Speculating about the potential buyers of FCA brands

So many things have been said about a deal between FCA and a potential buyer. The rumors grab more attention than the company’s financial results, but there’s very few evidence of a real agreement. Sergio Marchionne has constantly said FCA can make by its own, but at the same time he doesn’t hide his desire of finding the suitable husband to its beloved company. He’ll be out of office soon, and this is perhaps his major challenge now.

Marchionne would love to sell the company as a whole to a powerful car maker. The 9 main brands of the group sell around 5 million units per year with Jeep and Fiat counting for 63% of the total. An eventual partnership would increase this volume and get close to the big players like Renault-Nissan or Volkswagen Group. Despite the rumors of negotiations with Chinese Great Wall and Hyundai-Kia, the truth is that nothing has happened yet and its rivals continue to run faster.

Jeep-Ram-Chrysler-Dodge

What about splitting the group into three groups? Jeep is the most attractive brand in FCA world, but it loses value when living with Fiat under the same roof. The SUV brand would become more appealing to investors if it were spun off, just as it happened to Ferrari. My own speculation takes me to think that a big Chinese automaker like Zhejiang Geely Holding Group could be the most probable candidate for the purchase of Jeep, along with Ram, Dodge and Chrysler. Why?

Because the Chinese car makers understand that the best way to expand their operations outside China is not through their own low-reputation cars, but through acquisitions, mergers or collaborations with Western makers. Geely is China’s most international automaker due to its increasing importance in the European car market through Volvo cars, London Taxi Corporation and Daimler. The next step in its global expansion should focus on USA, and the former Chrysler group could be the perfect match.

There is also one more reason. Despite its strong results in 2017, Geely is still behind the leaders in the Chinese SUV segment. Last year they sold around 685.000 SUVs in China, up by 49%, and counting for 6,4% of the segment total. It was the fourth largest SUV maker behind GM, Great Wall and VW Group, with the American automaker leading the ranking with more than 940.000 units. If Geely wants to outperform its Western rivals and Great Wall, it needs more a wider range of brands. Jeep could solve this requirement by adding more than 200.000 units that it currently sells.

Fiat

We won’t explain again the reasons why Fiat is not attractive anymore. The brand’s big problems don’t mean there aren’t solutions or potential buyers. And this is where I speculate the most, as there is no evidence or even indications that this could happen. However, Fiat could be useful for an automaker wishing to compete against Mini. And that’s the case of Daimler, which could find in the icon Fiat cars the best way to add more volume to its profitable operations.

Daimler doesn’t stop selling more cars and making more profits. Last year it posted records in both, so it wouldn’t make sense to look for a troubled brand like Fiat. But Daimler could also replicate the case of success of Mini, by buying Fiat brand and its iconic nameplates. Then it would transfer its know-how and premium touch to position Fiat as a semi-premium brand focused on chic smart mobility. There would be a massive change from how Fiat is conceived right now and how it would be under Daimler management. This means no models like the Panda, 500L, Tipo.

An acquisition of Fiat from Daimler is not likely to happen. Even if it makes sense from the point of view of the new positioning of Fiat, there are many obstacles. One of them is what to do with Fiat factories in Serbia, Turkey and Poland. Italy, as the UK, would become the hub for the iconic brand of Daimler, but its factories in the other countries wouldn’t have any role. Brazilian operations would help Daimler to expand its presence there.

Alfa Romeo & Maserati

These two brands would be next in line for a possible spin-off. Marchionne keeps saying that this will be only possible after both brands become profitable again, but the rumors about it grow every time there’s a potential sale. In other words, Alfa Romeo and Maserati are likely to be the next brands to become independent as Ferarri. However, it will take time and money.

Alfa and Maserati are expected to remain under the Agnelli’s control, at least for some years. This way the some Italian factories like Casino, Grugliasco and Modena could continue operating. This situation could continue until both brands are attractive enough to be sold to a Chinese automaker wishing to compete in the profitable premium segment.