Sitting on a pair of jewels with its Jeep and Ram brands, but saddled with a high debt load and stormy stock value, Fiat Chrysler executives have made no secret of the company’s wish to merge with another automaker to help defray costs, while improving quality and profit.
However, it doesn’t look like FCA will turn eastward at this time for a partner.
FCA announced Wednesday that it has not agreed to sell any stake in the company to China’s Guangzhou Automobile Group (GAC) despite an Italian newspaper report last week indicating both companies were talking merger.
FCA chairman John Elkann told The Automotive News during a stockholder meeting Wednesday that both parties have not “made any agreement”, but Elkann did not deny such a move could happen down the road.
Fueling the rumor was GAC Chairman Zhang Fangyou’s visit to FCA's headquarters in Auburn Hills, Michigan last week, along with a very senior Chinese government official and China's ambassador to the U.S.
FCA and GAC already have a joint venture in China, allowing the US automaker to build and successfully sell its vehicles in the world's largest automotive market despite being a latecomer to the party.
GAC now wants FCA to return the favor, according to Motor Brand Chief Wu Song, who recently told a Reuters reporter in Beijing that the company certainly does want to enter the US market with FCA’s assistance.
"Chrysler's development in China required our support," Song said. "Now for GAC Motor's development in the U.S. we also hope for Chrysler's support and help."
While GAC does not necessarily ‘need’ anyone to bring its vehicles into the US market - it already has plans to launch its crossover type GS4 vehicle in 2017 or 2018 – a majority stake purchase in FCA would automatically gain GAC a domestic dealer network and the company would be able to rebrand its vehicles as Chrysler and Dodge. This could also be a way for FCA to dump off its Dart and 200 models.
Such an entry game plan already exists as China automaker Zhejiang Geely acquired Volvo cars in 2010 and plans to export its S60 sedan to the US market later this year under the Volvo name.
Another reason GAC may look to acquire a majority stake in FCA would be the acquisition of the highly popular and profitable Jeep and Ram divisions. These brands would add even more visibility to the GAC name, not to mention more profit to an already cash-rich company. This, many industry experts say, would create higher quality and production levels while eliminating FCA’s debt level.
FCA CEO Sergio Marchionne has made an aggressive push to find a merger partner over the past year, believing a merger would save upwards of $10 billion in development costs during a time when technology and automation threaten to be huge disruptions in the automotive market.
Despite Marchionne’s intentions, he has been unable so far to find such a partner as Ford, GMC, Toyota, and Volkswagen have all rejected offers.
