George S. May Business Blog

Fiat CEO, Sergio Marchionne, won’t stop at Chrysler

In a statement revealed by the board of Italian automaker, Fiat, we found out Sunday that the carmaker plans to try to acquire General Motors’ European operations. Information included in the statement expressed that after taking over GM’s European operations it would then look to combine the company with Chrysler and its current Fiat car brands (Fiat, Lancia, Alfa Romeo). Fiat estimated that should the Italian auto-giant complete the conglomeration the new company would look to earn more than $106 billion in annual revenues and become the world’s second-largest auto group after Toyota. But Fiat’s CEO, Sergio Marchionne, doesn’t plan to end there. Marchionne said he wanted to join Fiat’s auto division with Opel, Vauxhall and even Saab. Fiat’s board has already signed on expressing its “full support” and with that, Marchionne told the Financial Times that he looks to have this transaction completed by the end of May and list shares of the new company, “Fiat/Opel” by July.

If this massive consolidation is a success, I’m pretty sure that we can expect to see the same thing happening around the world. In my opinion, it is pretty likely that in the next 5 to 10 years, there may not be more than 5 or 6 automakers across the world. Think about it, as American carmakers consolidate, European carmakers consolidate, why wouldn’t Japanese carmakers do the same? Why wouldn’t German and Chinese carmakers follow suit? In order to compete, globally, looking forward, they may have no choice.

On another note, I’ve heard chatter, and frankly negativity, about this deal, in that, the perception is after all of this is said and done, it seems as though Fiat is the one coming out on top. Well, I want to put a few things into perspective. First of all, before the government stepped in and started laying down the law, GM and Chrysler were all but dead in the water. So, in effect, no matter who takes over, keeping Chrysler and GM standing is a victory in itself.

Secondly, and this is the most important part: Fiat makes small, fuel efficient, cars and they make them fast. What other company comes to mind when we think of small fuel efficient cars at a high production rate? Anybody say Toyota, aka the #1 carmaker in the world? It is about time that Chrysler and GM start to get with the program and following the trends. I understand that many are skeptical on, if and when Fiat starts producing smaller-fuel-efficient cars in the US, whether Americans will buy into the product, but frankly I think that this is exactly what the doctor ordered. In a time where gas is high and income is low, people aren’t buying large gas-hog SUV’s. So the bottom line is, if Americans want to buy an inexpensive fuel efficient car, if they now have an option between, say one made in Japan and one made in the US, don’t you think that most would by American. I understand that in the past people have bought foreign cars because American automakers simply didn’t have cars of that size, efficiency, and durability that could compete. But now that they will have the technology from a carmaker who has been successfully specializing in just that type of car for years, Chrysler and GM may have just landed themselves on a gold mine.

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