Published On: Thu, May 28th, 2015

Fiat Chrysler’s Sergio Marchionne Rebuffed in GM Merger Aspirations

The Chrysler logo is seen outside the Chrysler auto dealer in Broomfield,   Colorado

Fiat Chrysler’s Sergio Marchionne’s plans to merge his company with GM were foiled by Mary Barra. But the mogul has not let this setback deter him from his aspiration for more combination in the automobile industry.

Apparently Marchionne sent an e mail to Barra in March explaining that such a merger would save the new combined company billions a year in costs, but she shot down the idea. Last year he tried a similar move with Volkswagen.

“I meet with CEOs all the time. We have always discussed the possibility of cooperating on particular issues, ” Said Marchionne. “What happens is most organizations pay lip service to this thing and then life goes on. The full extent of consolidation, if properly executed, will cure all of the ills. But you have to go the distance.”

“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, ” he told the New York Times. “A remedy in our view is through consolidation.”

According to the Times, since its merger Fiat and Chrysler have doubled their sales in the United States 2009, but they sold only 4.6 million cars and trucks worldwide in 2014, about half as many as competitors like G.M. and Volkswagen.

But ultimately the issue is more about saving money by cutting costs when it comes to mergers, not increased sales. Even if sales remain the same, profits will of course jump when billions can be saved from operating expenses.

Marchionne will clearly not be deterred in his plans for mergers, according to many analysts

“We don’t believe Mr. Marchionne and (Fiat) Chairman John Elkann are weighing in on industry consolidation just to vent frustrations, ” Morgan Stanley analyst Adam Jonas said in a report published Tuesday. “We think they seriously want to be a part of the process. We think they may be successful in enticing other players to at least come to the table.”

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