Merger by Fiat

29 Apr 2015 By Antony Currie, Olaf Storbeck Follow @AntonyMCurrie

Fiat Chrysler’s boss sounded like an activist investor in making a solid case for car industry consolidation while haranguing analysts. Yet his bizarre plea for help with mass mergers sent the company’s shares down 5 pct. That kind of backfire smacks more of ex-VW chair Ferdinand Piech.

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Fiat Chrysler Chief Executive Sergio Marchionne on April 29 told investors and analysts that the auto industry desperately needs to consolidate. It’s not a new theme for Marchionne, but this time he devoted almost two hours to the topic during a conference call meant for discussing the company’s first-quarter earnings. He also provided a presentation entitled: “Confessions of a capital junkie: an insider perspective on the cure for the industry’s value-destroying addiction to capital.”

Marchionne pointed out that the mainstream automakers together do not earn enough to cover their cost of capital over an economic cycle. He blamed automakers that engage in “duplicative” uses of capital in designing and building vehicles. He called this “most offensive … It’s irrational and an economic waste and delivers no benefit to anyone.”

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