Wednesday, August 30, 2017


THE SCENE: The Fiat Chrysler Automobiles Boardroom.
THE PLAYERS: Head cowboy Sergio Marchionne, and assorted serfs in suits with grand titles, like VP of Money; VP of Selling; VP of Spin; VP of ‘Folks’.

AGENDA ITEM ONE: Great Wall’s rumoured offer to take Jeep of our hands

CHAIRMAN’S REACTION: Shock, horror! Would we sell Jeep to some two-bit Chinese company? Definitely not!

CHAIRMAN’S INSTRUCTION TO VP of SPIN: Write a press release saying we haven't heard from Great Wall, and we  reject the idea anyway!

Well, Sergio, that certainly was the right response, because it doesn’t matter how much FCA would make by selling Jeep. Because without Jeep you got nuthin’. Zero, nada, no hope!

Also, despite the fact Great Wall Motors has been successful with its SUVs and pickups, by global standards it’s still a minnow.
It simply doesn’t have the financial might to buy a property like Jeep, at least not without humungous borrowings. Great Wall's market capitalization might be only USD$16 billion; and the rumoured value of Jeep is USD$26 billion. That’s quite a gap, if it were taken up with debt.

Great Wall Motors got out of the blocks pretty smartly, its SUVs and pickups made great initial inroads into many global markets, and both Chairman We Jianjun (left) and President Wang Fengyin (right) were very impressed with their early results.

Trouble is, the rest of the market has grown hugely in terms of availability of a much wider range of SUVs, and Great Wall is now battling to stay relevant.

There are other things to consider: In the current climate in Trump-led America, it is highly unlikely President Trump would allow an American icon like Jeep to be acquired by a Chinese company!

It is also unlikely that GWM ever made a formal approach to FCA, because regulatory requirements for public companies in the USA demand that the company (FCA) disclose any approach, to its shareholders.

In addition there’s the technical and, culture shock, of integrating the two corporations; the differences in technologies; and the lack of technological skills of a Great Wall parent!; and product planning. All issues challenging a viable future of the entity.

Nope. It won’t happen.

As I have written before, the American analysts who are hyping up the value to FCA of selling off Jeep and Ram seem to be completely ignorant of the fact that what’s left – Chrysler, Dodge, Fiat, and the premium Maserati and Alfa Romeo brands are worth, precisely, nothing!

Certainly nowhere near enough to pay down FCA's net debt level, which remains around USD$6 billion. And, forget about all the pr releases that say Jeep is selling in big numbers. They may be, but an internal source at FCA (USA) tells me that their marketing costs and dealer bonus payments per vehicle to move the products are huge, which really just offsets whatever small profit there was.

Sergio may have invested USD$5 billion to create Alfa Romeo as a premium brand; but FCA will NEVER get a return on that investment. Not only because the profit margins are small, but industry sources in the USA tell me the new Alfa Romeo Giulia is absolutely plagued with massive electrical problems. 
Only 2,482 Giulias have been sold in the USA in 2017, and most of those were the potent Quadrifoglio model. The base cars are getting no traction in America, and I hear from friends who are very well-plugged into this level of the global automotive industry, that Maserati and Alfa Romeo are actively being hawked around.

Apparently, a couple of Chinese companies have shown some interest in Maserati - so interested parties should drop Sergio a line.

However, even if Maserati and Alfa Romeo were sold, that highlights the value of the remainder - not much.

(stock photo - reactions genuine)

Also, keep in mind Sergio Marchionne has told the FCA Board that his ‘new plan’ for the future of FCA must be finalized before he retires as Chairman by end of 2018. Good luck with that then.

FCA as automotive road kill? It’s looking more likely as each month passes.

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