INDUSTRY ON TRIAL
An examination of the auto industry
Did Sergio get it right?
Six superstars ponder the future of an ‘irrational’ auto industry
Sergio Marchionne says the auto industry is violated. Is he right or was he simply putting FCA up for sale? We asked six superstar industry thinkers to discuss the matter in detail: Bo Andersson, Arndt Ellinghorst, John Krafcik, Bob Lutz, Tim Manganello and Andy Palmer. They all see an industry with thick challenges.
Witness the entire movie
Or select a chapter:
Industry on Trial: Introduction
Chapter 1: ‘Today’s automotive industry – as it’s structured – is unsustainable.’
Chapter Two: ‘The automobile business is a destroyer of capital.’
Chapter Trio: ‘Very few mergers … have survived or make sense.’
Chapter Four: ‘Does the industry … need a catastrophic event in order to switch?’
Chapter Five: ‘How many major automakers will there be in ten years?’
Read Marchionne’s case: Confessions of a Capital Junkie
CAPITAL CRUNCH
New-vehicle sales in the U.S. are on track for the second-best year in history. So why do so many brainy people believe the auto industry is in a desperate situation?
Marchionne’s diagnosis of industry weakness goes far beyond FCA
FCA CEO Sergio Marchionne’s critique of the industry shouldn’t be disregarded. There is broad agreement among current and former executives that automakers fail to use capital efficiently.
Comeback on investment: Not a pretty picture
Last spring, General Motors began cracking out a fresh metric in its financial disclosures: comeback on invested capital. The relatively arcane financial metric is at the root of the debate sparked by Fiat Chrysler Automobiles CEO Sergio Marchionne.
Who will pay rising development costs?
Regulators and consumers keep requesting that automakers pack more features and equipment into vehicles. But all of that comes at a cost — which somebody ultimately has to pay.
Opinions about our series:
EDITORIAL: Conventional wisdom on industry needs rethinking
LETTER TO THE EDITOR: An outstanding ‘depth of perspective’
LETTER TO THE EDITOR: Autonomous cars will bring switch
LETTER TO THE EDITOR: Consolidation is not the only response
R&D SPENDING: HOW MUCH IS POINTLESS?
Carmakers spend billions to differentiate components “not discernible to consumers,” says Sergio Marchionne. Does every carmaker truly need its own 1.Three liter 4-cylinder engine? Its own axles? There are strongly-held beliefs on both sides.
Duplicating vehicle engineering
thrusts costs and prices higher
Since the beginning of 2012, at least twelve major global automakers have introduced or announced plans to launch petite, three-cylinder engines. The estimated total cost to engineer those distinct, proprietary three-cylinders: a staggering $Ten billion to $12 billion.
Global regulations drive up engineering costs
A tangled web of differing global regulations — mostly covering emissions and safety — compels automakers and suppliers to spend billions on redundant engineering.
Dealers fret over prices, split on parts sharing
Rising costs will cut into vehicle sales, hurting auto retailers. And while more parts sharing among automakers could help trim costs and keep fresh cars affordable, dealers say there are thresholds to doing so, an online, unscientific survey of auto retailers by Automotive News found.
Automotive News surveyed dealers on pricing trends and what greater parts sharing by automakers might mean at the retail level. Here’s what they said:
SURVEY: Price worries? Yes.
SURVEY: Parts sharing? Hmmm .
EDITORIAL: Industry must stop wasteful spending before it’s too late
MERGE OR DIE? IS CONSOLIDATION THE SOLUTION FOR AN ‘IRRATIONAL’ INDUSTRY?
Mergers always flop, right? Not so. We look at the handful of mergers/long-term collaborations that were successful, and ask: why did they work?
Uncommon alliance successes share key traits
The automotive industry landscape is littered with the carcasses of failed alliances, yet the truth is some marriages do produce positive results. Fiat and Chrysler are both healthier now, and Renault and Nissan have been working together for two decades. What makes some mergers or alliances work?
How Ford’s partnership with Mazda unraveled
The breakup of the Ford-Mazda partnership illustrated how even the most successful of long-term alliances can unravel under outward pressures.
DaimlerChrysler: Poster child of failed mergers
Sergio Marchionne says automakers consume too much capital. His solution: mergers and alliances. But few deals ruined more capital than the historic one thousand nine hundred ninety eight union that created DaimlerChrysler AG. Here’s how it went wrong.
COMMENTARY: M&A fever’s hefty toll on talent
EDITORIAL: Is a merger the way to go? Automakers better know history
THE STATE OF FIAT CHRYSLER AUTOMOBILES
Analyst Arndt Ellinghorst says Fiat Chrysler CEO Sergio Marchionne is “running a company which is most likely the most challenged within the global industry.” So is Marchionne’s “Confessions of a Capital Junkie” just a fancy way of putting FCA up for sale? Marchionne says no. Neither is it “an excuse for FCA’s current ranking in the automotive food chain,” he says.
Still, why do so many people have such grave doubts about an automaker that keeps setting sales records in the United States?
FCA chief wants tie-up with GM; GM’s response: ‘Why bail out FCA?’
General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away – not by a long shot. Marchionne says he has sweated the details and done the math and discovered there’s far too much upside in a merger of FCA and GM to let a deal go undone – or at least unexplored.
JASON STEIN: Marchionne waits at the gate, but who is there to response?
The indeed bad news for GM: A dragon stands again at the gates. And he’s wearing a black sweater. To talk again about a GM-FCA merger “and publicly reload the idea,” said analyst Arndt Ellinghorst, “clearly Sergio Marchionne is taking out the bazooka to hunt GM down.”
Marchionne wants a playmate but says FCA can get through alone ‘in mediocrity’
Compared to its larger and far richer global counterparts, Fiat Chrysler Automobiles faces a hefty set of problems. CEO Sergio Marchionne knows he has challenges but says he also has a plan that is working.
Marchionne’s collective views with UAW chief could help contract talks
Sergio Marchionne said he believes his straightforward relationship with UAW President Dennis Williams will help Fiat Chrysler reach a fresh labor agreement with the union.
Sergio may stay till 2020, hunts for next top leader
Sergio Marchionne is sixty three and the very first to admit that he and won’t stick around as CEO of Fiat Chrysler Automobiles forever. But he may remain a bit longer than expected.
Jeep helping to power FCA in Europe
Thanks to a strong commence for the Jeep Renegade and its sibling, the Fiat 500X, Fiat Chrysler’s sales in Europe are recovering quicker than the overall market.
How GM and FCA could come together
Mergers, of any kind, are difficult to execute, even when both parties are willing to do the deal. Arndt Ellinghorst, head of global automotive research at London-based Evercore ISI in London and one of Europe’s most influential auto analysts, handicaps the screenplays around a possible General Motors merger with Fiat Chrysler Automobiles.
The quotable Marchionne
EDITORIAL: FCA’s pursuit, GM’s protest are built into DNAs
IF NOT MERGERS, WHAT?
Sergio Marchionne is right. The problem is real. Automakers can’t go on consuming capital the way they have.
They can’t hope to meet the requests of consumers, regulators and investors without taking a hard look at how they spend their money.
On this much, the minds of the auto industry agree. But it’s Marchionne’s talk of mergers and takeovers — even hostile ones — that makes the industry cringe, and not without reason. Automotive history is rich with stories of deals gone sour, cultures clashing, “synergies” unrealized and employees embittered.
And besides, most automakers have concluded, there are better ways — or at least other ways — to conserve, consolidate and collaborate without the need to smash two companies into one.
Why won’t GM play ball with Marchionne?
Sergio Marchionne’s fixation with a General Motors merger says a lot about how he views the future prospects of FCA as a standalone entity. And GM’s reticence to engage says a lot about how Mary Barra & Co. view their own.
THE FORD MODEL: Internal consolidation and streamlining
The Ford Motor Co. that Alan Mulally took charge of in two thousand six was a dizzying jumble of eight brands and numerous regional fiefdoms. Mulally’s simplistic-sounding plan to create “one Ford” transformed the automaker just in time for it to weather the looming recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.
THE RENAULT-NISSAN MODEL: Taut alliance of separate companies
Instead of one company taking over the other, Renault and Nissan have helped each other through a global alliance for sixteen years. Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation treatment to consolidation that has failed other automakers.
THE TOYOTA MODEL: Discrete joint ventures and projects
Toyota exploits a mixed bag of discrete ventures where they make the most sense, while largely avoiding deeper entanglements. The objective is to learn what it can from its rivals, and attempt to pack niches in its own lineup.
THE TESLA MODEL: Collective access to technology
By opening up patents and sharing a set of powertrains and electronics — and encouraging other automakers to do the same — Tesla can invest in what sets it apart: design, branding and user interface.
Industry On Trial – Automotive News
INDUSTRY ON TRIAL
An examination of the auto industry
Did Sergio get it right?
Six superstars ponder the future of an ‘irrational’ auto industry
Sergio Marchionne says the auto industry is cracked. Is he right or was he simply putting FCA up for sale? We asked six superstar industry thinkers to discuss the matter in detail: Bo Andersson, Arndt Ellinghorst, John Krafcik, Bob Lutz, Tim Manganello and Andy Palmer. They all see an industry with meaty challenges.
Observe the entire movie
Or select a chapter:
Industry on Trial: Introduction
Chapter 1: ‘Today’s automotive industry – as it’s structured – is unsustainable.’
Chapter Two: ‘The automobile business is a destroyer of capital.’
Chapter Trio: ‘Very few mergers … have survived or make sense.’
Chapter Four: ‘Does the industry … need a catastrophic event in order to switch?’
Chapter Five: ‘How many major automakers will there be in ten years?’
Read Marchionne’s case: Confessions of a Capital Junkie
CAPITAL CRUNCH
New-vehicle sales in the U.S. are on track for the second-best year in history. So why do so many clever people believe the auto industry is in a desperate situation?
Marchionne’s diagnosis of industry weakness goes far beyond FCA
FCA CEO Sergio Marchionne’s critique of the industry shouldn’t be disregarded. There is broad agreement among current and former executives that automakers fail to use capital efficiently.
Comeback on investment: Not a pretty picture
Last spring, General Motors began violating out a fresh metric in its financial disclosures: come back on invested capital. The relatively arcane financial metric is at the root of the debate sparked by Fiat Chrysler Automobiles CEO Sergio Marchionne.
Who will pay rising development costs?
Regulators and consumers keep requesting that automakers pack more features and equipment into vehicles. But all of that comes at a cost — which somebody ultimately has to pay.
Opinions about our series:
EDITORIAL: Conventional wisdom on industry needs rethinking
LETTER TO THE EDITOR: An exceptional ‘depth of perspective’
LETTER TO THE EDITOR: Autonomous cars will bring switch
LETTER TO THE EDITOR: Consolidation is not the only response
R&D SPENDING: HOW MUCH IS POINTLESS?
Carmakers spend billions to differentiate components “not discernible to consumers,” says Sergio Marchionne. Does every carmaker indeed need its own 1.Three liter 4-cylinder engine? Its own axles? There are strongly-held beliefs on both sides.
Duplicating vehicle engineering
thrusts costs and prices higher
Since the beginning of 2012, at least twelve major global automakers have introduced or announced plans to launch petite, three-cylinder engines. The estimated total cost to engineer those distinct, proprietary three-cylinders: a staggering $Ten billion to $12 billion.
Global regulations drive up engineering costs
A tangled web of differing global regulations — mostly covering emissions and safety — compels automakers and suppliers to spend billions on redundant engineering.
Dealers fret over prices, split on parts sharing
Rising costs will cut into vehicle sales, hurting auto retailers. And while more parts sharing among automakers could help trim costs and keep fresh cars affordable, dealers say there are boundaries to doing so, an online, unscientific survey of auto retailers by Automotive News found.
Automotive News surveyed dealers on pricing trends and what greater parts sharing by automakers might mean at the retail level. Here’s what they said:
SURVEY: Price worries? Yes.
SURVEY: Parts sharing? Hmmm .
EDITORIAL: Industry must stop wasteful spending before it’s too late
MERGE OR DIE? IS CONSOLIDATION THE SOLUTION FOR AN ‘IRRATIONAL’ INDUSTRY?
Mergers always flop, right? Not so. We look at the handful of mergers/long-term collaborations that were successful, and ask: why did they work?
Infrequent alliance successes share key traits
The automotive industry landscape is littered with the carcasses of failed alliances, yet the truth is some marriages do produce positive results. Fiat and Chrysler are both healthier now, and Renault and Nissan have been working together for two decades. What makes some mergers or alliances work?
How Ford’s partnership with Mazda unraveled
The breakup of the Ford-Mazda partnership illustrated how even the most successful of long-term alliances can unravel under outer pressures.
DaimlerChrysler: Poster child of failed mergers
Sergio Marchionne says automakers consume too much capital. His solution: mergers and alliances. But few deals ruined more capital than the historic one thousand nine hundred ninety eight union that created DaimlerChrysler AG. Here’s how it went wrong.
COMMENTARY: M&A fever’s hefty toll on talent
EDITORIAL: Is a merger the way to go? Automakers better know history
THE STATE OF FIAT CHRYSLER AUTOMOBILES
Analyst Arndt Ellinghorst says Fiat Chrysler CEO Sergio Marchionne is “running a company which is very likely the most challenged within the global industry.” So is Marchionne’s “Confessions of a Capital Junkie” just a fancy way of putting FCA up for sale? Marchionne says no. Neither is it “an excuse for FCA’s current ranking in the automotive food chain,” he says.
Still, why do so many people have such grave doubts about an automaker that keeps setting sales records in the United States?
FCA chief wants tie-up with GM; GM’s response: ‘Why bail out FCA?’
General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away – not by a long shot. Marchionne says he has sweated the details and done the math and discovered there’s far too much upside in a merger of FCA and GM to let a deal go undone – or at least unexplored.
JASON STEIN: Marchionne waits at the gate, but who is there to response?
The truly bad news for GM: A dragon stands again at the gates. And he’s wearing a black sweater. To talk again about a GM-FCA merger “and publicly reload the idea,” said analyst Arndt Ellinghorst, “clearly Sergio Marchionne is taking out the bazooka to hunt GM down.”
Marchionne wants a playmate but says FCA can get through alone ‘in mediocrity’
Compared to its larger and far richer global counterparts, Fiat Chrysler Automobiles faces a ample set of problems. CEO Sergio Marchionne knows he has challenges but says he also has a plan that is working.
Marchionne’s collective views with UAW chief could help contract talks
Sergio Marchionne said he believes his straightforward relationship with UAW President Dennis Williams will help Fiat Chrysler reach a fresh labor agreement with the union.
Sergio may stay till 2020, hunts for next top leader
Sergio Marchionne is sixty three and the very first to admit that he and won’t stick around as CEO of Fiat Chrysler Automobiles forever. But he may remain a bit longer than expected.
Jeep helping to power FCA in Europe
Thanks to a strong embark for the Jeep Renegade and its sibling, the Fiat 500X, Fiat Chrysler’s sales in Europe are recovering quicker than the overall market.
How GM and FCA could come together
Mergers, of any kind, are difficult to execute, even when both parties are willing to do the deal. Arndt Ellinghorst, head of global automotive research at London-based Evercore ISI in London and one of Europe’s most influential auto analysts, handicaps the screenplays around a possible General Motors merger with Fiat Chrysler Automobiles.
The quotable Marchionne
EDITORIAL: FCA’s pursuit, GM’s protest are built into DNAs
IF NOT MERGERS, WHAT?
Sergio Marchionne is right. The problem is real. Automakers can’t go on consuming capital the way they have.
They can’t hope to meet the requests of consumers, regulators and investors without taking a hard look at how they spend their money.
On this much, the minds of the auto industry agree. But it’s Marchionne’s talk of mergers and takeovers — even hostile ones — that makes the industry cringe, and not without reason. Automotive history is rich with stories of deals gone sour, cultures clashing, “synergies” unrealized and employees embittered.
And besides, most automakers have concluded, there are better ways — or at least other ways — to conserve, consolidate and collaborate without the need to smash two companies into one.
Why won’t GM play ball with Marchionne?
Sergio Marchionne’s fixation with a General Motors merger says a lot about how he views the future prospects of FCA as a standalone entity. And GM’s reticence to engage says a lot about how Mary Barra & Co. view their own.
THE FORD MODEL: Internal consolidation and streamlining
The Ford Motor Co. that Alan Mulally took charge of in two thousand six was a dizzying jumble of eight brands and numerous regional fiefdoms. Mulally’s simplistic-sounding plan to create “one Ford” transformed the automaker just in time for it to weather the looming recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.
THE RENAULT-NISSAN MODEL: Taut alliance of separate companies
Instead of one company taking over the other, Renault and Nissan have helped each other through a global alliance for sixteen years. Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation treatment to consolidation that has failed other automakers.
THE TOYOTA MODEL: Discrete joint ventures and projects
Toyota exploits a mixed bag of discrete ventures where they make the most sense, while largely avoiding deeper entanglements. The objective is to learn what it can from its rivals, and attempt to pack niches in its own lineup.
THE TESLA MODEL: Collective access to technology
By opening up patents and sharing a set of powertrains and electronics — and encouraging other automakers to do the same — Tesla can invest in what sets it apart: design, branding and user interface.
Industry On Trial – Automotive News
INDUSTRY ON TRIAL
An examination of the auto industry
Did Sergio get it right?
Six superstars ponder the future of an ‘irrational’ auto industry
Sergio Marchionne says the auto industry is cracked. Is he right or was he simply putting FCA up for sale? We asked six superstar industry thinkers to discuss the matter in detail: Bo Andersson, Arndt Ellinghorst, John Krafcik, Bob Lutz, Tim Manganello and Andy Palmer. They all see an industry with enormous challenges.
Witness the entire movie
Or select a chapter:
Industry on Trial: Introduction
Chapter 1: ‘Today’s automotive industry – as it’s structured – is unsustainable.’
Chapter Two: ‘The automobile business is a destroyer of capital.’
Chapter Three: ‘Very few mergers … have survived or make sense.’
Chapter Four: ‘Does the industry … need a catastrophic event in order to switch?’
Chapter Five: ‘How many major automakers will there be in ten years?’
Read Marchionne’s case: Confessions of a Capital Junkie
CAPITAL CRUNCH
New-vehicle sales in the U.S. are on track for the second-best year in history. So why do so many clever people believe the auto industry is in a desperate situation?
Marchionne’s diagnosis of industry weakness goes far beyond FCA
FCA CEO Sergio Marchionne’s critique of the industry shouldn’t be overlooked. There is broad agreement among current and former executives that automakers fail to use capital efficiently.
Come back on investment: Not a pretty picture
Last spring, General Motors began violating out a fresh metric in its financial disclosures: come back on invested capital. The relatively arcane financial metric is at the root of the debate sparked by Fiat Chrysler Automobiles CEO Sergio Marchionne.
Who will pay rising development costs?
Regulators and consumers keep requiring that automakers pack more features and equipment into vehicles. But all of that comes at a cost — which somebody ultimately has to pay.
Opinions about our series:
EDITORIAL: Conventional wisdom on industry needs rethinking
LETTER TO THE EDITOR: An amazing ‘depth of perspective’
LETTER TO THE EDITOR: Autonomous cars will bring switch
LETTER TO THE EDITOR: Consolidation is not the only response
R&D SPENDING: HOW MUCH IS POINTLESS?
Carmakers spend billions to differentiate components “not discernible to consumers,” says Sergio Marchionne. Does every carmaker indeed need its own 1.Trio liter 4-cylinder engine? Its own axles? There are strongly-held beliefs on both sides.
Duplicating vehicle engineering
shoves costs and prices higher
Since the beginning of 2012, at least twelve major global automakers have introduced or announced plans to launch petite, three-cylinder engines. The estimated total cost to engineer those distinct, proprietary three-cylinders: a staggering $Ten billion to $12 billion.
Global regulations drive up engineering costs
A tangled web of differing global regulations — mostly covering emissions and safety — coerces automakers and suppliers to spend billions on redundant engineering.
Dealers fret over prices, split on parts sharing
Rising costs will cut into vehicle sales, hurting auto retailers. And while more parts sharing among automakers could help trim costs and keep fresh cars affordable, dealers say there are boundaries to doing so, an online, unscientific survey of auto retailers by Automotive News found.
Automotive News surveyed dealers on pricing trends and what greater parts sharing by automakers might mean at the retail level. Here’s what they said:
SURVEY: Price worries? Yes.
SURVEY: Parts sharing? Hmmm .
EDITORIAL: Industry must stop wasteful spending before it’s too late
MERGE OR DIE? IS CONSOLIDATION THE SOLUTION FOR AN ‘IRRATIONAL’ INDUSTRY?
Mergers always flop, right? Not so. We look at the handful of mergers/long-term collaborations that were successful, and ask: why did they work?
Uncommon alliance successes share key traits
The automotive industry landscape is littered with the carcasses of failed alliances, yet the truth is some marriages do produce positive results. Fiat and Chrysler are both healthier now, and Renault and Nissan have been working together for two decades. What makes some mergers or alliances work?
How Ford’s partnership with Mazda unraveled
The breakup of the Ford-Mazda partnership illustrated how even the most successful of long-term alliances can unravel under outer pressures.
DaimlerChrysler: Poster child of failed mergers
Sergio Marchionne says automakers consume too much capital. His solution: mergers and alliances. But few deals demolished more capital than the historic one thousand nine hundred ninety eight union that created DaimlerChrysler AG. Here’s how it went wrong.
COMMENTARY: M&A fever’s hefty toll on talent
EDITORIAL: Is a merger the way to go? Automakers better know history
THE STATE OF FIAT CHRYSLER AUTOMOBILES
Analyst Arndt Ellinghorst says Fiat Chrysler CEO Sergio Marchionne is “running a company which is most likely the most challenged within the global industry.” So is Marchionne’s “Confessions of a Capital Junkie” just a fancy way of putting FCA up for sale? Marchionne says no. Neither is it “an excuse for FCA’s current ranking in the automotive food chain,” he says.
Still, why do so many people have such grave doubts about an automaker that keeps setting sales records in the United States?
FCA chief wants tie-up with GM; GM’s response: ‘Why bail out FCA?’
General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away – not by a long shot. Marchionne says he has sweated the details and done the math and discovered there’s far too much upside in a merger of FCA and GM to let a deal go undone – or at least unexplored.
JASON STEIN: Marchionne waits at the gate, but who is there to reaction?
The truly bad news for GM: A dragon stands again at the gates. And he’s wearing a black sweater. To talk again about a GM-FCA merger “and publicly reload the idea,” said analyst Arndt Ellinghorst, “clearly Sergio Marchionne is taking out the bazooka to hunt GM down.”
Marchionne wants a playmate but says FCA can get through alone ‘in mediocrity’
Compared to its larger and far richer global counterparts, Fiat Chrysler Automobiles faces a massive set of problems. CEO Sergio Marchionne knows he has challenges but says he also has a plan that is working.
Marchionne’s collective views with UAW chief could help contract talks
Sergio Marchionne said he believes his straightforward relationship with UAW President Dennis Williams will help Fiat Chrysler reach a fresh labor agreement with the union.
Sergio may stay till 2020, hunts for next top leader
Sergio Marchionne is sixty three and the very first to admit that he and won’t stick around as CEO of Fiat Chrysler Automobiles forever. But he may remain a bit longer than expected.
Jeep helping to power FCA in Europe
Thanks to a strong embark for the Jeep Renegade and its sibling, the Fiat 500X, Fiat Chrysler’s sales in Europe are recovering swifter than the overall market.
How GM and FCA could come together
Mergers, of any kind, are difficult to execute, even when both parties are willing to do the deal. Arndt Ellinghorst, head of global automotive research at London-based Evercore ISI in London and one of Europe’s most influential auto analysts, handicaps the scripts around a possible General Motors merger with Fiat Chrysler Automobiles.
The quotable Marchionne
EDITORIAL: FCA’s pursuit, GM’s protest are built into DNAs
IF NOT MERGERS, WHAT?
Sergio Marchionne is right. The problem is real. Automakers can’t go on consuming capital the way they have.
They can’t hope to meet the requests of consumers, regulators and investors without taking a hard look at how they spend their money.
On this much, the minds of the auto industry agree. But it’s Marchionne’s talk of mergers and takeovers — even hostile ones — that makes the industry cringe, and not without reason. Automotive history is rich with stories of deals gone sour, cultures clashing, “synergies” unrealized and employees embittered.
And besides, most automakers have concluded, there are better ways — or at least other ways — to conserve, consolidate and collaborate without the need to smash two companies into one.
Why won’t GM play ball with Marchionne?
Sergio Marchionne’s fixation with a General Motors merger says a lot about how he views the future prospects of FCA as a standalone entity. And GM’s reticence to engage says a lot about how Mary Barra & Co. view their own.
THE FORD MODEL: Internal consolidation and streamlining
The Ford Motor Co. that Alan Mulally took charge of in two thousand six was a dizzying jumble of eight brands and numerous regional fiefdoms. Mulally’s simplistic-sounding plan to create “one Ford” transformed the automaker just in time for it to weather the looming recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.
THE RENAULT-NISSAN MODEL: Taut alliance of separate companies
Instead of one company taking over the other, Renault and Nissan have helped each other through a global alliance for sixteen years. Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation treatment to consolidation that has failed other automakers.
THE TOYOTA MODEL: Discrete joint ventures and projects
Toyota exploits a mixed bag of discrete ventures where they make the most sense, while largely avoiding deeper entanglements. The objective is to learn what it can from its rivals, and attempt to pack niches in its own lineup.
THE TESLA MODEL: Collective access to technology
By opening up patents and sharing a set of powertrains and electronics — and encouraging other automakers to do the same — Tesla can invest in what sets it apart: design, branding and user interface.
Industry On Trial – Automotive News
INDUSTRY ON TRIAL
An examination of the auto industry
Did Sergio get it right?
Six superstars ponder the future of an ‘irrational’ auto industry
Sergio Marchionne says the auto industry is cracked. Is he right or was he simply putting FCA up for sale? We asked six superstar industry thinkers to discuss the matter in detail: Bo Andersson, Arndt Ellinghorst, John Krafcik, Bob Lutz, Tim Manganello and Andy Palmer. They all see an industry with yam-sized challenges.
See the entire movie
Or select a chapter:
Industry on Trial: Introduction
Chapter 1: ‘Today’s automotive industry – as it’s structured – is unsustainable.’
Chapter Two: ‘The automobile business is a destroyer of capital.’
Chapter Trio: ‘Very few mergers … have survived or make sense.’
Chapter Four: ‘Does the industry … need a catastrophic event in order to switch?’
Chapter Five: ‘How many major automakers will there be in ten years?’
Read Marchionne’s case: Confessions of a Capital Junkie
CAPITAL CRUNCH
New-vehicle sales in the U.S. are on track for the second-best year in history. So why do so many wise people believe the auto industry is in a desperate situation?
Marchionne’s diagnosis of industry weakness goes far beyond FCA
FCA CEO Sergio Marchionne’s critique of the industry shouldn’t be overlooked. There is broad agreement among current and former executives that automakers fail to use capital efficiently.
Comeback on investment: Not a pretty picture
Last spring, General Motors began violating out a fresh metric in its financial disclosures: come back on invested capital. The relatively arcane financial metric is at the root of the debate sparked by Fiat Chrysler Automobiles CEO Sergio Marchionne.
Who will pay rising development costs?
Regulators and consumers keep requiring that automakers pack more features and equipment into vehicles. But all of that comes at a cost — which somebody ultimately has to pay.
Opinions about our series:
EDITORIAL: Conventional wisdom on industry needs rethinking
LETTER TO THE EDITOR: An exceptional ‘depth of perspective’
LETTER TO THE EDITOR: Autonomous cars will bring switch
LETTER TO THE EDITOR: Consolidation is not the only response
R&D SPENDING: HOW MUCH IS POINTLESS?
Carmakers spend billions to differentiate components “not discernible to consumers,” says Sergio Marchionne. Does every carmaker indeed need its own 1.Three liter 4-cylinder engine? Its own axles? There are strongly-held beliefs on both sides.
Duplicating vehicle engineering
thrusts costs and prices higher
Since the beginning of 2012, at least twelve major global automakers have introduced or announced plans to launch petite, three-cylinder engines. The estimated total cost to engineer those distinct, proprietary three-cylinders: a staggering $Ten billion to $12 billion.
Global regulations drive up engineering costs
A tangled web of differing global regulations — mostly covering emissions and safety — compels automakers and suppliers to spend billions on redundant engineering.
Dealers fret over prices, split on parts sharing
Rising costs will cut into vehicle sales, hurting auto retailers. And while more parts sharing among automakers could help trim costs and keep fresh cars affordable, dealers say there are thresholds to doing so, an online, unscientific survey of auto retailers by Automotive News found.
Automotive News surveyed dealers on pricing trends and what greater parts sharing by automakers might mean at the retail level. Here’s what they said:
SURVEY: Price worries? Yes.
SURVEY: Parts sharing? Hmmm .
EDITORIAL: Industry must stop wasteful spending before it’s too late
MERGE OR DIE? IS CONSOLIDATION THE SOLUTION FOR AN ‘IRRATIONAL’ INDUSTRY?
Mergers always flop, right? Not so. We look at the handful of mergers/long-term collaborations that were successful, and ask: why did they work?
Uncommon alliance successes share key traits
The automotive industry landscape is littered with the carcasses of failed alliances, yet the truth is some marriages do produce positive results. Fiat and Chrysler are both healthier now, and Renault and Nissan have been working together for two decades. What makes some mergers or alliances work?
How Ford’s partnership with Mazda unraveled
The breakup of the Ford-Mazda partnership illustrated how even the most successful of long-term alliances can unravel under outward pressures.
DaimlerChrysler: Poster child of failed mergers
Sergio Marchionne says automakers consume too much capital. His solution: mergers and alliances. But few deals ruined more capital than the historic one thousand nine hundred ninety eight union that created DaimlerChrysler AG. Here’s how it went wrong.
COMMENTARY: M&A fever’s hefty toll on talent
EDITORIAL: Is a merger the way to go? Automakers better know history
THE STATE OF FIAT CHRYSLER AUTOMOBILES
Analyst Arndt Ellinghorst says Fiat Chrysler CEO Sergio Marchionne is “running a company which is most likely the most challenged within the global industry.” So is Marchionne’s “Confessions of a Capital Junkie” just a fancy way of putting FCA up for sale? Marchionne says no. Neither is it “an excuse for FCA’s current ranking in the automotive food chain,” he says.
Still, why do so many people have such grave doubts about an automaker that keeps setting sales records in the United States?
FCA chief wants tie-up with GM; GM’s response: ‘Why bail out FCA?’
General Motors has flatly rejected the advances of its crosstown rival, Fiat Chrysler Automobiles, but FCA CEO Sergio Marchionne is not going away – not by a long shot. Marchionne says he has sweated the details and done the math and discovered there’s far too much upside in a merger of FCA and GM to let a deal go undone – or at least unexplored.
JASON STEIN: Marchionne waits at the gate, but who is there to reaction?
The indeed bad news for GM: A dragon stands again at the gates. And he’s wearing a black sweater. To talk again about a GM-FCA merger “and publicly reload the idea,” said analyst Arndt Ellinghorst, “clearly Sergio Marchionne is taking out the bazooka to hunt GM down.”
Marchionne wants a fucking partner but says FCA can sustain alone ‘in mediocrity’
Compared to its larger and far richer global counterparts, Fiat Chrysler Automobiles faces a gigantic set of problems. CEO Sergio Marchionne knows he has challenges but says he also has a plan that is working.
Marchionne’s collective views with UAW chief could help contract talks
Sergio Marchionne said he believes his straightforward relationship with UAW President Dennis Williams will help Fiat Chrysler reach a fresh labor agreement with the union.
Sergio may stay till 2020, hunts for next top leader
Sergio Marchionne is sixty three and the very first to admit that he and won’t stick around as CEO of Fiat Chrysler Automobiles forever. But he may remain a bit longer than expected.
Jeep helping to power FCA in Europe
Thanks to a strong embark for the Jeep Renegade and its sibling, the Fiat 500X, Fiat Chrysler’s sales in Europe are recovering quicker than the overall market.
How GM and FCA could come together
Mergers, of any kind, are difficult to execute, even when both parties are willing to do the deal. Arndt Ellinghorst, head of global automotive research at London-based Evercore ISI in London and one of Europe’s most influential auto analysts, handicaps the screenplays around a possible General Motors merger with Fiat Chrysler Automobiles.
The quotable Marchionne
EDITORIAL: FCA’s pursuit, GM’s protest are built into DNAs
IF NOT MERGERS, WHAT?
Sergio Marchionne is right. The problem is real. Automakers can’t go on consuming capital the way they have.
They can’t hope to meet the requests of consumers, regulators and investors without taking a hard look at how they spend their money.
On this much, the minds of the auto industry agree. But it’s Marchionne’s talk of mergers and takeovers — even hostile ones — that makes the industry cringe, and not without reason. Automotive history is rich with stories of deals gone sour, cultures clashing, “synergies” unrealized and employees embittered.
And besides, most automakers have concluded, there are better ways — or at least other ways — to conserve, consolidate and collaborate without the need to smash two companies into one.
Why won’t GM play ball with Marchionne?
Sergio Marchionne’s fixation with a General Motors merger says a lot about how he views the future prospects of FCA as a standalone entity. And GM’s reticence to engage says a lot about how Mary Barra & Co. view their own.
THE FORD MODEL: Internal consolidation and streamlining
The Ford Motor Co. that Alan Mulally took charge of in two thousand six was a dizzying jumble of eight brands and numerous regional fiefdoms. Mulally’s simplistic-sounding plan to create “one Ford” transformed the automaker just in time for it to weather the looming recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.
THE RENAULT-NISSAN MODEL: Taut alliance of separate companies
Instead of one company taking over the other, Renault and Nissan have helped each other through a global alliance for sixteen years. Less than a merger, more than a partnership, the Renault-Nissan Alliance so far has proved a viable alternative to the all-or-nothing, one corporation treatment to consolidation that has failed other automakers.
THE TOYOTA MODEL: Discrete joint ventures and projects
Toyota exploits a mixed bag of discrete ventures where they make the most sense, while largely avoiding deeper entanglements. The objective is to learn what it can from its rivals, and attempt to pack niches in its own lineup.
THE TESLA MODEL: Collective access to technology
By opening up patents and sharing a set of powertrains and electronics — and encouraging other automakers to do the same — Tesla can invest in what sets it apart: design, branding and user interface.