Why a VW-Fiat merger could be chaos
VW head Piech may be a genius, but he’s aging
The potential of the rumoured — and much denied — Fiat-Chrysler-Volkswagen merger being bandied about this past week depends much on whether you believe the success of a corporation is the logical conclusion of capitalistic dynamics or of the forceful vision of one charismatic leader.
If you believe in the former, then you believe that the logistics will help buffer the giant against business cycles, that is if the Volkswagen Group does manage to get its grubby little hands on Sergio Marchionne’s FiatChrysler conglomeration (and, according to reports, VW has more than enough money to finance the whole deal from petty cash).
VW would immediately vault to No. 1 in the fiercely competitive global marketplace, its now-combined 14 million annual sales some four million ahead of either General Motors or Toyota. Some also point out the economies of scale, both in marketing and engineering — the latter especially appropriate since Volkswagen is the master of maximizing the number of cars built on the smallest number of platforms.
The same proselytizers point out that Fiat-Chrysler’s Ram pick ups would fill a huge hole in Volkswagen’s lineup and that Jeep gives the company the SUVs it has always coveted. Fiat’s 500 is the micro car that Volkswagen can’t build profitably and VW gets to add Alfa Romeo and Maserati to a stable of premium brands that already includes Lamborghini, Bugatti, Porsche and so many more I’ve lost count (the Agnelli family — the money behind Fiat-Chrysler — is reportedly insisting on keeping Ferrari, not for nostalgia’s sake as you might imagine, but because it is incredibly profitable).
This last, if you’re a believer in the second option postulated above, is a problem. A big problem! Never mind that conglomerates don’t have a history of success in recent automotive history — both GM and Ford were only successful after they jettisoned the very kinds of brands that Volkswagen is buying — but the Volkswagen group is arguably being held together through the force of a single man. Ferdinand Piech is very much the titan behind the scenes at Volkswagen and is single-handedly responsible for the growth of VW into a company that is nipping at the heels of GM and Toyota for top spot among automakers.
He is acknowledged to be a genius, a master number cruncher and, in an earlier career, a brilliant engineer. So, unlike so many in his position, he can tell when the production line is feeding him a stinker. He is also, as forces of nature are wont to be, autocratic, an attribute absolutely essential when acquiring companies, divisions and groups, and then sorely missed when management is left to run all those disparate divisions when he leaves the helm.
For the simple truth — and I apologize in advance for the following morbidness — is that Piech is 77 years old. Not only is this an age when most have eased their way into rocking chairs, it is also damnably close to the average age at which German males pass on to the big Reichstag in the sky (78.5 years of age according to the World Health Organization). What is to happen to Volkswagen’s incredible smorgasbord after Piech is gone?
The resultant Volkswagen Group would be so diverse — the number of marques falling under Volkswagen’s purview would easily be up to 20 — that without Piech instilling the fear of God in every division manager, I suspect the resultant sprawl would invite chaos.
Volkswagen’s war with Porsche — first Porsche, the enterprising guppy, was going to take over Volkswagen but then the Great Recession interceded and VW swallowed Porsche — was as acrimonious as inter-family squabbles get. Spanish affiliate Seat is not exactly happy at being seen as the spendthrift of the conglomerate (even if it’s true) and even Audi chafes at Piech’s dicta (his decision that Volkswagen should have a luxury sedan — the Phaeton — to challenge the A8 did not go down well at all in Ingolstadt). And that’s even before Volkswagen has added the mess that is Fiat-Chrysler to the mix.
Chrysler, on a huge upswing right now, is the most bipolar of automakers, its manic success often followed by an equally dramatic round of non-profitability (see Daimler’s merger of un-equals). And is there anyone out there who thinks Italian autoworkers are going to respond to German management in a more complacent manner than they have to the Italian/Canadian Marchionne?
So, the question that pundits the world over should ask isn’t whether Piech will be successful in stealing the suddenly attractive FiatChrysler from under Mr. Marchionne’s nose, but what in tarnation Volkswagen will do with it once Piech has left the building.