Fiat Chrysler Automobiles CEO Sergio Marchionne’s call for more large-scale consolidation in the global auto industry is being ignored so far, especially by executives at his No. 1 merger candidate: General Motors. Marchionne says the auto industry is broken because automakers waste billions on pointless r&d investment and destroy heaps of shareholder value in the process. He says companies must consolidate now or face “disastrous consequences” later.
Despite this dire prediction, top GM executives have refused to meet with Marchionne. At the Frankfurt auto show last month, GM CEO Mary Barra said the automaker’s leadership as well as “expert advisers from the outside” have examined the prospect of a GM-FCA tie-up. “We’ve looked at it very, very carefully and in tremendous detail. And it’s not in the best interest of General Motors shareholders,” Barra said.
A number of top European automotive executives shared their views with Automotive News Europe on the topic. Like Marchionne, Renault-Nissan CEO Carlos Ghosn believes that “smaller carmakers will need alliances and cooperations with bigger players” to cope with the huge investments needed to offer greener powertrains, connected cars and autonomous driving features, but he is skeptical about mergers because so many of them have failed.
PSA/Peugeot-Citroen CEO Carlo Tavares said that the advantages of size -- such as better pricing from suppliers because of the higher volumes and a lower r&d amortization cost per unit built -- need to be balanced with the importance of remaining agile. “I have not found the perfect number to match size with agility yet,” he said. In his view, CEOs should concentrate on increasing efficiency by better utilizing their resources rather than growing just for the sake of volume. “The new norm is frugality: to do more with less,” he said.
Volvo Cars purchasing and manufacturing boss Lars Wrebo also doesn’t believe in bigger is better. “If size was all you needed then GM would have never gone into bankruptcy,” he said. “We see our relatively small size as an advantage because we can make decisions quicker.”