Marchionne’s Madness

Marchionne’s Madness

Sergio Marchionne, Fiat’s chief executive, evidently thinks he knows something that the rest of the automotive world has yet to work out. How to make a auto merger work.

In his pursuit to create the world’s second-largest car maker Fiat will gobble up Chrysler as well as taking on General Motor’s European and Latin American assets including the Opel, Saab and Vauxhall brands.

But it is worth looking at the wreckage from previous high-profile mergers.

BMW gave up on Rover selling it for just $14, while it also offloaded Land Rover and Jaguar for a more impressive $3 billion to Ford.

Ford in turn cut their losses and offloaded Land Rover and Jaguar to India’s Tata for $2.3 billion. Ford also failed to make Austin Martin a viable concern and is currently courting bids to relieve itself of Volvo.

In the new economic climate it is the Indian and Chinese who are heading the queue of potential buyers, keen to get their hand on such technology.

If the German power house of Daimler could not turnaround Chrysler how can the penniless Fiat manage? It shows no sign of throwing in its own money into any merger, rather relying on government aid. And not all is rosy at Carlos Ghosn’s Renault-Nissan.

There have been successes, Volkswagen bought Seat and Skoda in the 1990s – taking small digestible bites before moving on to bigger fish; Bentley, Lamborghini and Bugatti. Meanwhile from the wreckage of its Rover purchase, BMW salvaged Mini and Rolls Royce.

The German government is unhappy with Marchionne’s plans to axe plants and jobs and should move to save the man from himself by opting for another buyer.

Wringing cost from suppliers will be easy, but trying to mix Italian flare and German technology will be the difficult part.

Ready made plants and dealership aside, what the Americans will bring to the party remains a mystery.

Fiat had been bleeding money since 2000 when Marchionne – having proved himself as a turnaround expert — was appointed CEO in June 2004. He took the loss-making Italian automaker and engineered a profit in 2006.

For the 56-year-old Italian-Canadian this could prove to be a tough challenge. After the party is over Fiat and Marchionne could be suffering from indigestion.  

- Abid Ali, Business Editor