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A General Motors-Fiat Chrysler Merger? Maybe Not.

Despite attempts made earlier this year by Fiat Chrysler Automobiles (FCA) Chief Executive Officer (CEO) Sergio Marchionne, a merger with General Motors (GM) is highly unlikely. GM CEO Mary Barra rejected Marchionne’s calls for a mutual merger, and FCA is not planning a hostile takeover.1 Previously, Marchionne called for the two automobile manufacturers to merge, considering it a “high priority,” as he believed they could sharing technology and avoid waste caused by developing multiple versions of the same technology to meet increased environmental regulations.2

In March, Marachionne emailed Barra about a potential merger, but in September, Barra said “We have studied that issue in great detail, both with internal resources and external experts, and it’s not in the best interest of General Motors’ shareholders,” suggesting GM’s stability and scope are enough to provide “the best return possible to [their] shareholders” by remaining independent.3 At the time, Marchionne would not rule out a hostile takeover of GM, but analysts called a hostile takeover “beyond ambitious,” as it is smaller than GM, GM’s largest investor, Brock Capital Group, manages the shares for the United Auto Workers healthcare trust for retired workers, and FCA would need to pay approximately $77 billion to follow through on a hostile takeover.4

Now, FCA is not planning a hostile bid for GM, saying, “We have been publicly rebuffed, we have been rejected, and you cannot force these things. I don’t want to. At the moment, we have no intention to do anything hostile.”5 Although Marchionne has left the door open to finding another merger partner, he does not believe finding a merger partner is “a matter of life or death,” saying, “We are not choking. We are in relatively decent shape.”6 ­Marchionne has also shown he will use discretion in finding a partner, saying, “This is not an indiscriminate dating game. I’m not willing to go with anyone to get it done.”7

Instead, FCA will focus on a five-year, $52 billion investment plan focused on globalizing the Alfa Romeo, Jeep, and Maserati brands.8 As Flak writes, “Analysts have raised concerns about FCA’s ability to execute the plan, given its net debt of 7.85 billion euros, product delays, and persistent weakness in Latin America.”9. Already, FCA has plans to delay product launches for Alfa Romeo and Maserati.10

Ultimately, it seems Marchionne viewed Barra’s resistance to a mutual merger and the financial and logistical obstacles to a hostile takeover as not worth the trouble. In the past, Marchionne has seemed intent on merging, if not with GM, with someone, even suggesting that “other less-optimal combinations,” such as Google, Inc., which is testing self-driven cars, and Apple, Inc., were options.11 However, in a change of direction, instead of desperately merging with a different, less favorable firm, Marchionne seems content to focus on investing into FCA’s existing brands and increasing revenue that way.

  1. See Agnieszka Flak, Fiat Chrysler to focus on growth plan as GM merger hopes fade, Reuters (Dec 3, 2015 10:57 AM), 

  2. Fiat Chrysler CEO says pursuing merger with GM a “high priority”, Yahoo! Fin. (Sep. 8, 2015, 9:54 AM),–finance.html; see Tommaso Ebhardt and Chris Reiter, GM CEO Barra Resists Fiat Merger Call as Renzi Backs Marchionne, Bloomberg Bus. (Sep. 15, 2015, 6:04 AM), 

  3. Tommaso Ebhardt and Chris Reiter, supra

  4. See Fiat Chrysler CEO says pursuing merger with GM a “high priority”, supra; Pamela Barbaglia, et al., GM and Fiat Chrysler are in a full-blown merger standoff, Bus. insider (Jun. 17, 2015, 5:17 PM),—2015-6. 

  5. Agnieszka Flak, supra

  6. Id. 

  7. Id. 

  8. See id. 

  9. Id. 

  10. See id. 

  11. See Ben Dummett, Fiat Chrysler CEO Sees Possible Merger Partners Other Than Reluctant General Motors, Wall St. J. (Jul. 10, 2015, 5:11 PM),