FCA Chair Says Proposed Consolidation Talks with Several Rivals

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Fiat Chrysler Automobiles NV Chairman John Elkann said Friday the world's seventh-largest car maker has made contact with multiple rivals, including General Motors Co., to propose talks about industry consolidation.

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The comments echo his outspoken chief executive Sergio Marchionne, who has said publicly he has attempted to convince competitors of the logic of tying up. While Mr. Elkann didn't detail the scope or content of the outreach, the dialogue comes at a time of heightened focus on potential deal-making--especially amid overcapacity across much of Europe.

Mr. Elkann was asked about a report in the New York Times that said Chrysler Chief Executive Sergio Marchionne had written an email to Mary Barra, his counterpart at GM, to propose a tie-up of the two U.S. car makers

"The email to General Motors wasn't the only one," Mr. Elkann said at a news conference. "It isn't a single conversation."

Mr. Marchionne, who has neither confirmed or denied writing the letter, has been championing the need for consolidation in the auto industry, but until now his calls have fallen flat with competitors including Ms. Barra. Mr. Marchionne argues that the capital intensive nature of the car industry means there must be consolidation to better allocate funds and boost profitability.

It is unclear if a car marker has been willing to hold talks with Fiat Chrysler, and analysts have struggled to identify a suitable candidate. Ford Motor Co., Volkswagen AG and Toyota Motor Corp. have all rebuffed Mr. Marchionne's attempts to discuss consolidation.

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Frustrated at not getting much of a reaction from his rivals, Mr. Marchionne took the unusual step a month ago of presenting his case to analysts on an earnings conference call. On the call an analyst suggested Mr. Marchionne would do better to speak to the 10 executives who might be involved in the consolidation rather than a group of analysts.

Investors interpreted Mr. Marchionne's plea for consolidation as a sign of weakness and the stock fell 15% in the days following the conference call. The shares have since gained most of the lost ground and are trading more than 50% higher than at the end of last year, but that hasn't quelled speculation among investors and analysts that Mr. Marchionne had effectively put his company up for sale because he doesn't see it having a sustainable future on its own.

Mr. Marchionne has repeatedly denied that Fiat Chrysler needs a tie-up to survive an eventual market downturn. Yet he is turning a paltry profit in Europe, is late setting up production in the now slowing Chinese market, and in Brazil, where Fiat Chrysler is the market leader, the car market in tanking.

While Mr. Marchionne successfully pulled off Fiat's acquisition of bankrupt Chrysler, the combined company remains much weaker than rivals. Its profit margins are well below GM and Ford, while Volkswagen and Toyota, two of the industry giants, turned in profits about 30 times higher than Fiat Chrysler's in their most recent reporting periods.

Fiat Chrysler's sales, profit and market share have been growing in the U.S., but a booming market that has feed gains for most in the industry now looks to be peaking. Mr. Marchionne is seeking a solution before North America, which has offset weaker results in the rest of the world and accounts for half of global revenue, starts to decline and already slim profit margins get thinner or disappear altogether.