Rumors that Volkswagen Group and Fiat Chrysler Automobiles could merge to become the biggest four-wheeled Goliath of all time have been squashed by high-ranking executives on both sides.
But since our industry runs on rumor, let’s imagine Volkswagen, Audi, Škoda, SEAT, Porsche, Lamborghini, Bentley, Bugatti, Fiat, Chrysler, Dodge, Jeep, Ram, Lancia, Alfa Romeo, Maserati, and Ferrari—plus Ducati motorcycles and Scania and Man trucks and buses—all coming together under one annual report. While Ford and General Motors learned the hard way that stuffing too many eggs in one basket isn’t always the best idea, money can make shareholders do crazy things. For our part, here’s why combining 20 brands probably isn’t wise—as well as some reasons it might make sense after all.
Thou Shalt Not Covet Ferrari
Lamborghini has been very happy under German authority, as it has learned how to build higher-quality supercars without going bankrupt every decade or so. But Ferrari, even under Fiat’s wide umbrella, answers to almost no one. The prancing horse is easily the most desirable auto brand on the planet as evidenced by never-ending wait lists, capped production, and handpicked clients who must prove their unwavering fealty for the privilege of buying each new model. Then there are the engines. The Formula 1 team. Heck, even the car fires are part of the Ferrari mystique. All of that—not to mention the brand’s healthy profits—meant that during FCA’s investor briefing in May, Fiat Chrysler CEO Sergio Marchionne put up a slide that said, “Ferrari is not for sale.”
Rinse with DaimlerChrysler, Then Spit
When DaimlerChrysler dissolved in 2007, the so-called “merger of equals” promise was finished. While not without success in those nine years—Chrysler upped its quality and gained access to Mercedes platforms; Daimler got Dr. Z to schlep American minivans—it was no good having two CEOs on two continents. Chrysler was gutted by its subsequent owner, capital firm Cerberus, which kept it on life support to survive bankruptcy and an eventual takeover by Fiat. Daimler continued on as its all-conquering self. There’s little doubt where a VW-Fiat merger would leave Fiat.
Volkswagen plans to reach 10 million in global sales and become the world’s top-selling automaker before 2018. Last year, the VW Group reaped $16.3 billion in operating profit, or more than triple that of FCA. (Porsche alone, after failing to buy all of VW a half-decade ago, made three-quarters of FCA’s $4.7 billion profit in 2013.) Fiat, having leveraged Chrysler’s U.S. market share after buying the company on the cheap, is still hemorrhaging at home and would have done worse without Chrysler’s own $2.8 billion profit. Then there are VW’s 573,000 employees, which numbers 2.5 times greater than FCA’s roster.
FCA’s jumble of mailing addresses seems to repeat DaimlerChrysler’s mess—it’s registered in the Netherlands, headquartered in London, and answers phones in both Turin and Auburn Hills. To think the Germans wouldn’t dominate the room and leave the Italians and Americans twiddling their thumbs in the corner is a gross underestimation of VW’s lofty goals. Why would anyone at Chrysler want to go through this a second time?
Antitrust Lawsuits and Stakeholders
A merger on this massive scale would attract government regulators the world over for its apparent monopolistic intent. This threat alone could kill the deal. Plus, under the archaic and altogether strange “Volkswagen Law” from 1960, the German government of Lower Saxony can block any company deal with its 20-percent stake in the VW Group. VW used this power to veto Porsche when the latter attempted the aforementioned takeover in 2008. Fiat also has family obligations. The founding Agnelli family currently controls 30 percent of Fiat and could see their voting rights climb to 46 percent as part of a reward planned for long-term shareholders—a potential obstacle to any foreign takeover. As FCA investors vote on the Chrysler merger tomorrow—and by all accounts, it’s been a success—the Agnellis seem to have little reason to put their baby up for international adoption.
Competing All-Reaching Platforms
FCA is already committed to bringing more Fiat-based platforms and engines to current and upcoming Jeep, Chrysler, and Dodge models. Volkswagen is busy expanding its MQB platform for volume front-wheel-drive cars such as the Golf, the MLB for Audis and Bentleys, the Porsche-developed MSB (which may also cover Lamborghini and Bentley), and the NSF subcompact platform. With all of this heavy investment by both companies underway, it would be massively challenging to bring all of these platforms to a harmonious, cost-friendly resolution in a reasonable time.
BUT, HEY, MAYBE IT COULD WORK!
Killing the Electric Car, Sharing Diesel
This is true brand synergy. Aside from ultra-exotics like the LaFerrari, a few plug-in Porsches, and a possible next-gen Bugatti hybrid, both companies generally dislike electrification. Marchionne is the only automotive CEO on record to tell people not to buy his electric car, the Fiat 500E, because he loses lots of money every time he sells one. While FCA is working on a plug-in-hybrid Town & Country and has a test fleet of plug-in Rams, there isn’t a single hybrid or EV in its lineup aside from the California-only 500E. Volkswagen wishes everyone would slurp diesel and be done with gas-electric cars, hence Audi’s TDI parade on Washington, D.C., and incessant push toward clean-diesel technology. Those few Jetta and Touareg hybrids on the road are a concession to Americans; Europeans couldn’t care less.
Killing Other Brands
There’s no doubt that each company sells a few brands that could use the boot. At VW, Škoda and SEAT have the least marketing reach and overlap much of what entry-level Volkswagens already offer; they exist seemingly for nationalistic reasons. FCA has already admitted to an “internal brand turf war” between Chrysler and Dodge, so one of those could easily go. The Italian Lancia brand seems to be on its way out. And now that SRT is part of Dodge, we could also see Ram returning under red stripes, too, however unlikely that is presently.
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Creating the Lambugarrari
This is our real hope, if anything. Combining the likes of seven of the world’s most exotic and high-performance automakers—Bugatti, Ferrari, Lamborghini, Bentley, Porsche, Alfa Romeo, and Maserati—could be the stuff of dreams. Sure, none of these brands work together much under their current corporate structures, but with a merger, wouldn’t we be right to expect a dream supercar that could destroy every supercar ever made in terms of ultimate power and performance? Let their powers combine!