Fiat Chrysler CEO Marchionne expresses urge to merge with GM

31 Aug 2015 | Author: | No comments yet »

Fiat Chrysler CEO Fuels Talk of GM Merger.

Marchionne has publicly pushed for consolidation, citing rising production costs among other reasons, ever since overseeing the merger of Fiat and Chrysler. In a new report from industry publication Automotive News, Marchionne did not go as far as saying FCA would embark on a hostile bid. “There are varying degrees of hugs,” he added.

But the Italian-Canadian CEO said “it would be unconscionable not to force a partner,” and he added that FCA’s board must put pressure on GM to engage in discussions. FCA has crunched the numbers, Marchionne said, and merging the company with larger rival GM would create a single automaker with $30 billion in earnings before interest, taxes, depreciation and amortization (EBITDA). “Our management and board are always working to maximize shareholder value,” GM said in a statement provided to FOXBusiness.com. “After we completed a thorough review of a possible merger with FCA, we concluded that executing our current plan is the best way to create value for GM stockholders.” In June, Barra dismissed talk of merging with FCA, the least profitable of Detroit’s Big Three. Consumers typically flock to dealer lots on the traditional last weekend of summer as the model year is changing over, drawn by new designs or discounts on outgoing vehicles. Since the bankruptcy of Chrysler LLC, Reid Bigland, who heads sales for the company’s Michigan-based unit, has benefited from a growing U.S. market that rebounded from 10.4 million vehicles sold in 2009 to an almost 17 million pace this year. At the same time, Chief Executive Officer Sergio Marchionne has expanded the Jeep lineup, split off Ram trucks as its own brand, added Fiat and Maserati to the family and improved the car lineup with the Dodge Dart and Chrysler 200. “FCA accomplished something that nobody would have predicted a few years ago — to have five-plus years of sales increases — even in an accelerating market,” said Karl Brauer, senior analyst with Irvine, California-based Kelley Blue Book. “It’s an impressive feat and reflects very well on Sergio.” A messy calendar and a choppy stretch on stock markets won’t alter what’s been driving auto sales in 2015 to the highest levels in at least a decade, Brauer said.

The average of 12 analyst estimates is for a 17.3 million light-vehicle selling rate for August, the same as a year earlier. “All the fundamentals that drive vehicle purchases are still relatively strong if not exceptionally strong,” Brauer said. “Nothing’s changed. Last year August looked great and September got short shrift and this year August is taking the hit.” Automakers report August sales results Tuesday. They’ll probably post a 3.3 percent decline in deliveries of cars and light trucks to about 1.53 million, the average estimate from five analysts surveyed by Bloomberg.

Toyota Motor Corp. may have led the decliners, with analysts estimating a 10 percent drop in monthly sales, followed by Volkswagen AG’s VW and Audi brands, which may see a combined 7.5 percent fall, and a 7 percent projected slide for Honda Motor Co. Deliveries for Detroit-based General Motors Co., reducing its sales to rental-car companies, may have fallen 2.6 percent and Ford Motor Co.’s may have slid 0.2 percent. One possible deterrent for shoppers could be the turbulent stock markets: When consumers feel their savings is at risk, they often pull back on large and discretionary purchases. So far, that hasn’t been the case, said analysts, including Jeff Schuster of LMC Automotive. “The current stock-market volatility does not seem to be having much of a negative impact on consumers as the selling rate remains well above 17 million units,” he said in an e-mail. “Upside potential for the U.S. auto market is gaining momentum, as it now looks unlikely there will be an interest rate increase in September, and a delay in rising rates will most certainly assist in keeping growth on track.” This is the first time since 2012 that Labor Day weekend sales will be counted for September, J.D.

Shares in the Italian-American automaker, which is based in London, rose 24 percent this year through Friday, more than any U.S. automaker, including Tesla Motors Inc., which gained half that much. The company’s Auburn Hills, Michigan-based FCA US unit remains the most dependent on truck sales of any full-line automaker in the U.S. market, which has worked well in 2015.

The parent company raised its full-year earnings forecast last month on the strength of the Jeep brand. “Our trucks and Jeeps are selling well, but it has been difficult selling the car lines — and we have cash-back on them,” said Jim Hardick, managing partner of Moritz Dealerships, which owns Chevrolet, Kia and Chrysler-Jeep-Dodge-Ram outlets in Fort Worth, Texas.

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