Fiat Chrysler has dropped a number of clues suggesting that it may be preparing to force General Motors' hand in an historic deal.
This April, when Fiat Chrysler Automobiles’ CEO Sergio Marchionne gave his speech, “Confessions of a Capital Junkie,” underlining the importance of mergers and acquisitions in the auto industry, many people scoffed. According to USA Today, however, the speech may have been more than just rhetoric. Analysts are beginning to believe that his presentation was a posturing move to prepare for the sale of FCA.
The speech is seen by many as another request for a merger, only six years after Fiat and Chrysler merged in 2009. Now, some are positing that the speech could foreshadow a possible merger with General Motors sometime in the future.
Both automakers appear to be taking the possibility seriously, after hiring financial advisers from Goldman Sachs and UBS earlier this week. This suggests that the preliminary gears of a deal are already turning.
Many believe that Marchionne could be angling for a hostile takeover of GM. According to analyst Max Warburton, “The mechanics of such a bid look ambitions – in fact, they are without precedent. Selling it to shareholders, unions, and anti-trust authorities would be hugely complex, but stranger things have happened.” FCA is much smaller than GM, and has much higher levels of debt. Despite their difference in size, officials from both companies still seem to talk about the deal with a air of seriousness.
Marchionne has outright asked for the two companies to combine resources on multiple occasions, although there has still not been any formal acceptance of the request on GM’s part. Emails sent to GM’s CEO proposing a merger did not receive a response.
While capital is already appearing to be allocated for some sort of big move, it is still unclear what exactly will happen between the two auto companies. One thing is for sure, however – Marchionne’s plan to combine the resources of the two auto companies may be the best way to keep up with rising expenditures and rapidly shifting auto markets in the U.S.