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  • Is the Fiat boss an industrial genius or has he lost control?

    Posted on May 4th, 2009 Peter Tjernström No comments

    Sergio Marchionne, Fiat chief executive, today travelled to Berlin where he presented his plan for a three-way alliance among Fiat, Chrysler and Opel to German Foreign Minister Frank-Walter Steinmeier and German Economy Minister Karl-Theodor zu Guttenberg.

    Sergio Marchionne

    Sergio Marchionne

    According to a Fiat press release from May 3, Fiat will consider creating a new publicly traded company that combines the auto maker’s car unit, Fiat Group Automobiles, including its stake in Chrysler, with GM’s European operations (including Opel (DE), Vauxhall (UK), and Saab (SE)). The three-way alliance is expected to generate €80 billion ($106 billion) in annual revenues.

    Fiat needs the support of the German government, which is leading Opel’s search for a new investor as GM has officially declared that it will not finance Opel long term.

    Let’s hold on there for a second and recap what Mr Marchionne has been doing lately. After he was appointed CEO of Fiat on June 1, 2004, he has turned around the then borderline survivor to a profitable company and credible industry consolidator. Only four days ago, Fiat announced the acquisition of a 35 per cent stake in the troubled US carmaker Chrysler in return for technology and other resources but without any cash injection from the Italian group. Together with the announcement today, Mr Marchionne is up for a much bigger challenge than the re-structuring of Fiat itslef.

    One thing is certain: German companies really don’t like to be bought by big foreign competitors. Anyone who remembers the row back in 2000 when Vodafone aquired Mannesman? This at the time largest corporate merger in history was initially criticized by the then German Chancellor Gerhard Schröder. This time rumour has it that Mr Steinmeier opposes the deal. Since the Opel business is depending on government backed-up loans, you can be sure that the German national interest will play a big role in this deal. Now consider the fact that the current German government is a “Grand Coalition” between the two biggest parties with a general election due in September, and you understand that Mr Marchionne has to master both the political and the business side of things.

    The question is if Mr Marchionne is an industrial genius of a rare kind or if he pushed the accelerator too hard this time. Maybe he knows something that everyone else doesn’t. Are we maybe at the bottom of the economic downturn? Buying Fiat shares, anyone?

    Media links: FT, Handelsblatt (DE),  DN (SE), AFV (SE)

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