Auto politics makes for strange bedfellows

di Redazione del March 16, 2017
The Honourable Joe Volpe, Publisher
TORONTO - Monday, March 14, Peugeot SPA, a French auto giant, closed a deal to acquire Opel (Europe) and Vauxhall (Britain) from General Motors. With it, Peugeot becomes the second largest automaker in Europe.
The move will not have caught either VW or FCA by surprise. FCA in particular, like a lioness in heat, had been offering itself to GM and to VW.
Last week, probably in response to news that exploratory merger talks between Peugeot and GM were becoming serious, FCA’s CEO groused to Italian media that the company was being shunned by the other Auto players in the European market. VW responded with classic condescension to FCA’s lamentations. 
The emergence of a Peugeot-Opel-Vauxhall conglomerate, however, may have focused the mind. What may have been unpalatable 48 hours ago has taken on a different hue.
Yesterday, VW appears to have changed its mind about either a merger with FCA if not indeed an outright purchase of its decidedly junior partner. At annual revenues of $149 billion CDN, FCA is just less than halve the size of VW at $305 billion CDN.
Both have reputational and brand problems in the USA that carry financial and [potentially] criminal liabilities. Operating profits for VW dropped 10% last year after the charges from the Environmental Protection Agency started to take hold.
Matthias Mueller, its CEO, is cleaning up VW’s corporate culture and focusing on the company’s core business and strategic plan for the USA.  
VW made changes “at the top”, set aside $34 billion CDN to settle fines and court challenges in the USA.  No more escort services and all-expenses-paid trips to Paris for wives and girlfriends.
Mueller doesn’t have time for games. Governments, competitors and consumers are lining up to follow the US example. All that money (potentially $50 billion CDN) must come from somewhere.
But FCA has yet to come to grips with its own challenges in the US marketplace: it continues to deny charges of fraudulent reporting; address fines associated with it (c. $1 Billion CDN); has been compelled to recall 500,000 vehicles for shoddy workmanship and faces a $5.8 billion CDN fine for the same emissions scandal. 
Its CEO, Sergio Marchionne, a hands-on administrator, cultivates a public image of the perennial mendicant, homeless man … ad nauseum. He “toys with media”, tossing out nuggets of information designed to distract and confound.
Italians are still bitter about how FIAT took $12 billion CDN in direct government but re-invested only $10 billion CDN back into the industry over the last ten years. 
Unions gripe that despite an estimated $100 billion CDN in indirect support over the last 25 years, FIAT still cut thousand of jobs, closed plants and moved its operation off-shore to Britain. Clearly Trust is an issue.
Nonetheless, business is business and Mueller reluctantly opened the door, ever so slightly. Yesterday, he offered that if Marchionne is serious “he should be talking to us” rather than to the Media.
Consumers, workers and pensioners should check the locks on their safes.

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