Marchionne’s Merger Mania Examined – Again. Where Driven to Write leads, the mainstream press follow: Autocar finally gets around to examining the Marchionne plan.
Quis custodiet ipsos custodes. Recently, one of our readers took us to task over our coverage of FCA’s latest product plans, suggesting we were being unduly negative about them and about FCA’s knitwear enthusiast-in-chief. It’s easy to see why, but at least we have been applying our critical faculties to the subject – something that has (up to now) been conspicuously absent in the mainstream automotive media.
Last week however, Autocar’s Hilton Holloway wrote a piece assessing Marchionne’s plans for a vastly smaller, yet simultaneously larger auto industry. In it, Holloway acknowledges the FCA chief’s highlighting of the massive technological overlap that exists amongst mainstream manufacturers, yet scarcely challenges his espousal of mergers and acquisitions. This raises a question: we understand the level of R&D spend is becoming unsustainable, but are mega-mergers the only means of alleviating it?
We also know Sergio has sat down with his spreadsheets and the numbers attributed to a merger with General Motors appear compelling. But knowing you can do something doesn’t automatically mean you should. There are as many reasons to avoid such a coming together as there are to enact one. Despite Marchionne’s claims to the contrary, the complications would be as vast as the attrition is likely to be.
Remember too, FCA came into being on the back of a failed series of mergers, which leads one to wonder why Sergio thinks it will be different this time. The unavoidable inference being that while mega-mergers are not necessarily in the motor industry’s best interest, they most certainly are in his.
Another point missing from this and other assessments lie with future developments within the industry itself. Yes, manufacturers spend billions on drivetrain and powerplant development, but manufacturers are currently ramping up the level of co-operation well beyond engines and drivetrains into body structures and actual car lines; to say nothing of the increasing importance of the supplier base.
A huge increase in the level of strategic component sharing by rival manufacturers will occur simply because it makes commercial sense to do so – and tellingly, it won’t require mega-mergers to implement.
Furthermore, as internal combustion engines become increasingly sidelined in favour of alternative modes of propulsion, the idea of manufacturers not sharing powertrain technology could well become laughable. And this isn’t some distant dystopian future we’re talking about either. It’s already happening – and tellingly, it doesn’t require mega-mergers to implement.
Nonetheless, I believe Sergio Marchionne has the toughest job in the motor industry right now. The task of righting FCA is proving far more difficult than even he could have imagined and with few options left, he’s having to go all in. This putative mega-merger with General Motors clearly isn’t a template for the salvation of the wider industry, but it does represent a plausible way out for FCA. Without it, he says the group will survive – ‘in stagnation’.
Marchionne has achieved a great deal with very little and while results have been patchy at best, both he and FCA are defiantly still here. So it’s entirely feasible he’ll force his way into GM’s boardroom, but what then? And should his ‘go-large’ strategy hit the buffers, what other troy will be left for him to burn?