Fiat boss Sergio Marchionne said last year that he believed the global car industry would have to evolve into five giant industrial groups, each making up to six million units per year. The car industry’s recent collapse has created an opening for Marchionne to realize his prediction and build a vast car maker to rival Toyota and Volkswagen.
Stage one was swooping on Chrysler, and offering Fiat platforms in exchange for a stake in the U.S. manufacturer. Fiat will get 20 percent and Marchionne will become Chrysler boss. This tie-up gets Fiat into the U.S. market and improves the economies of scale for its own platforms. Now Marchionne is trying to exploit a bigger and potentially game-changing opportunity in buying out GM’s European operations.The benefits:
• The new Fiat/Chrysler/Opel could build most of its cars on three Opel-engineered platforms, plus one Fiat small-car platform, using just a handful of engine families.
• The combined enterprise could build six million cars a year.
• The plan could save Fiat $2 billion by 2015, the point when all the vehicles are being built on the three platforms.
• Fiat would also need just three basic factory layouts globally. But the business plan means closures at some of its UK and European plants.The challenges:
• Fiat will require U.S. and European Union government loans of 7 billion euros ($9.8b) to stay in business for two years. Marchionne is betting that the German and Spanish governments will realize that Opel’s chances of prospering are much improved by being part of this alliance.
• It would require GM to hand over royalty-free rights to the Gamma, Delta and Epsilon 2 platforms. Negotiations have only just started between Fiat and GM, but reports say GM wants a 30 percent stake in Fiat Auto in exchange for the technology. Fiat isn’t willing to offer more than 10 percent.
If Marchionne pulls this off, he will become one of the all-time automotive industry greats. But the biggest obstacles are the engineering effort and money needed to integrate the sprawling Fiat Auto, Chrysler and Opel product lines. Such an audacious project has never been tried in the history of the car industry.Hilton Holloway/Autocar