It's too late to make play for Chrysler
(MCT) -- Suddenly it seems like everybody wants Chrysler. It's too late, though. Only Fiat had the guts and vision to rescue the smallest of the Detroit 3 from the Great Recession.
If there were any lingering doubts about how far Fiat Chrysler Automobiles has come, they should have ended with recent European reports that Volkswagen and Peugeot were looking to the Italian-American firm as the answer for what ails them.
There's precious little reason in the rumors, though. Neither VW nor PSA is an ideal match for FCA.
"We were very surprised by the reports" of potential mergers, said Ian Fletcher, London-based IHS Automotive principal analyst.
Maestro CEO Sergio Marchionne has orchestrated a brilliant first act for FCA, but there's more to do. This is at most the intermission. The second act is yet to come. It'll be years till we know if the performance succeeded.
There may be more deals in FCA's future, but a European-based partner is unlikely.
Either deal would almost certainly face antitrust objections. Combining Fiat with VW - already Europe's largest automaker - would create a giant with more than 30 percent of western European sales, according to figures by Bernstein Research. A tie-up with PSA would lift the French automaker - currently tied for No. 2 with about 13 percent of sales - to 20 percent, well clear of a pack of seven automakers currently between 6 percent and 13 percent.
European regulators and other automakers would probably object to either merger. A deal could face the same challenges in South America, where VW and Fiat are both strong.
Peugeot and VW are both grievously underrepresented in North America, but if they wanted to address that with a merger, the time to do it was 2009-10, when Chrysler was available to any automaker with a coherent rescue plan. Fiat had one. They didn't.
Now VW and PSA are missing out on the profits from booming North American sales.
"North America is carrying all the global automakers," Autotrader.com analyst Michelle Krebs said. "VW barely has a presence in the United States and Peugeot has none."
Despite that, the rationale for either reported deal is iffy.
Peugeot might want Fiat Chrysler for access to the U.S. market, Ram trucks and Jeep's potential as a global prestige brand, but all it appears to offer Fiat is the possibility of eventual sales from PSA's new alliance with Dongfeng in China.
It wouldn't be shocking to see Fiat Chrysler and PSA develop some technologies or vehicle architectures together, but it's hard to see a rationale for anything more.
Volkswagen makes even less sense. It already has more brands than any automaker has ever successfully managed. It's also reportedly struggling to get its ambitious new MQB architecture into production.
VW would love to get its hands on the Alfa Romeo, Ram trucks and Jeep, but the German giant has little or no use for Fiat and the automaker's Italian assembly and engineering facilities. It'd be tough to sell the Italian public, government and unions on a deal that looked like an asset strip.
It's hard to see a deal with VW benefitting Chrysler and its workers, either. Volkswagen has a history of absorbing brands and bringing them under the control of company headquarters in Germany. While VW might covet Chrysler's sales volume, it probably wouldn't have much use for the automakers' U.S. design, product development and engineering resources.
VW didn't understand American buyers during the decades its North American HQ was in Auburn Hills. There's no reason to think that would change if the automaker - which decamped from metro Detroit for suburban Washington, D.C., a few years ago - moved a couple of miles up the road to Chrysler's address.
"Fiat Chrysler has done remarkably well," IHS' Fletcher said. "When Marchionne went into Chrysler, everybody thought he was barking mad. "He's proven Chrysler had strong brands and a good business without its legacy costs. Fiat also has very strong brands. Now the company is looking to leverage them, too."
There's lots of work to be done, but today Fiat Chrysler is in a position to plan its next moves and choose its partners carefully. Neither of the recently suggested deals should withstand that scrutiny.
ABOUT THE WRITER
Mark Phelan is the Detroit Free Press auto critic. He can be reached at firstname.lastname@example.org.
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