He may be fuelled by Marlboro rather than the sun’s rays, but Fiat CEO Sergio Marchionne is seen as the ailing auto industry’s own Superman, with ambitions to acquire both Chrysler and Opel. Mark Bursa reports
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The turmoil in the auto industry is starting to look like the plot for a superhero movie. General Motors is on the brink of Bankruptcy! Chrysler is collapsing – we’ve got a month to save it!
Hollywood, of course, would summon Superman – mild-mannered Clark Kent would emerge transformed from a convenient phone box to save the day.
Back in the real world, Superman is sadly not available. But if someone is going to save the day, it looks like he’ll at least have the initials SM.
He’s even got a distinctive superhero costume of sorts – and thankfully it doesn’t involve wearing underpants over tights. Is there a phone box in Turin where Sergio Marchionne hangs up his jacket and tie and dons the legendary blue pullover?
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By GlobalDataIncreasingly, SuperSergio is looking like the only plausible saviour for both Chrysler and Opel. The recession was always going to create opportunities, but things are so tough in the car business that few companies have the stomach to take on new problems.
But for Marchionne, the opportunity is there to make Fiat a serious player in the new world automotive order – indeed, Marchionne put his cards on the table last December, when Italian media reported him as saying: “By the time we finish with this in the next 24 months, as far as mass-producers are concerned, we’re going to end up with one American house; one German of size; one French-Japanese, maybe with an extension in the US; one in Japan; one in China and one potential European player.” No prizes for guessing who the “potential European player” would be!
So far, he’s being proved right. The US Big Three could end up as a Big One – Ford has cannily dodged the worst of the carnage through prescient pre-crisis mortgaging of property. GM’s existence is still in the balance, and its European business can be yours for a dollar.
“The only way for companies to survive is if they make more than 5.5 million cars per year,” Marchionne added. Right now, Fiat doesn’t come close. And even if you factor in Chrysler, the combined group would be some way short of Marchionne’s magic number. Together, Fiat and Chrysler built around 4.2m cars in 2008, a figure that will fall substantially this year.
But if you add in Opel/Vauxhall, and GM’s South American plants, you’d have made 6.5m units last year – second only to Toyota in the production league table for 2008, and bigger than General Motors, Volkswagen, Ford and Renault-Nissan. Much more like it.
Marchionne has attempted to distance himself from any deal with Opel/Vauxhall – but this could be seen as a smokescreen to keep the trade unions on board in both Germany and Italy, who fear closures and cutbacks in a merged Fiat-Opel/Vauxhall operation. And clearly there would be some cuts – though you suspect Germany, with its higher costs, might feel the force more than Italy, where capacity utilisation is relatively high – or at least it was before the meltdown.
Even before Fiat entered the frame for Opel/Vauxhall, there was intense speculation that one or both of the Opel plants at Bochum and Eisenach might have to go. Smaller Opel models such as Corsa or Meriva might end up being shifted to Fiat plants. Certainly there would be a heavy concentration of activity in Southern Poland, where GM and Fiat both have large plants, as well as shared engine facilities, a hangover of the ill-fated Detroit-driven attempt to merge GM and Fiat.
A lot of the GM-Fiat structure remains in place – not just engines; there are still some shared platforms – Corsa and Punto, for example – and shared purchasing operations. Remember, the alliance made sense structurally, but the financial structure of the deal was all wrong. GM’s ‘put’ option cost the company more than $2bn to cancel.
There would be some overlap – light commercials, for example, where GM is allied with Renault. But it would make more sense to supply Opel/Vauxhall from the Fiat-PSA Sevel JV, which might cast a shadow over the GM IBC plant in Luton, UK, which builds vans for Opel/Vauxhall as well as Renault-Nissan. In the current market, Nissan’s Spanish van plant could probably handle Renault and Nissan’s needs if Opel/Vauxhall was out of the equation.
Of course there are other model lines that Opel/Vauxhall would bring to the party that are absent in any meaningful way from the Fiat range – such as the D-segment Insignia and the compact MPV Zafira. Opel would sit as a more upscale brand in the group, which would allow Fiat to position it in the longer term as an ‘Audi’ to Fiat’s ‘VW’. This would also allow the likes of Lancia and Alfa Romeo to become more specialised, niche players, building sports cars and limousines.
What’s really interesting about Marchionne’s plan is the fact that it gives Opel the opportunity to re-establish itself as a global brand. GM’s South American operations may be Chevy-branded, but the cars they build have a lot more in common with European Corsas and Astras. Would car buyers in Brazil or Argentina be prepared to switch from a Chevy Corsa to an Opel Corsa? Probably. And next-generation small Opels could leverage Fiat’s extensive world car expertise, using platforms such as the Palio replacement and the larger Linea.
What’s more, adding the GM Mercosur plants to Fiat’s extensive footprint in the region would give Marchionne market dominance in Fiat’s second-biggest region. And you could build Opels at Fiat plants elsewhere in the world, such as India, Morocco or South Africa.
Ownership of Opel might also offer Fiat a better route back into China. If there’s a black mark on Marchionne’s record, it’s Fiat’s failure to build a presence in what will this year become the world’s largest car market. Marchionne got rid of Nanjing Automobile but couldn’t get a workable deal with Chery off the ground. But German brands play well in China, and positioning Opel relatively up-market might compensate for the late start.
Secretly, Marchionne must covet the 1 million-plus vehicles produced a year by Shanghai-GM, though trying to squeak that into an Opel takeover is probably too great a task even for SuperSergio. Shanghai-GM is effectively part of Chevrolet – and that means it’ll be in the ‘Good GM’ business that will surely be bundled out of GM’s inevitable Chapter 11. Maybe Chrysler, which also tried and failed to get a China small car project going with Chery, offers a better way in?
A deal for Chrysler is more urgent than a deal for Opel. This has looked touch-and-go since US President Obama set a tight 30-day deadline for an agreement – and the clock runs out on Thursday. But the jigsaw appears to be falling into place. Daimler has agreed to surrender its remaining stake in Chrysler – a move that will cost Stuttgart $700m.
And crucially, the American UAW trade union has agreed a deal to take stock instead of cash for its retiree healthcare fund. “The deal provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the US Treasury Department,” Chrysler said in a statement.
And Chrysler does make sense for Fiat. It gives the Italians a US market share they could never achieve alone, plus SUV, pick-up and large car technology, as well as some advanced powertrain projects (hybrids, range-extenders and battery EVs) through Chrysler’s ENVI programme. Add in Fiat’s expertise in small gasoline and diesel engines and this could become a potent combination for the future.
Can Marchioinne pull this off? Don’t bet against it. Sorting out three corporate cultures won’t be easy – but there are enough residual links and ties for the plan to make sense. He might not be able to fly like Superman, but Marchionne might just be ready to pilot Fiat to undreamt-of heights.
Mark ‘Coolbear’ Bursa
