Marchionne Talk of Industry Mergers Called Sign of 'Panic' - Bloomberg
Chief Executive Officer Sergio Marchionne has been talking for months about merging Fiat Chrysler Automobiles NV with a giant like General Motors or Ford. For starters, the company is boosting discounts on many models and selling unpopular sedans and compacts to rental-car companies and corporate fleets. That’s depressing profit margins, meaning Marchionne will generate less cash to develop the next generation of vehicles and technologies on his own. “What Sergio is panicked about is how much sales are growing while profit margins are falling,” said Maryann Keller, an independent consultant in Greenwich, Connecticut. This isn’t about putting FCA up for sale, a matter of “life and death” for the company, or Marchionne’s “final big deal,” he said. Cutting Costs Marchionne said he wants consolidation that helps cover development costs for costly things like engines, advanced technologies and more mundane things like parts. If companies can merge and defray those costs over more sales volume, they can boost returns, Marchionne said. Warburton said on the call that he and other analysts largely agree with Marchionne’s premise that the industry’s high capital costs make for low returns,. Source: www.bloomberg.com
