Non-News

As I roved about the internet, I found this odd non-news-as-news. Despite mentioning a merger with VW, Sergio Marchionne has no interest in a merger with VW.

Sergio Marchionne and friend: Reuters

The story features a very entertaining photo of Mr Marchionne with President Trump.

It’s a rather baffling snippet. Marchionne floats an idea and then says he is not interested in it and, in so doing, explains all the reasons why it would be a good idea anyway. But he’s not doing it. He’s a puzzling chap. As I see it, VW has nothing at all to gain from taking over FCA with its army of problems and horde of underperforming models. VAG makes more money selling alloy wheels and trim options on the Seat Leon than Alfa Romeo makes on its entire line-up (infinitely more). FCA will disintegrate in due course, leaving VW to mop up any sales left over. 

This is what he said: “I only said that if you were the No. 1 automaker in Europe and somebody combines with another automaker to become the second and gets very close to your position, you’re very first reaction is to distance the second again,” Marchionne told reporters Wednesday. “We are the only natural combination partner for somebody who wants to do that. If you were playing a chess board game, that’s what you would do,” he said.

oOo

If I felt motivated I might rail now at President Trump’s plans to nudge the US corporate fuel economy standards back to 1995 and the disheartening willingness of the Big Two to go along with it. As I like to say, capitalism is the most agile and inventive way of driving innovation: it can deal with regulation as long as it is stable.

Going along with Trump’s retrograde policy is to agree to the prejudice of low expectations. The Japanese marques have had no real problems dealing with CAFE or any of the rest of the US’s regulatory evolution. Ford and GM are, in effect, saying they are too weak or too lazy or too dim to cope.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

9 thoughts on “Non-News”

  1. Owners of revered name plates who are deemed to have tarnished that heritage get a very hard time on here, it seems.

    Build a resolutely mainstream and unexceptional car, though, and you get praised.

    Might we be a bit nicer to FCA? Alfa Romeo might, just might, be on the verge of a comeback, and they deserve some credit for that. It was the autocratic Agnellis who failed to build ‘proper’ Alfas and Lancias. Marchionne is picking up the pieces.

    1. Everyone gets a hard time here except, of course for Opel. Should we be nicer to FCA? Not really. I think Marchionne´s management is opportunistic. I am a little fed up of the vapour ware (“20 new cars by next week!”). I am not down on the Alfa Romeo Giulia at all, not as it is. It looks like a pretty decent car if somehow not the Alfa I really wanted them to make (I can´t easily explain that). If you are wondering about makers of unexceptional cars getting an easy time, are you thinking of, say, Opel? It depends on how you think of unexceptional being defined. For me, it´s deeply impressive to make a decent, useful and affordable car. Various companies get this right at different times. Ford had the knack for a while; Opel seem to have cracked it at the moment; Kia and Hyundai are doing it too. I´m interested in solutions to the problem of making what are affordable cars also decent to live with and look at. When money is no object or the car can be focused on one particular characteristic that becomes less interesting to me. Porsche make fine sports cars: they can make them as costly as they like. When Fiat made the roadster or Ford the Focus Mk1, it mattered more that they made such intriguing vehicles for ordinary sums of money.

      We also give Mercedes and BMW a hard time too, don´t we? And PSA. So it´s not only FCA who suffer our oppobrium. When Marchionne green lights a raft of convincing new Lancias I may think again.

    2. Jacomo: I might be misreading your comment, but it appears to suggest that we in our loft-conversion DTW-ivory tower dole out judgements and pronouncements as though from on high. I disagree. If anything, we’re probably too fair. As Richard points out, everyone gets a fair crack of the whip – (except of course Opel).

      We give credit where it’s due. DTW has been generous in its praise of what Volvo is doing for example.

      Okay, we do talk a lot about Lancia and (especially in my case) Jaguar, but (and I can only speak for myself here) I do so as one would reminisce over a recently deceased loved one. I find it cathartic. But like any grieving relative, I find the subsequent desecration of their names somewhat distasteful.

      You ask if we might we be a bit nicer to FCA? I don’t see why. A RHD Alfa Romeo wasn’t something I recall saying fevered novena’s for. Do we really believe there are (outside of ‘enthusiast’ circles who’ll salivate but never actually push the button) a vast swathe of customers waiting for Alfa to build a RWD car? The Alfa revival has been built on hype. Hype from the auto press who believe RHD can cure all known cancers. Hype from FCA who rubbished the past – (and many worthy Alfa’s) so they could spin this is as Alfa, year Zero.

      Now with all the delays, setbacks and reversals, Alfa’s sales are dangerously low and if you look at the trouble JLR is having selling their competitive Jaguar-branded saloons globally, the only reasonable outcome is that the moment is passing for new entrants to make a mark. This isn’t lost on Serge, who is now having to make up policy on the back of his hand.

      I’ve seen the sum total of two Giulia’s. Ever. I thought they looked quite nice, but to be blunt, I really wouldn’t have minded if they were FWD. To me it makes little difference either way, because in my view, a car either drives nicely or it doesn’t. It’s also likely to make little difference in the broader sense, because thanks in no small part to Marchionne’s decisions since the famous 2014 ‘plan’, Alfa will (most likely) join Jaguar amid the also-rans. No more.

    3. There is reason in what jacomo says since the reason Lancias, Citroens, Alfas, etc have lost their reputations is due to the mismanagement of past custodians, not Marchionne or Jackson. But it’s no good railing at all these (mostly dead) people who couldn’t capitalise on what we now judge to be gold. So it’s not unreasonable of us to wish that a new Giulia should be as better than a Vectra (sorry Insignia) as an old Giulia was better than a Victor or Rekord. It is probably impractical though since the Opels are so incredibly good. Did I get that right Richard? Will you let me out now?

  2. These two seem like minded throwing out smoke screens while pursuing a different direction, wondering if Marchionne tweets?

  3. As a long-time observer, I think Marchionne is a useful guy to have on board when the game is high-stakes corporate poker, but a liability when it comes to coherent long-term strategic vision and addressing systemic, deep-seated cultural issues.

    If you accept the premise that both Fiat and Chrysler were internationally weak and too small to compete effectively when Marchionne got hold of them individually, then Marchionne’s broad strategy of merging and gaining scale seems reasonable enough. I will admit that I thought taking over Chrysler in 2009 was a gambit doomed to failure – it seemed like a carcass swinging in the breeze. In that sense, the progressively rising sales year-on-year were cause for me to (grudgingly) give the guy some credit for his ability to see value, almost akin to a vulture capitalist.

    But to my mind, his reputation as a poker player is tarnished by his willingness to overplay his hand, when it seems like everyone else at the table knows what cards he has (a pair of 3s at best). Merging two internationally and reputationally weak companies is one thing – then trying to merge THAT entity with someone else, when there is good evidence to suggest the integration process hasn’t been entirely completed yet, seems like desperation.

    Large-scale mergers fail more often than not and the task of cultural integration is magnified enormously when one or both entities are a) major market presences and b) perceive themselves to be successful prior to the merger. FCA retains numerous problems, including poor margins, poor reputation, confused branding, massive overdependence on sectors of the market that are vulnerable to cyclical trends, and the corollary of this, a very evident willingness to cut and run from major market sectors (Dart, 200, Punto, European C-segment – a developing-world box is not a serious effort here) that cannot help but have long-term ramifications.

    For at least the last half-decade, someone in Marchionne’s position who was truly interested in making FCA a viable entity long-term would have been well-served to focus on organic growth, especially via a redoubled focus on quality control. What we get instead is FCA brands consistently rooted to the bottom of quality surveys, at least three Giulias that experienced different reliability problems on test with US magazines (not counting the car purchased by Consumer Reports that has already been back to the dealer three times), electrical problems manifesting in Pacificas, and a penny-pinching mentality to warranty work that manifests itself via a poor relationship to customers via dealers. These are not the actions of a company that is serious about addressing probably its most endemic problem, and the biggest risk to its survival. This is before we get to the basic failure to understand or respect things like brand heritage. Marchionne has made it plain through his actions that he considers such notions irrelevant. I happen to disagree.

    The thing about all the PowerPoint presentations is that they do serve a purpose, just not one that is necessarily widely understood. A basic rule of all con artists is that the ability to buy time is one of the most valuable weapons in one’s arsenal. With time, after all, one may even wriggle off the hook. If Marchionne’s investor PowerPoints were an accurate representation of what ends up appearing, the narrative would be that the company’s new product pipeline is desperately empty and the company has no chance of competing. But stack it with vapourware and you can present a good news story for that day. The fact that half the stuff on the timeline will never appear doesn’t really matter since their ‘cancellations’ can be leaked out in dribs and drabs, justified by market conditions, product reshuffles, brand realignments – take your pick really. The truly poisonous effect is in trampling relationships with suppliers, which are already poor since FCA is amongst the tightest companies around when it comes to beating them down on price, and increasingly, revealing the truth that the company’s leadership is all about the short-term.

    As for the comments about VW above, they’re just bizarre. The guy has spent a decade railing about the industry’s appetite for capital destruction, a not-insubstantial proportion of which has come from poorly-planned and awfully-executed mergers, and now VW’s “logical” reaction to the PSA deal should be to try to expand its near-quarter-share of the European market? Normally Marchionne is pretty easy to read, and this comes across as the desperation it is. VW has various problems, but a lack of scale most assuredly isn’t one of them.

    1. What a good comment! I couldn’t have said it better myself or even as well, and have binned the words I was putting together on the subject completely. It would be piling on to no effect.

  4. Just another note on the Giulia, well a particular one. I had coffee with my pal, the local FCA dealer warranty manager, this morning. Down at the Autoport, where imported cars for Eastern Canada are unloaded, stored and parcelled out for further shipment by rail, there is a stuck Giulia. The three key set is nowhere to be found, so the vehicle is immobile. They have to put it on dollies to get it off the ship, then flatbed it to my pal’s dealership, where on Monday they will attempt to make three keys by programming them over Chrysler’s network. Two technicians were already sent to Autoport overnight using their normal FCA key programmer; however, Alfa’s are different from their norm apparently, so no luck.

    If it’s possible and not treading on anyone’s toes, he’s going to phone me to come and look at the car while it’s in the shop. Nearest actual Alfa dealer is in Montreal 800 miles away so no examining one here in the normal showroom sense, but without a running engine they can’t get it on a rail or truck transporter. If things don’t go well, some flatbed tow truck operator will make a fortune next week.

    Considering that we have MB, BMW, Porsche, Jaguar etc dealers here but no Alfa (and a Bentley sitting conspicuously at the Audi dealer this morning), how is Marchionne planning to make money on a car that will likely sell only in the low hundreds across the country? There are only six dealerships nationwaide. The mind boggles a bit.

  5. This is all very distressing. Alfa is starting from a base of zero in North America, a few 4Cs excepted.

    Fiats and Fiat-derived Chryslers, Dodges and RAMs are achieving low enough ratings in customer satisfaction and reliability surveys to hit the headlines. Is it any surprise that there are only six dealerships in Canada? It’s scarcely an attractive franchise compared with the Japanese and Koreans when money is made by shifting metal. (Unless FCA pay good rates for warranty work)

    There’s always Europe. Where the seven year old Giulietta is outselling the new Giulia by a ratio of around two to one, and the Lancia White Hen single-handedly beat the entire Alfa range in EU and EFTA sales.

    Oh Sergio! Oh Giorgio! Who would want to be in Big Reidland’s job?

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