Marchionne Won’t Let Go Of a Merger With GM
This just keeps getting weirder and weirder. Fiat Chrysler Automobiles CEO Sergio Marchionne really wants to see his company merge with General Motors, and he’s made precisely zero effort to keep the discussion discreet. His aggressive tactics have ranged from emailing GM CEO Mary Barra directly to contacting “rouge investors” at GM to explaining his reasons to industry analysts.
“I think it is absolutely clear that the amount of capital waste that’s going on in this industry is something that certainly requires remedy,” Marchionne said in and analyst conference call according to The New York Times. “A remedy in our view is through consolidation.”
More recently, Marchionne spoke further about his intentions with Automotive News, which is when things got even weirder. “It would be unconscionable not to force a partner,” he said. AN countered by asking if he was suggesting a hostile takeover. "Not hostile," explained Marchionne. "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."
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Corporate hugging aside, Marchionne still truly believes that a merger is the best way forward for both companies, and says he has the math to prove it. "We’re not talking about marginal improvement in margins, we’re talking about cataclysmic changes in performance, just huge," he explained. "I’ve gone through product by product, plant by plant, area by area, and I’ve analyzed them all.”
Marchionne has been surprisingly candid about the specifics of the merger, explaining that it would likely mean the end of certain platforms and engines.
He claims that a merger would yield annual profits of $30 billion a year. “Just think about that [expletive] number," he explained to AN. "In steady-state environments, it’ll make me $28 to $30 billion at a seasonally adjusted annual selling rate of 17 million.”
Marchionne has been surprisingly candid about the specifics of the merger, explaining that it would likely mean the end of certain platforms and engines. Among others, he’s likely talking about Chrysler’s aging LX platform, which underpins the Dodge Charger and Chrysler 300. It’s a leftover from the Daimler-Chrysler era and has been in use since 2005.
Barra said in June that GM had no intention of merging with FCA. "There was an email that was very much vetted with management and our board," she told reporters before a shareholder’s meeting. "And after we reviewed that, we are committed to our plan. We think that’s in the best interest of General Motors shareholders, and we have strong support."
Marchionne says he’s offered to walk Barra and other GM top brass through his plan, but they aren’t returning his phone calls. He seems genuinely upset at GM’s refusal to at least hear him out. "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."
Then things got weird again. "I’m not trying to date Mary, for the record, but I tried to get to see her." Uh, Sergio, no one was suggesting that you’re trying to date Mary Barra, but now we kind of think you are. We also have to wonder if Marchionne would have said the same thing about Ford CEO Mark Fields or any other male CEO.
Why it matters
Even if he’s right, you can’t help but feel that Marchionne’s strange, aggressive, arguably sexist language is undermining his message. He proved himself to be a shrewd businessman during the Fiat-Chrysler merger that saved both companies, but these one-sided talks just keep getting more and more bizarre. Marchionne doesn’t seem like a guy who concerns himself with P.R., but the story now is becoming less about the merger and more about what he’ll say next to try to make it happen.
Corporate mergers typically happen in secret boardrooms away from the prying eyes of the press and public, but that’s definitely not the case here. So, you have to wonder if Marchionne has some ulterior motive or is possibly in more secretive merger talks with another company.
Source: Automotive News