When Sergio Marchionne first floated the idea of a merger between General Motors and Fiat Chrysler Automobiles, it was hard to take his idea seriously. There was always the chance he didn’t really mean what he’d said and was instead trying to communicate just how expensive developing new cars is. After all, bringing a new vehicle to market can easily cost a billion dollars. If FCA could find a way to save a billion dollars here and a billion dollars there, pretty soon it would be saving some real money.
After his initial idea was laughed off though, Marchionne doubled down and insisted he was serious. He thought the auto industry needed to consolidate, and he wanted to merge with GM. Mary Barra, CEO of GM, made it clear she thought the idea was ridiculous, which theoretically should have put the final nail in the merger’s coffin. At that point, a three-way merger between Verizon, Chipotle, and Exxon sounded about as likely as a GM merger with Fiat.
Despite the seemingly-ridiculous and unlikely nature of FCA facilitating a merger with an unwilling GM, the idea keeps getting brought back up. No matter how unlikely it is, since people continue to talk about it, and since Marchionne hasn’t given up, maybe it’s time to consider the possible benefits of it actually happening.
As Automotive News reports, one analyst — Bernstein Research’s Max Warburton — thinks there’s potential for cost savings to reach $10 billion annually, more than double the $5 billion Marchionne had previously estimated.
Following a merger between FCA and GM, vehicle platforms could be shared and consolidated, product planning could be streamlined, and redundant plants could be closed. If both companies combined their production and distribution channels in North America, the same could work in Latin America – an area of the world where both companies have a strong presence but could benefit from shoring up market share.
Consolidation would lead to even more savings, allowing the biggest strengths of each company to be combined into one much-more-efficient company. The amount of consolidation that would be possible would be entirely dependent on whether or not they went forward with a full merger or not.
A partial merger would probably mean co-developing and sharing a common full-size truck platform that would underpin Silverado, Sierra, and Ram trucks. A full merger, on the other hand, could lead to the consolidation of the Silverado and Ram nameplates into one truck capable of potentially unseating the F-150 as the top-selling vehicle in the country.
Both companies also have several rear-wheel-drive vehicles that both compete with each other and are expensive to develop. Sharing a common platform and potentially eliminating a few redundant vehicles would likely make those that remained even more competitive in their segments. If Ford continues its domination with the Mustang, joining forces could be the only way for either GM or FCA to take it down.
Both Fiat and Opel are struggling in Europe, too, which might present the opportunity to merge the two and cut their losses. But FCA’s biggest asset in the event of a merger is Jeep: Other than that, FCA doesn’t really have a lot of assets that GM would necessarily need. Then again, eliminating competition and focusing on beating other players might end up being more valuable than any specific asset.
When you look at the potential for massive cost savings and increased profitability, the idea of an FCA merger with GM starts to look like there might actually be enough benefits to make it worthy of consideration. Then again, even if both companies were interested in merging, there are so many hurdles that would be in their way, it still looks incredibly unlikely. If Marchionne manages to pull it off, though, at the very least it would be fascinating to watch.