Sergio Marchionne is an auto executive who just can’t take no for an answer. Already rebuffed by General Motors, the Fiat Chrysler Automotive (FCA) keeps charging back in seeking a merger deal that is unlikely to happen. Indeed, he is hinting of a potential hostile takeover bid, if GM doesn’t agree to talk. That doesn’t phase, GM, as executives speaking on background to Automotive News, rejected Marchionne again.
Speaking to Automotive News today on background, a GM exec said flatly: “Why should [GM] bail out FCA?” Other executives queried by the trade publication questioned the supposed synergies that Marchionne saw in the merger and labeled the FCA chief’s plan a bad idea.
Marchionne, though, counters that his strategic vision is “irrefutable,” and foresaw “cataclysmic changes in performance” as a result. He said quite frankly that he was “not talking about [a] marginal improvement in margins.” Marchionne noted that he had made some “arbitrary assumptions about which architectures survive, which engines survive,” concluding that the only deal that offers “same benefits that we potentially get … is us.”
In response, the GM executive said the automaker had not seen Marchionne’s analysis of the data. He did question whether the proposed combined automaker would meet Marchionne’s profit prediction without impacts to dealers or job cuts. Last week at dealer meetings in Las Vegas, Marchionne promised there would be no dealer impacts or job cuts in the wake of FCA actions.
While not terming Marchionne’s analysis right or wrong, the GM executive said that company officials believed that the automaker would do better on its own.
Still, Marchionne is emphatic in his belief that the best path for FCA and GM is a merger. He indicated he had crunched the numbers; looked at products, and explored each company from top to bottom. He believes the results are so cogent that he will urge his board of directors to pressure GM to enter talks now. He told Automotive News frankly that it “would be unconscionable not to force a partner.” That statement implies that Marchionne will sponsor a hostile takeover of GM.
Marchionne told the Automotive News in a lengthy Detroit interview that he wouldn’t go as far as calling it a hostile takeover, preferring to compare it to hugging. There are many types of hug. He said he could “hug you nicely … hug you tightly … hug you like a bear. Everything starts with physical contact …” Over time, though, the talks can fail, but you still need the initial contact.
GM insiders, on the other hand, believe the idea is bad, all around. They question Marchionne’s supposed synergies and, indeed, all of his assertions.
For Marchionne, the results have been quiet phone lines as no one from General Motors is answering his calls but he is still more than hopeful. “I’ve offered to sit down with them and take them through the numbers … They won’t listen.”
He criticized GM’s “abject refusal to engage,” indicating that the capital markets wouldn’t view it positively. Indeed, he suggested that the capital markets might find it hard to “understand why” GM is rejecting even just having discussions. Earlier this summer, the FCA chief urged the financial markets to pressure GM to enter into merger discussions.
It’s not that FCA doesn’t have potential partners, Marchionne said, because the automaker does. He said be sold today. He is just “not interested in doing deals with them … because there is a better deal.”