A match made in China
AFTER many years of trying — and failing — to merge with another company, Fiat Chrysler Automobiles (FCA) could finally be acquired by a Chinese company.
Sergio Marchionne, Chief Executive Officer (CEO) of FCA, tried hard to entice General Motors and later Volkswagen to consider merging with FCA but was rebuffed by the former and ignored by the latter. Now, a number of Chinese companies are competing to make FCA an offer it cannot refuse.
Chinese companies are encouraged by their government to expand outside China by acquiring foreign companies.
They also need to close the quality gap in order to invade the US and European markets. Chinese companies formed partnerships with major manufacturers and now they are moving to outright acquisitions.
There are yet no formal announcements but leaks indicate that an offer to FCA above its current valuation was turned down for being insufficient.
Chinese delegations were seen visiting FCA headquarters in Michigan and FCA executives recently visited China.
China is after iconic brands such as Jeep and Ram, which would open the US market, and Fiat, which is strong in Europe. As such, FCA is an ideal Chinese purchase. Geely has succeeded in acquiring Volvo in 2010, and other Chinese acquisitions include Pirelli, the Italian tire company, and German robotics giant, Kuka.
Bloomberg recently reported that Chinese companies plan to spend $1.5 trillion on acquiring overseas companies over the next decade, which is an increase of 70 percent over current levels.
FCA makes an ideal acquisition for the Chinese companies having 2,600 dealerships in the US, 162 manufacturing operations and 87 research and development centers.
But any Chinese purchase would not include Maserati and Alfa Romeo, which would be spun off separately.
It is very likely that Marchionne realizes that signing a contract with a Chinese company would not be a partnership or a merger but a clear acquisition with total Chinese control over future plans.
Such a step, however, may have American political hurdles to overcome.
Murad is a senior motoring and business journalist based in London.