TURIN, Italy—Fiat Chrysler Automobiles NV Chairman
John Elkann said Friday the world's seventh-largest car maker has
made contact with multiple rivals, including General Motors Co., to
propose talks about industry consolidation.
The comments echo his outspoken chief executive Sergio
Marchionne, who has said publicly he has attempted to convince
competitors of the logic of tying up. While Mr. Elkann didn't
detail the scope or content of the outreach, the dialogue comes at
a time of heightened focus on potential
deal-making—especially amid overcapacity across much of
Europe.
Mr. Elkann was asked about a report in the New York Times that
said Chrysler Chief Executive Sergio Marchionne had written an
email to Mary Barra, his counterpart at GM, to propose a tie-up of
the two U.S. car makers
"The email to General Motors wasn't the only one," Mr. Elkann
said at a news conference. "It isn't a single conversation."
Mr. Marchionne, who has neither confirmed or denied writing the
letter, has been championing the need for consolidation in the auto
industry, but until now his calls have fallen flat with competitors
including Ms. Barra. Mr. Marchionne argues that the capital
intensive nature of the car industry means there must be
consolidation to better allocate funds and boost profitability.
It is unclear if a car marker has been willing to hold talks
with Fiat Chrysler, and analysts have struggled to identify a
suitable candidate. Ford Motor Co., Volkswagen AG and Toyota Motor
Corp. have all rebuffed Mr. Marchionne's attempts to discuss
consolidation.
Frustrated at not getting much of a reaction from his rivals,
Mr. Marchionne took the unusual step a month ago of presenting his
case to analysts on an earnings conference call. On the call an
analyst suggested Mr. Marchionne would do better to speak to the 10
executives who might be involved in the consolidation rather than a
group of analysts.
Investors interpreted Mr. Marchionne's plea for consolidation as
a sign of weakness and the stock fell 15% in the days following the
conference call. The shares have since gained most of the lost
ground and are trading more than 50% higher than at the end of last
year, but that hasn't quelled speculation among investors and
analysts that Mr. Marchionne had effectively put his company up for
sale because he doesn't see it having a sustainable future on its
own.
Mr. Marchionne has repeatedly denied that Fiat Chrysler needs a
tie-up to survive an eventual market downturn. Yet he is turning a
paltry profit in Europe, is late setting up production in the now
slowing Chinese market, and in Brazil, where Fiat Chrysler is the
market leader, the car market in tanking.
While Mr. Marchionne successfully pulled off Fiat's acquisition
of bankrupt Chrysler, the combined company remains much weaker than
rivals. Its profit margins are well below GM and Ford, while
Volkswagen and Toyota, two of the industry giants, turned in
profits about 30 times higher than Fiat Chrysler's in their most
recent reporting periods.
Fiat Chrysler's sales, profit and market share have been growing
in the U.S., but a booming market that has feed gains for most in
the industry now looks to be peaking. Mr. Marchionne is seeking a
solution before North America, which has offset weaker results in
the rest of the world and accounts for half of global revenue,
starts to decline and already slim profit margins get thinner or
disappear altogether.
Write to Eric Sylvers at eric.sylvers@wsj.com
Access Investor Kit for Volkswagen AG
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0007664005
Access Investor Kit for Volkswagen AG
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0007664039
Access Investor Kit for Toyota Motor Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=JP3633400001
Access Investor Kit for Ford Motor Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3453708600
Access Investor Kit for General Motors Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US37045V1008
Access Investor Kit for Toyota Motor Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US8923313071
Access Investor Kit for Volkswagen AG
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9286623031
Subscribe to WSJ: http://online.wsj.com?mod=djnwires