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Why the Detroit Three should merge their engine operations

GM and FCA should consider a smaller merger that could still save them billions of dollars, and maybe lure Ford into the deal. Fiat-Chrysler CEO Sergio Marchionne would love to see his company merge with General Motors. But GM's board of directors essentially told him to go pound sand. So now what? The boardroom battle started when Mr. Marchionne published a study called Confessions of a Capital Junkie. In it, Sergio detailed the amount of capital the auto industry wastes every year with duplicate investments. And he documented how other industries provide superior returns. He's right, of course. Other industries earn much better returns on their invested capital. And there's a danger that one day the investors will turn their backs on the auto industry and look to other business sectors where they can make more money. But even with powerful arguments Marchionne couldn't convince GM to take over FCA. And while that fight may now be over, GM and FCA should consider a smaller merger that could still save them billions of dollars, and maybe lure Ford into the deal. No doubt this suggestion will send purists into convulsions, but so be it. The Detroit Three should seriously consider merging their powertrain operations, even though that's a sacrilege in an industry that still considers the engine the "heart" of the car. These automakers have built up considerable brand equity in some of their engines. But the vast majority of American car buyers could not tell you what kind of engine they have under the hood. More importantly, most car buyers really don't care what kind of engine or transmission they have as long as it's reliable, durable, and efficient. Combining that production would give the Detroit Three the kind of scale that no one else could match. There are exceptions, of course. Hardcore enthusiasts care deeply about the powertrains in their cars. So do most diesel, plug-in, and hybrid owners. But all of them account for maybe 15 percent of the car-buying public. So that means about 85 percent of car buyers don't care where their engine and transmission came from, just as they don't know or care who supplied the steel, who made the headlamps, or who delivered the seats on a just-in-time basis. It's immaterial to them. And that presents the automakers with an opportunity to achieve a staggering level of manufacturing scale. In the NAFTA market alone, GM, Ford, and FCA will build nearly nine million engines and nine million transmissions this year.

Marchionne backs off merger plans, could retire after 2018

FCA boss Sergio Marchionne is stepping back from plans to attempt a major auto industry merger like the oft-speculated deal with General Motors last year. According to Bloomberg, Marchionne now wants to grow his automaker through 2018, and then the 63-year-old could retire around the end of that year. Marchionne claims he received merger proposals last year, but he couldn't find an attractive enough partnership. "We went back to concentrate on the 2018 plan which would boost Fiat Chrysler's value and its position in a deal," he said to Bloomberg. He still believes that a big merger is possible, but "it will be someone else's duty," he said after previously hinting about possibly staying at FCA until 2020. Marchionne was clear that any chance for the GM merger was likely over. "I met Mary Barra less than a month ago in Washington," he told Bloomberg. "I don't think I will have another coffee with her. It won't happen again in the future." Now, the boss intends to spend the rest of his time at FCA building the automaker through its five-year plan, and his goal is to grow global deliveries to seven million units a year by 2018. To make that happen, the automaker will invest around $52 billion over that time to improve its brands' product slate. Marchionne began backtracking from the possible GM merger late in 2015 after it became clear that The General's board wasn't interested. Earlier in the year, he seemed more aggressive about the prospect by suggesting a hostile takeover with a bizarre metaphor about giving the company a hug. Related Video: News Source: BloombergImage Credit: Richard Drew / AP Photo Chrysler Fiat GM Sergio Marchionne FCA fca us

Fiat Chrysler, GM are trying 7-year 0% loans, online buying to lift plunging sales

With auto showrooms shut during the coronavirus pandemic, Fiat Chrysler and General Motors moved to reboot demand with seven-year, no-interest loans and programs allowing customers to buy vehicles online. Fiat Chrysler Automobiles' new "Drive Forward" marketing program includes online shopping tools that will for the first time allow U.S. customers to complete the purchase of a vehicle through an FCA dealer without setting foot in a dealership, a company spokesman said. The move toward online sales and home delivery breaks with a long U.S. auto sector tradition of manufacturers giving franchised dealers control of sales to consumers. Dealers have fought Tesla 's efforts to sell vehicles directly to consumers through its website. GM and Fiat Chrysler's promotions of extended, no-interest loans — made less costly by the Federal Reserve's recent interest rate cuts — echo the "Keep America Rolling" sales push GM launched to jump start a paralyzed consumer market after the Sept. 11, 2001, attacks. But the pandemic has been pulling auto retailing into the digital age, with dealerships shuttered across the country and sales likely to take a further beating in April as social distancing guidelines remain in place.   Related: Auto sales drop in March as coronavirus hits demand, output   FCA shares were down 4.9% to $6.84 in afternoon trading in New York after the company posted a 10% drop in first-quarter U.S. auto sales, as the pandemic hurt demand and halted production from mid-March. The company, however, did not break out sales by month. General Motors reported its first-quarter sales fell 7% because of significant declines in March, and said customers can use its existing "Shop.Click.Drive." program to find, purchase and arrange for home delivery of a vehicle. A GM spokeswoman said across the Chevrolet, Buick, GMC and Cadillac brands the automaker has seen two to four times greater online site visits and sales leads than before the pandemic. Hyundai said earlier that its U.S. sales fell 43% in March due to the pandemic. "It goes without saying that the entire world is facing a tremendous challenge that is having a significant impact on business and our normal way of life," Randy Parker, vice president for sales at Hyundai Motor America, said in a statement. Toyota said its sales were down nearly 37% in March and 8.8% for the quarter. Nissan reported a 27% drop in first-quarter sales.