VW may consider Chrysler merger
Volkswagen Group reportedly opened the door to a possible merger with rival Fiat Chrysler Automobiles, setting the stage for a potentially seismic shakeup in the global automotive industry.
Volkswagen global CEO Matthias Mueller told reporters in Germany that he would not rule out talks with ItalianAmerican automaker Fiat Chrysler, according to Reuters.
His comments, which came after an annual news conference, signal a possible speedup in consolidation for an industry that’s on the verge of massive upheaval via selfdriving vehicles and ridehailing applications.
“I am not ruling out a conversation,” Mueller told reporters, according to Reuters. He said he had not yet spoken with Fiat Chrysler CEO Sergio Marchionne about the topic but that “it would be very helpful if Mr. Marchionne were to communicate his considerations to me too and not just to you.”
Marchionne has publicly lobbied for auto industry consolidation for years, having previously proposed a deal with General Motors that GM rejected.
But urgency is picking up after GM reached a deal to sell its European division to French automaker PSA Group, which controls the Peugeot brand, potentially translating into stiffer competition for VW in its home market.
In the U.S., Fiat Chrysler owns the popular and profitable Jeep and Ram brands but is saddled with ailing car-heavy brands Dodge, Chrysler and Fiat.
As one of the smaller global automakers, Fiat Chrysler may need a deal to navigate a massive increase in technological investment required to keep pace as the industry shifts toward self-driving vehicles, electric cars and ride-sharing business models.
But that doesn’t mean a deal makes sense for Volkswagen, Autotrader analyst Michelle Krebs said.
“They have a lot on their plate as it is,” Krebs said. “It’s clear that Volkswagen needs to focus on profitability and getting the most out of their brands.”
A Fiat Chrysler representative declined to comment.
Volkswagen spokeswoman Jeannine Ginivan said in an email “there are no plans and have been no discussions” between the two companies.
Potentially complicating matters is the rivalry between VW and Fiat Chrysler. Marchionne once memorably challenged VW leaders to a showdown at the Paris Auto Show.
But Marchionne last week told reporters at the Geneva Auto Show that VW might come calling.
“I have no doubt that at the relevant time VW may show up and have a chat” for a merger because the Opel-PSA deal threatens VW, Marchionne said, according to Bloomberg.
Volkswagen, which is under pressure to bolster its profit margins, could be enticed by the Jeep and Ram cash cows. It could also envision opportunities for cost cuts, combined purchasing power or engineering collaboration in Europe through a Fiat Chrysler tie-up.
But a deal could make more sense for Fiat Chrysler, which is not blessed with the financial wherewithal that some of its rivals possess.
What’s more, after rescuing Chrysler from liquidation through a U.S. government bailout, bankruptcy and restructuring, Marchionne is looking to “leave the house in good order” before his planned retirement in early 2019, Krebs said.