel to PSA.

In a wide-ranging session with reporters at the Geneva Motor Show, Marchionne said now that GM has lost the European brand, there is a 15-percent loss of synergies because there are fewer architectures that could be shared in a merger and thus less opportunity to improve efficiency.

Not that GM is expected to come calling. Asked if the door is closed, Marchionne laughed as he said it was never open to him despite numerous attempts in the past. “I knocked but no one answered.” But he is undeterred. “I never close any doors. I may shamelessly try and knock again … on the GM door or any door if I thought it was a good thing for the business. Absolutely, without even blinking.”

He also mentioned VW as a potential partner, an idea that VW executives have already shot down.

But he is not interested in merging with a Chinese automaker where there would be little overlap and thus little opportunity to reduce cost.

Marchionne does not rule out FCA finding a merger partner in the future but is uncertain if it will happen during his tenure which ends in 2019. “Nothing needs to happen before I step down.” A bigger priority for the company is eliminating debt.

GM’s explanation that it sold Opel due to geo-political risks “shocked me out of my pants,” Marchionne said, adding he has heard Europe described many ways but this one seems to be a stretch. But he does appreciate GM’s recognition of the need for scale, a theme Marchionne has been promoting as the only way to keep to ensure strong margins in the auto industry given the high cost of technology.

The FCA CEO had nothing but praise for PSA CEO Carlos Tavares, while questioning why GM can successfully conduct business in other regions but could not find a way to improve operations in Europe.

Asked if FCA will sell any of its numerous brands, he responded, “I can confirm we will not.”

As for FCA’s diesel investigation in the U.S., Marchionne said the automaker has been dealing with the Environmental Protection Agency and California Air Resources Board on accusations of using hidden software. The automaker is cooperating but the matter is in the hands of lawyers. FCA has been unable to certify and sell 2017 models equipped with diesels. The aim is to get the certification and apply the fixes to earlier models dating back to 2014. But in the long run, he sees small diesels being phased out of the marketplace because of their high cost.

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