Good Morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Sergio Marchionne Welcomes You To Crazytown, Of Which He Is Mayor
The big news of the day has to be Automotive News’ Larry Vellequette’s interview with Fiat Chrysler CEO Sergio Marchionne, in which the Italian-Canadian executive reveals he has not actually given up trying to merge his company with General Motors. Not by a damn sight.
What, you thought that was going away? Everyone sort of did too. But in the interview, which I highly recommend you read in full, Sergio seems pretty insistent on making it happen. No does not mean no to him.
“It would be unconscionable not to force a partner,” he said.
That sounds like a hostile takeover bid is in the works.
“Not hostile,” said the FCA chief. “There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you. Everything starts with physical contact. Then it can degrade, but it starts with physical contact.”
Wow. Um, okay. More, in which he says he’s figured out how it all could work in terms of vehicles, brands, plants and eliminating obvious overlap:
He said: “I’ve gone through product by product, plant by plant, area by area, and I’ve analyzed them all.
“I’ve obviously made some arbitrary assumptions about which architectures survive, which engines survive, and the only deal that offers them the same benefits as we potentially get ... is us.”
The potential profits, he says, are exponentially larger than the current combined global earnings of GM and FCA.
Also:
Asked directly, a GM spokesman wouldn’t call Marchionne’s analysis wrong but said GM officials believe the company and its shareholders are better off on their own.
Marchionne said he has never met GM CEO Mary Barra.
“I’m not trying to date Mary, for the record, but I tried to get to see her.”
...Huuuuh. Well alright, then.
Marchionne says such a merger could generate as much as $30 billion a year in earnings. GM, for the record, says they’ve downsized their brand portfolio since the bankruptcy and are already “merging with themselves.” Speaking of bailouts, one last quote from that story:
“Why,” asked a high-ranking GM executive, “should [GM] bail out FCA?”
More on this story later today.
2nd Gear: Why Does He Even Want To Merge?
Remember that magical-sounding five-year plan Fiat Chrysler unveiled in 2014? It seems clear now Marchionne’s company may not be able to afford to do all that stuff. Hence, a desire for a merger, even though some of those plans would likely go by the wayside.
In the second part of that interview, Marchionne says Fiat Chrysler can survive in the short-term on its own but “in mediocrity,” which I’m sure will be awesome for their share prices.
Marchionne says if FCA continues “globalizing Jeep at the speed of light” and developing Alfa Romeo and other premium vehicles, it will have sufficient capital to survive for the long term.
Jeep, he says, “is the biggest insurance policy I have because that brand was the best part of Chrysler by a long, long stretch.” Analysts agree. They have pegged the value of Jeep at close to 60 percent of FCA’s total value after Ferrari is spun off.
But to outsiders, including analysts, competitors and potential partners, FCA has issues. Lots of big issues.
Fiat Chrysler has a laundry list of cost issues, lower margins, fuel economy average problems and more you can read here. When you look at things from this lens, a merger seems like a quick fix for many of those problems. Maybe.
3rd Gear: The VW-Suzuki Battle Ends
Four years after a bitter dispute began, a court in London ordered Volkswagen to sell its shares in Suzuki after the failure of a partnership that was announced in 2009. One more from Automotive News:
Volkswagen must sell its shares in estranged partner Suzuki, an international court has decided, ending a nearly four-year battle over a dysfunctional alliance between the two carmakers.
The decision, by the International Court of Arbitration of the International Chamber of Commerce in London, was announced by Suzuki today in a filing to the Tokyo Stock Exchange.
4th Gear: The New Normal In China
Automakers are slowly learning to adapt to a Chinese market with far less demand than in previous years. Via Bloomberg:
German car makers are reviewing how many vehicles to send to China or the U.S., and U.S. dealers say they expect to get more Mercedes, Audi and BMW sport utility vehicles to sell as a result. A longer term slump could prompt automakers to export more vehicles from Chinese factories or absorb the short-term cost of production cuts, analysts said.
Most global automakers have significant manufacturing operations in China they want to keep running. Industry executives say China is still a growth market over the long haul, even if the pace of growth slows.
To offset the sharp slowdown in the growth of overall sales, vehicle manufacturers in China are pushing sales of sport utility vehicles that typically generate more profit per vehicle.
5th Gear: Strike Authorized
As the U.S. automakers continue their contract negotiations with the United Auto Workers union, Chrysler workers overwhelmingly voted to authorize a strike if they decide the company isn’t acting in good faith. From The Detroit News:
UAW-Chrysler Department Vice President Norwood Jewell on Friday said the union’s locals had passed strike authorization votes at an overwhelming 97 percent as the union and Auburn Hills-based automaker continue contract negotiations.
Strike authorization votes are procedural measures taken by union members at all three automakers. Each year, the votes pass with an overwhelming margin and allow the union to call for a strike if they determine the automakers have not bargained in good faith. This is the first year since 2007 that the union can call a strike against Fiat Chrysler or GM.
Reverse: The Awesome Power Of The Sun
Neutral: There Are Varying Degrees Of Hugs
Okay, let’s say Marchionne succeeds in a hostile takeover of GM. What brands live and what brands die from each? Or do Chryslers become Chevrolets or what have you?
Contact the author at patrick@jalopnik.com.