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Getbig Main Boards => Gossip & Opinions => Topic started by: Palumboism on November 29, 2015, 09:26:35 AM
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Does Sergio Marchionne's desired merger of GM and Chrysler make sense?
By Larry P. Vellequette:
DETROIT -- General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away -- not by a long shot.
Marchionne says he has sweated the details and done the math and discovered there's far too much upside in a merger of FCA and GM to let a deal go undone, or at least unexplored.
In a blunt, two-hour interview in his downtown Detroit office, Marchionne said the numbers come out so good that his board of directors has no choice but to put pressure on GM to begin discussions now.
"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."
GM insiders, speaking on background, question Marchionne's assertions about synergies and suggest a merger with FCA is a bad idea all around.
"Why," asked a high-ranking GM executive, "should [GM] bail out FCA?"
But Marchionne says the logic of the deal is "irrefutable."
"We're not talking about marginal improvement in margins," he said, "we're talking about cataclysmic changes in performance, just huge."
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.
Marchionne says GM isn't taking his phone calls.
"I've offered to sit down with them and take them through the numbers," said the Italian-Canadian CEO as he sipped an espresso and swiped through documents on his tablet, giving his visitors a cursory look at various charts and graphs he says make his case.
"They won't listen. And that kind of abject refusal to engage ... the capital markets won't understand why you are rejecting the discussion.
"You may reject the deal but you can't reject the discussion. If you're refusing to talk to me, and you have seen nothing, you either think you're above it all, or you think the capital markets are full of schmucks that owe you something."
'A better deal'
Marchionne says he doesn't lack for potential partners and he could sell or merge FCA as it stands today.
"There have been responses of people who have shown interest in discussing," he said. "Are they the people I wanted to get the response from? The answer is probably not. There are people who are interested in doing deals. I'm not interested in doing deals with them ... because there's a better deal.
Without specifying how he arrived at the figures, Marchionne cites a staggering combined EBITDA (earnings before interest, taxes, depreciation and amortization) figure that he says would result from the merger of FCA and GM.
"Look, the combined entity can make $30 billion a year in cash. Thirty. Just think about that [expletive] number," he said. "In steady-state environments, it'll make me $28 to $30 billion," at a seasonally adjusted annual selling rate of 17 million.
And if there is resistance to sitting down with FCA because of Marchionne's reputation as a crafty and cagey deal-maker, Marchionne has an answer for that, too.
"Look, I'm a tough negotiator and people know it, right? I am who I am, but so what?" he said. "Send somebody else in. Send the shark. I'd come off the table."
Marchionne insists there is too much to be gained. He said he is "not the guy at the corner who's selling pencils. I tell you that you can make X billion more by being together, I guarantee you that I can carry half the market."
http://www.autonews.com/article/20150830/INDUSTRY_ON_TRIAL/308319981 (http://www.autonews.com/article/20150830/INDUSTRY_ON_TRIAL/308319981)
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No. No it does not.
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Nothing about GM makes sense. They have ~90k employees yet carry ~900k on the health insurance roles due to union contracts. They are a health insurance company that makes cars as a side business.
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Nothing about GM makes sense. They have ~90k employees yet carry ~900k on the health insurance roles due to union contracts. They are a health insurance company that makes cars as a side business.
Wow a private sector company that takes care of the people that make their products....shocking!
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yes...the way to make two inefficient union run government bailout monopoly companies better is to combine them into one union run government bailout company.
If we broke them up and forced them to compete in a market then they'd have to make better products and/or lower their costs. None of that is good for the consumer.... ::)
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Nothing about GM makes sense. They have ~90k employees yet carry ~900k on the health insurance roles due to union contracts. They are a health insurance company that makes cars as a side business.
Its diversification. Isn't this something all large companies do, create a side business that generates revenue from their principal business?
Marchionne seems like a real comedian. Big businesses are interesting in how they see where future market is heading. I'm curious for the real reason behind his public posturing, didn't Chrysler have a financial collapse that nearly folded the company in the early 80s as well?
Are GM and Chrysler really government controlled?
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Its diversification. Isn't this something all large companies do, create a side business that generates revenue from their principal business?
Marchionne seems like a real comedian. Big businesses are interesting in how they see where future market is heading. I'm curious for the real reason behind his public posturing, didn't Chrysler have a financial collapse that nearly folded the company in the early 80s as well?
Are GM and Chrysler really government controlled?
When Lee Iacocca took over as CEO of Chrysler in 1979 it was a mess. Chrysler just launched a new line of full sized cars during an oil embargo. Their most "fuel efficient" car at the time, the 6 cylinder dodge Aspen, suffered multiple recalls.
Most of Chrysler's sales today are coming from Hemi powered gas guzzlers. The only fuel efficient car they sell, the Dart, is selling poorly.
If there was an Oil embargo right now they would be in exactly the same situation and Sergio know this.
In the last Auto bailout Taxpayers lost $9.26 billion
http://www.usatoday.com/story/money/cars/2014/12/30/auto-bailout-tarp-gm-chrysler/21061251/ (http://www.usatoday.com/story/money/cars/2014/12/30/auto-bailout-tarp-gm-chrysler/21061251/)
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Sergio has been pushing this for months now. Seems like a chick desperate for a prom date who just won't go away.
He is an egomaniac and Euro elitist who IMO has a limited understanding of the American car consumer.
GM and Chrysler are two great tastes, best left separate rather than combined.
For the record FCA should focus on quality control if they want to gain market share.
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Sergio has been pushing this for months now. Seems like a chick desperate for a prom date who just won't go away.
He is an egomaniac and Euro elitist who IMO has a limited understanding of the American car consumer.
GM and Chrysler are two great tastes, best left separate rather than combined.
For the record FCA should focus on quality control if they want to gain market share.
For me this whole Sergio merger drama is popcorn time. I view Sergio as grifter and don't believe a word he says.
Sergio is desperate for a GM merger, but why? My opinion is low gas prices are masking how bad a shape Chrysler's really in and I think he's realized how much money it's going to cost to fix.
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For me this whole Sergio merger drama is popcorn time. I view Sergio as grifter and don't believe a word he says.
Sergio is desperate for a GM merger, but why? My opinion is low gas prices are masking how bad a shape Chrysler's really in and I think he's realized how much money it will cost to fix.
Bingo.
I thought Chrysler was producing V8's that were getting revolutionary gas mileage though?
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yes...the way to make two inefficient union run government bailout monopoly companies better is to combine them into one union run government bailout company.
No shit. Two absolute failures ruined by big unions and bad products, bailed out with tax dollars by a govt who screwed over private investors.
Normally, I wouldn't even expect such a merger to be allowed to go through if it was even attempted. But with the cronyism we see between current big govt and those in the private sector who they happen to be buddies with, it wouldn't shock me if such a merger would be allowed these days.
These urgent pushes for mergers by one CEO to another company that is apparently not so willing are usually a desperate attempt by that CEO or one or more of his big investors to drive up the stock price. The fact that UAW and Buffett owned a combined 12% of the much larger GM's shares make any sort of "hostile takeover" of GM by FCAU extremely unlikely IMO. If anything, GM would be the one trying to take over FCAU, which of course would surely drive up FCAU's stock price, which is what this is anyway. And unless there is some likely significant benefit to GM acquiring FCAU (if they even could), why would they bother?
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When Lee Iacocca took over as CEO of Chrysler in 1979 it was a mess. Chrysler just launched a new line of full sized cars during an oil embargo. Their most "fuel efficient" car at the time, the 6 cylinder dodge Aspen, suffered multiple recalls.
Most of Chrysler's sales today are coming from Hemi powered gas guzzlers. The only fuel efficient car they sell, the Dart, is selling poorly.
If there was an Oil embargo right now they would be in exactly the same situation and Sergio know this.
In the last Auto bailout Taxpayers lost $9.26 billion
http://www.usatoday.com/story/money/cars/2014/12/30/auto-bailout-tarp-gm-chrysler/21061251/ (http://www.usatoday.com/story/money/cars/2014/12/30/auto-bailout-tarp-gm-chrysler/21061251/)
^^
I ACTUALLY had a new Dodge Dart 1.4 liter Turbo as a "Courtesy Car" when my car was recalled- I had it 2 days, and drove it around quite a lot, and the gas gauge BARELY moved a few millimeters!!!
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my dad works for chrysler one of the lucky union dudes
is very over paid,
not making this up he drives a switcher and has been making 140k a year the past 3 years with overtime
and what is funny he actually thinks he is worth what he is getting paid.
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Perhaps they should merge and base the company out of Ireland. :)
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Sergio Marchionne has been trying to court Mary Barra for awhile. And she keeps telling him "no". Maybe he will get the hint?
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The fact that UAW and Buffett owned a combined 12% of the much larger GM's shares make any sort of "hostile takeover" of GM by FCAU extremely unlikely IMO.
Sergio has a reputation for being able to make deals and negotiate, so this isn't as unlikely as you think. He stated he would wait till Ferrari went public before pursing GM. Depending on how much they get for Ferrari he could buy enough shares to gain a few seats on the board of directors. Getting the approval of the UAW will not be that difficult either. Then he simply needs to present his case to the rest of the shareholders.
The presentation's called Confessions of a Capital Junkie:
http://www.team-bhp.com/forum/international-automotive-scene/164522-confessions-capital-junkie-sergio-marchionne.html (http://www.team-bhp.com/forum/international-automotive-scene/164522-confessions-capital-junkie-sergio-marchionne.html)
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if it's just pure numbers then it probably is a good deal for the shareholders
I would be more worried about a company that was too big to fail getting suddenly twice as big
free market principles of peace
:o
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For me this whole Sergio merger drama is popcorn time. I view Sergio as grifter and don't believe a word he says.
Sergio is desperate for a GM merger, but why? My opinion is low gas prices are masking how bad a shape Chrysler's really in and I think he's realized how much money it's going to cost to fix.
You're right....Sergio is definitely one who will bring the drama.
Chrysler will be ok until the next time Americans see gas approaching $4/gallon. Their lineup is decidedly old school with a heavy reliance on V8 muscle and flashy looks. The 200 is junk compared to the Camry/Accord/Korean stuff. Don't even get me started on the Dart.
From an academic point of view, there well may be significant economic reasons that GM and Chrysler should merge based on economies of scale.
I oppose the merger from a car guy's point of view. On paper, uniting these two behemoths may actually make sense.
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I look at GM cars as having a motor and transmission that last forever but everything else on the car breaks. Dodge/Chrysler from what I have seen is known for motor and transmission problems. Had a Durango and the transmission was slipping at 40K miles. Every time I see a car blowing blue smoke out of the tail pipe indicating shot piston rings or poor engine tolerances it's a Chrysler product.
I might be in the minority in this leasing age but the most important thing I look for in a car is reliability. That's where Toyota and Honda shine if you do the maintenance. I always had a company car to take home usually a Ford or a Dodge Durango. I had a Toyota that I used for personal use that ran perfect for 17 years. The only repair was a water pump outside of normal maintenance. Sold it to a college kid and 4 years later says the car has been running perfect.
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I look at GM cars as having a motor and transmission that last forever but everything else on the car breaks. Dodge/Chrysler from what I have seen is known for motor and transmission problems. Had a Durango and the transmission was slipping at 40K miles. Every time I see a car blowing blue smoke out of the tail pipe indicating shot piston rings or poor engine tolerances it's a Chrysler product.
I might be in the minority in this leasing age but the most important thing I look for in a car is reliability. That's where Toyota and Honda shine if you do the maintenance. I always had a company car to take home usually a Ford or a Dodge Durango. I had a Toyota that I used for personal use that ran perfect for 17 years. The only repair was a water pump outside of normal maintenance. Sold it to a college kid and 4 years later says the car has been running perfect.
Exact same experiences I've had. have gone with Toyota for the past 10 years with zero problems.
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No. Bah!
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Dodge sucks.
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Zero sense for GM. But Sergio needs someone to help the Agnelli family divest their shares as well as find another host to prop FCA up.
Besides Chrysler/Dodge/Jeep it looks like Fiat and Fiat owned Euro brands are running on empty. R&D has been hallowed out, product development stretched etc etc.
Sergio is making a plea to the "activist investors" to come and force GM to drink the poison. I hope it doesn't happen.
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Lutz: GM-Chrysler Merger Makes Sense
By Aaron Cole on August 5, 2015
[snip]
Lutz said GM tried to buy Chrysler twice and that it would have made sense for the automakers: their headquarters are close, and there were efficiencies in their powertrains, i.e. Hummer and Jeep.
“I was always in favor of GM acquiring Chrysler and I honestly think it would deserve a serious look now. You would get synergies … which would be massive,” he told the panel.
And “Maximum Bob” being “Maximum Bob”:
“We look at DaimlerChrysler as having been a failed merger. Well, it wasn’t failed for the Chrysler shareholders. At the time of the merger, the Chrysler shareholders realized an enormous gain.
“The subsequent execution was flawed in that Daimler never stepped in. Everybody kept doing their own architecture, and you had the hubris as part of the Mercedes [side] that said, ‘We will never use a Chrysler engine.’ I have news for you: Our four-cam V-6 engine 3.2-liter was every bit as good as the equivalent Mercedes-Benz.”
And then cynical, coal-powered Bob:
“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65 (thousand) now. Yukons are in the $70 (thousands). The Escalade comfortably hits $100 (thousand). (Eds Note: It gets comfortably close.) Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”
Don’t you dare change, Bob.
http://www.thetruthaboutcars.com/2015/08/lutz-gm-chrysler-merger-makes-sense/ (http://www.thetruthaboutcars.com/2015/08/lutz-gm-chrysler-merger-makes-sense/)
Bob Lutz is a former President and Chief Operating Officer for Chrysler and a former Chairman of GM North America.
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I look at GM cars as having a motor and transmission that last forever but everything else on the car breaks. Dodge/Chrysler from what I have seen is known for motor and transmission problems. Had a Durango and the transmission was slipping at 40K miles. Every time I see a car blowing blue smoke out of the tail pipe indicating shot piston rings or poor engine tolerances it's a Chrysler product.
Every dindu Chrysler 300 or Dodge Magnum running on 20k mile oil of peace.
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Chrysler and GM might as well merge. That would be the only way to re-negotiate the massive payouts they owe over the long term. I'm surprised with robotics there are any human workers left to be honest. Must be the union keeping them in there. The auto industry in general is already too big to fail. In 2008 when every related supply/support business was tanking they had to prop these companies up. I respect Ford for at least trying to do the right things, even though I'm sure they benefit as well.
As a side note about the pricing on new cars.....hell with that. Why would I go buy a $55,000 4wd supercab truck when I can get the same one 5-6 years old with low miles for 16k at 60 months and 3% interest? Just be picky and find the right used one. Then again there is nothing like buying a new car, but I've already been through that stage and had some really nice stuff. When you drive a car you paid 80k for for 3-4 years and it's then worth 20k you learn pretty quickly, haha.