Jeremy Warner: Fiat's marriage in heaven is triumph of hope over experience
Wednesday 06 May 2009
Outlook: I'm sorry, but I just don't see it. Sergio Marchionne, chief executive of Fiat, is self-evidently an inspirational business leader with a superficially compelling vision for creating a global auto manufacturer of sufficient scale to survive and prosper.
The deep recession, with car companies going bust right, left and centre and governments desperate for solutions, also gives him a realistic, and once-in-a-lifetime opportunity to bring about the grand consolidation he has long aspired to. For decades, car manufacturing has been plagued by chronic overcapacity, but there has been no market mechanisms to allow these totems of national pride to exit the industry.
Mr Marchionne is determined to seize the moment. Yet even if he gets his plans past the myriad of political and regulatory obstacles he already faces, can be make the new engine fire on all cylinders? Marriage, they say, is a triumph of hope over experience, and that's certainly the case when it comes to auto industry mergers.
The last time I heard an auto industry consolidation described as "a marriage made in heaven", as Mr Marchionne called his proposed three-way link up with Chrysler and General Motors Europe over the weekend, was back in 1998 when Daimler Benz merged with Chrysler in a $36bn deal. Juergen Schrempp, then CEO of Daimler, not only used the same language, he also cited much the same strategic logic to justify a deal that turned out to be a disaster both for Daimler and Chrysler.
Rover nearly busted BMW while Jaguar and Land-Rover similarly consumed huge amounts of capital before Ford was eventually forced to get rid of them. The examples multiply. For cultural, political and technological reasons, it seems to be virtually impossible to build international scale in auto manufacturing by acquiring struggling overseas rivals. There's no reason to believe it will be any different this time. Mr Marchionne dreams of transforming not just Fiat Auto, but the entire auto industry. Dream on.
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