Marchionne Continues to Press GM for a Merger with FCA

Last week Fiat Chrysler Automobiles CEO Sergio Marchionne told U.S. dealers the company was sound enough to thrive on its own. But he is continuing to pester General Motors Co. to consider a merger, Automotive News reports.

AN says Marchionne hints that FCA may attempt a hostile takeover of GM if the larger company continues to rebuff his overtures because, he says, "it would be unconscionable not to force a partner."

Marchionne says he has calculated the math of such a deal in depth. His conclusion: Combining GM and FCA would bring "cataclysmic changes in performance" for the merged companies. For one thing, he says, the merged companies could generate $30 billion per year in earnings before interest, taxes, depreciation and amortization.

But Marchionne grouses that GM has flatly refused to review his calculations. "They won't listen," he says, declaring "you may reject the deal, but you can't reject the discussion." He opines that GM's continuing refusals mean either GM thinks "it's above it all" or believes the capital markets "are full of schmucks."

A GM source tells AN the company doubts Marchionne's rosy profit forecast for a GM-FCA merger. The source also says one high-ranking GM executive has wondered aloud why GM would want to bail out FCA.

Analysts generally agree with Marchionne's observation that carmakers would benefit by merging to help pay for future emission and fuel economy technologies. One quoted by AN even agrees that Marchionne's EBITA estimate for a merger GM and FCA is feasible. But another analyst said in June that attempting such a deal would be an "operational and management nightmare."