It’s a bit like one of those teenage parties when the breathing is getting dangerously heavy and someone switches the lights out.
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When the lights go back on, the boys are all shocked by the alliances that they have been clinging to in the turmoil, and the girls are all denying that they said and did any of those things that they said and did.
So it is with Fiat, Chrysler and General Motor Europe. Who would ever have guessed that this threesome could come out of the darkness? Can it really be anything more than a dangerous chance encounter?
This cycle of rationalisation in the auto industry is not following a logical course. Partnerships are being formed in the gloom of recession and with the breathlessness of bankruptcy. That’s wrong. In business as in life, survival is for the fittest.
Chrysler should never have been at a teenage party in the first place. It is famously an old loner and failed in relationships with Simca and the Rootes Group in the seventies, Renault and Mitsubishi in the eighties, and in the world’s largest industrial merger with Daimler-Benz now almost fully unwound. That was Chrysler’s third divorce. This is Chrysler’s third bankruptcy.
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By GlobalDataAnd GM? What is going on there? It paid Fiat $2bn alimony in 2004 to be rid of the major shareholding in a Fiat it no longer wanted. Now it says it is interested in selling General Motors Europe to Fiat. It also says it could be interested in buying a major shareholding in that new grouping, now likely also to contain Chrysler.
Hello? GM has only just finished beating Chrysler to within an inch of its life in the US car market. It knows that the old loner is knackered.
If there was something so inherently wrong with a GM- GME- Fiat threesome in 2004 what is so inherently right about a Chrysler-GME-Fiat threesome in 2009? Apart, the three were all sub-scale. Together they make the world’s second largest OEM behind Toyota but that does not create any instant product synergy or international logic.
Fiat is not making the running because it is a strong company. Indeed it openly admits to financial vulnerability and fails to make any headway at all in the sophisticated car markets of the world (US, Germany, China, Japan, UK). It is making the running because CEO Sergio Marchionne tells all the best stories.
Yesterday, Fritz Henderson, the new CEO of General Motors made it pretty clear in a conference call to journalists that GM too would go into Chapter 11 bankruptcy. “It is probable that we need to reach our goals in bankruptcy but there is still a chance for it to be done outside a bankruptcy.”
In that event, Marchionne will be talking to an administrator about the sale of GME to Fiat and what an administrator needs is cash for assets. Fiat has no cash and Chrysler has no cash. The only source of funds is State funds from the US and Germany and that comes with strings and is repayable.
World car production has been growing ahead of demand for far too long. Consumption has been falling too fast. There have to be clear winners and losers. Relationships forged in the darkness will not see too many dawns.
Rob Golding
‘Goldie’
See also: US: Henderson says GM bankruptcy ‘more probable’
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