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post #1 of 6 (permalink) Old 05-08-2017, 04:59 AM Thread Starter
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Why FCA is Seeking a Merger

The following article, about FCA's financial problems, is from Business Insider:

"Outwardly, Fiat Chrysler Automobiles looks as if it's doing great.The carmaker, long the most vulnerable of the Detroit "Big Three" (GM and Ford are the other two), spent the 2000s in limbo, owned first by Daimler, then by the private-equity firm Cerberus, and finally by Fiat in a bailout-and-bankruptcy deal engineered by the federal government.

FCA's recovery has been impressive: It posts month after month of positive sales in the US and has benefited fantastically well from the SUV boom, thanks to the Jeep brand. So naturally, CEO Sergio Marchionne has made it his quixotic mission in life to get FCA merged with another major automaker. He took a shot at GM last year and was rebuffed. Now he's again making the rounds. The reason is simple: He doesn't think FCA can ride out the next downturn in the industry.

At Bloomberg Gadfly, Chris Bryant zeroes in on FCA's biggest problem — and it has nothing to do with cars:If anything, Bryant is understating how bad this is for FCA. A lot of folks erroneously believe that automakers are in the car business. They are, but the real meat on that bone is the lending side. Car companies with their own banks, in effect, don't sell cars; they sell car loans. FCA does this in some regions, but not in the US.

For FCA to be missing out on this is a big reason why it's overall debt position, at about $5.5 billion, is worrisome relative to its Detroit and global competition. Debt tends to be what gets car makers in the end — the business is extremely capital-intensive, and it can be challenging for the companies to avoid spending their way into a hole to keep from losing out on market share, especially when tastes shift away from rainmaking products, as they did when SUVs fell out of favor, when gas prices spiked, or when credit constricts and consumers are reluctant to borrow to buy new cars.

So Marchionne knows he can't win a price war, and he knows that FCA debt could catch up with it. The only recourse he has is to line up, well in advance, a rescue package in the form of a merger. That's why he's been so dogged on this front.
But it's hard to see what would be gained from taking on FCA and its debt, even if Jeep is part of the package."


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post #2 of 6 (permalink) Old 05-08-2017, 08:44 AM
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That article is a year old and out of date. FCA debt is now down to about 3 billion, down from 5.5. Sergio, at least publicly, rebuffed VW for merger talks a few months ago. They don't appear to be actively seeking a merger at this time. And they do have a captive finance arm- Chrysler Capital.

FCA is, however, extremely vulnerable to the next gas crisis or economic downtown.

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post #3 of 6 (permalink) Old 05-08-2017, 09:01 AM
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I don't know why people think FCA is in financial difficulty. Their profits last year were 1.9 billion and they are on track with their current 5 year plan that ends in 2018. Dropping the Dart and 200 was a good move. They were not profitable and the extra capacity to build more Trucks and Jeeps that are very profitable really helped their bottom line. They are not currently looking for a merger.

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post #4 of 6 (permalink) Old 05-08-2017, 09:58 AM
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Anyone who thinks FCA isn't in financial trouble or seeking any merger they can possibly get isn't paying attention...
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post #5 of 6 (permalink) Old 05-08-2017, 11:05 AM
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Originally Posted by ygbsm View Post
. And they do have a captive finance arm- Chrysler Capital. .
Chrysler Capital is offering a $1000 discount for people specifically with LOW credit scores. Obviously, they will jack up the rate but isn't this how the housing market crashed, financing deadbeats just to push product out the door?
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post #6 of 6 (permalink) Old 05-09-2017, 10:46 AM
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Originally Posted by mjb4450 View Post
Chrysler Capital is offering a $1000 discount for people specifically with LOW credit scores. Obviously, they will jack up the rate but isn't this how the housing market crashed, financing deadbeats just to push product out the door?
i'm just waiting for the car bubble to burst. when gas is expensive and risky loans catch up to automakers, everything will come crashing down. hell, even the used market is ridiculous right now - almost everything is "collectible", with people flipping cars for more and more money, just wait for the day people realize they don't want these cars anymore. not to mention cash for clunkers, which basically ignited the flame.
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