Fiat Chrysler boss Sergio Marchionne has never been shy with his opinions. Now he's suggesting that there is room for an even bigger automaker than current top dog Toyota, something he says the "fragmented" automotive industry needs because of an imbalance between the growing costs of developing a new model and the rate of return on those new models.
The combination of increasing regulations and rising consumer demand for high-tech features along with forecasts of mild near-term growth may mean that the time for mergers is now. That's especially true considering the current competition in the auto industry and its cyclical nature, according to an analyst.
"These companies strive for economies of scale to keep prices down," Richard Hilgert, a Chicago-based analyst with Morning Star, told Bloomberg Businessweek.
Mergers are always a dicey proposition in the automotive industry. While the Fiat Chrysler marriage seems to be working so far, Chrysler's last merger, which was with Daimler, ended up being disastrous for the American automaker.
Contentious almost from the beginning, the deal was thought of as more of a Daimler takeover than a merger of equal companies, as it had been touted at the time. Chrysler ended up being sold to Cerberus Capital Management, an arrangement that also didn't work well. It was during a 2009 bankruptcy that Chrysler merged with Fiat in order to keep the company afloat.
Similarly, an attempted merger between Volkswagen and Suzuki has ended in years of litigation that is still ongoing.
As for any predicted future mergers, Fiat Chairman John Elkann said his company would be "ready to participate .... If it makes sense," according to Bloomberg.
Fiat brass said that they'd look for opportunities but that the company didn't necessarily need a deal. No one from Fiat mentioned a specific automaker the company or others might pair with in a major merger.
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