Wednesday 10 June 2015

Fiat and GM? Barra says No!

Mary Barra is facing her first real test as chief executive officer of General Motors.
Should she accede to Sergio Marchionne’s idea that Fiat Chrysler Automobiles (FCA) and General Motors (GM) should merge.

At present she has firmly rejected any idea that GM would benefit from such a link-up with FCA.

“Adding a partner is not necessary for one of the world’s biggest auto companies,” she said. “We have scale and we are leveraging that scale. For the last couple of years we have been merging with ourselves.”

She says that GM has “no interest” in pursuing a deal with FCA, despite a personal appeal by an email from the company’s Italian supremo.

Quite who would benefit from the merger is not spelled out, but one imagines that Marchionne sees himself as the leader of the new group with Barra as second in command.

Barra says GM’s plan is "to remain firmly committed to building brands, increasing market share and maintaining its international operations”.

And so, at just the point that GM is beginning to regain momentum in the marketplace, its long-term prospects have been thrown into doubt as Marchionne throws an Italian-shaped spanner into the works.

Marchionne sees a combination of the two companies “would save billions of dollars in costs and provide better return for shareholders”.

Quite which of the two companies would benefit most for the “combination” is difficult to see but since Marchionne is the advocate of the proposal seemingly he would not be suggesting it unless FCA came out on top in terms of cost savings and improved profitability.

The “combination” of FCA and GM could see benefits coming in the form of component sharing, greater plant utilisation, improved purchasing, pooled R&D and a reduced headcount as under-utilised plants are shuttered.

Having seemingly having mastered the link-up of Fiat Auto and Chrysler (a company that Daimler AG either failed to come to terms with in terms of understanding the business mode; or, having looked closely at the business, recognised it would not be a suitable business match for the German car, bus and truck maker) Marchionne seems keen to march on and form a tripartite global automotive business.  

But Barra, for the moment, remains focused on “the plan”.

“GM will sell 10 million vehicles worldwide this year and does not need a partner to improve profits and become more efficient,” she has said.

However, it is that golden spectre of 10 million vehicles that no doubt is proving so alluring to Marchionne who, looking at the figures, no doubt has thoughts how he could increase the profits for the combined group, especially the FCA part of the “combination”.

Time will tell if Mary Barra is right, and Marchionne has mistimed his attempts at courtship. Incidently, GM's media website makes no mention of the company receiving an approach from Marchionne.

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